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Michelle Singletary
Washington Post Personal Finance Columnist
Thursday, October 8, 2009; 12:00 PM

Need advice about how to handle your personal finances? Whether the struggle is saving for retirement, organizing your bank files, or talking about money responsibility with your spouse or loved one, Post personal finance columnist Michelle Singletary was online to offer her advice and answer your questions on Thursday, October 8 at 12 p.m. ET.

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Read Michelle's latest columns, check out her Color of Money Book Club selection archive or sign up for her weekly e-mail newsletter.

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Michelle Singletary: Hello everyone. Thanks again for joining me for our regular discussion about money.

Looking forward to your questions and comments.

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San Diego, Calif.: Hi Michelle,

I think I have a similar situation to "Ann" from your October 1st column, and I'd like your advice. I have two credit cards, both with zero balances. My main card has an 8% interest rate and ample credit line ($28k), not that I use it anyway. My secondary card has a 15% interest rate and similarly ample credit line, however, there is also an $80 annual fee for it. The back story is that the secondary card was one of only two that I could find that insured car rentals for a particular country I was vacationing in, and rental insurance there would have cost me many times the $80 fee. So at this point I'm debating whether canceling the card, while saving me $80/year on the fee, might cost me more when I go to get a loan if it impacts my credit score.

From reading your column, it sounds like I should go ahead and cancel the card?

washingtonpost.com: Keep the Rate or Keep the Card? (Oct. 1st)

Michelle Singletary: If you don't need the card anymore and you don't want to pay the $80 fee, closing it shouldn't greatly affect your credit scores, especially if you have no outstanding balances on either card.

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Jackson, Mich.: Michelle,

A good friend recently told me to get Dave Ramsey's book "The Total Money Makeover", he raved about the teachings and advice in it. I got it and read it in one day. I was not only impressed but I was also inspired and am now motivated to follow the plan and change my life. My question to you is, are you familiar with the book and its message and what is your opinion of it? I'm just curious. Thanks and keep up the good work! YOU ARE MAKING A DIFFERENCE!

Michelle Singletary: Thanks for your lovely comment.

And yes I know the book, I know Ramsy's system and I think it's very good.

I'm a fan of his. I listen to his radio show just about everyday -- so much so that my kids throw stuff at me from the back seat because they are tired of hearing "that money guy."

You can't go wrong with the Ramsey plan...or the Singletary plan laid out in my book "Spend Well, Live Rich."

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Like a squirrel saving acorns for the winter: Does a squirrel ever know when to stop saving acorns? We are ok financially but the news have us acting very cautious.

Michelle Singletary: Haven't talked to a squirrel about his or her acorn saving strategy. Mostly they are ducking and diving around my car.

But I do know they are ALWAYS saving so that's something to emulate. I don't think any of us regular working folk can ever really save enough for every possible financial disaster.

However, if you have an emergency fund, life happens fund, saving for retirement, or kids college...have life insurance, disability insurance, etc. you cover the basis.

Then you don't let fear dictate your living a good life with the money that is left over.

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Seattle, Wash.: Thanks for all the great advice over the years! I'm a huge fan and often give your books out as gifts.

I am looking into getting disability insurance, but am having a hard time getting quotes, and even a basic idea of what an individual policy might cost. I am leery of some of these websites offering multiple quotes from different companies, especially since they want so much of my personal information up front. Any advice on where to start, or what a good individual policy might cost? I am a healthy 28 year-old woman with a fairly specialized and high-risk job, salary around $70K, and no dependents (but a mortgage, of course) Thanks!

Michelle Singletary: I don't think you have to worry so much about the sites that get you multiple quotes. But here's an article on www.bankrat.com on disability insurance that I think will be very helpful for you.

http://www.bankrate.com/finance/insurance/disability-primer-obtaining-full-coverage-1.aspx

If the link doesn't work just google "disability insurance and bankrate.com

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Washington, D.C.: Our mom is retired and living on social security. She has a small amt of money in a savings money market account. But the return is so pitiful, it isn't worth mentioning.

The following thought has emerged, but I don't know if it is realistic, or even a rational thought for that matter. Here it goes...

Would it be possible to transfer her money into a foreign bank (say, in Australia) where interest bearing accts pay more? If that can be done, will her deposit be automatically exchanged from American dollars to the Australian dollar?

Michelle Singletary: This is so out of my area of expertise.

But I would do a LOT of homework before I venture to do this. And is the Australian bank really paying that much more in interest? Is the money your mom puts in protected from loss as it is with the U.S. FDIC insurance. I haven't checked the exchange rate so not sure if there might be some loss there as well.

I'm just not sure the savings you are hoping for is worth the change.

If you want to search for the highest possible yielding savings account here in the US go to www.bankrate.com

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Jackson, Michigan again.....: Oh GREAT!! I'm so happy to hear that you agree with Dave's plan, I believe you and he have THE BEST advice out there and I can't wait for your book to come out January 1st!! By the way, do you do personal/one on one counseling outside of your church? I'd like to get your help to get started on my financial makeover.

Michelle Singletary: Cool.

I can't wait for the new book either. Did I tell you guys I shot a commercial for it? I'm so excited.

It's called "The Power to Prosper" and it's going to be very, very challenging. You can go to facebook and sign up with the fan page. I'll be adding updates soon (too busy of late helping people.).

Yes I do work with people one-on-one but only thu my church ministry. So sorry. And I've got all the people I can handle right now, plus my job, finishing my book, being a wife, mother, friend, etc. Additionally, I've started volunteering at the local women's prison to help soon-to-be released inmates get their money straight. So my plate is way full.

But there are many others who can help if you need guidance, etc. Go to www.debtadvice.org and search for a consumer credit counseling agency. They do more than just debt plans. They do help people budget, etc.

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Bethesda: Are interest rates ever going to go up? My ING Direct account is earning 1.3%. I remember when it used to be close to 5% and I was earning a good chunk of change each month.

Michelle Singletary: Who knows. But if the savings rates go up, so too will the rates on credit.

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Cleveland, Ohio: I wrote an article last year in our college newspaper regarding the face of homelessness and that is it changing. I decided to go homeless for 24 hours and get a feel of how it would be. What a humbling experience. I encourage everyone to look in the mirror regarding their personal finances. Michelle keep up the great work!!! Everyone needs to hear the message.

Michelle Singletary: Thanks.

And having worked recently with people who have lost their jobs and their homes, it's really scary.

Really, many of us are just a job away from severe financial issues. I'm just so sad for so many people.

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Pittsburgh, Pa.: I found myself chuckling at your mention of the song, "Cheaper to Keep Her" in regards to men paying child support and alimony at the break-up of their marriages.

See, I'm a feminist (one of the few who actually is proud of that term), and as such, I've always been perplexed by the alimony system in this country.

I understand the need for child support. It takes two people to make a baby and for too long, men have walked away from their responsibilities and left the women to parent the kids and pay all the expenses to boot.

But, alimony? That seems like an outdated concept, based on the idea that women can't, or shouldn't, earn a living. I'm insulted that some women perpetuate this stereotype that they're too delicate for the workforce, while getting their pit-bull lawyers to ring the last drop of money of of their exes. Maybe it's an extreme example, but take a look at any of the "Real Housewives" shows to see how many of those women took their husbands to the cleaners and now fill their days with drinking and salon appointments on the ex's dime.

I'm not naive about working. I know women face a lot of extra job pressures, and still earn less than men for comparable work. Those things need to change. But we have to change this alimony system if we're really going to make things fair all the way around, I think.

washingtonpost.com: The Faces of Homelessness

Michelle Singletary: Seriously?

You believe what you wrote?

No, it must be a joke, right?

And certainly you aren't using those dingbats from Real Housewives as your source material.

Alimony is needed and you know some women have to pay it to their ex husbands.

There is still a need for such a thing when you have spouses who choose to stay at home to WORK and care for their children or the household. It's hardly a case of all such men and women deciding to sit home on the couch and eat chocolate watching Oprah.

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Arlington, Va.: The person with the credit card that has an $80 fee should call the company to see if they will waive the fee. Or they may have another card product without a fee they will move the account to. I had a Chase business Mileage Plus Visa card that I wanted to get rid of because I didn't want to pay the fee. Instead of canceling they offered to switch the account to a different product with no annual fee. I kept the same account number, credit line, and so forth. Of course it doesn't collect frequent flier miles either so I don't really use the card. But if you are worried about effects on your credit score this is one option to pursue.

Michelle Singletary: Or just get rid of a credit card you don't need.

But your way works too.

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Australian bank: Sounds like you not only have to worry about the things Michelle said but taxes also. Is income from an overseas bank taxed at a different rate? Is it reported on a different form? Your mom could go from a simple 1040A to having to pay someone to do taxes.

Michelle Singletary: Didn't think of that.

Thanks.

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Rockville, Md.: I'm reeling from my bank's response to a recent HELOC request. They insisted on a loan instead of a credit line, wanted to fix the interest at ten percent (with mortgages at five?!), and only allowed a total debt of 70 percent LTV. Okay I get that last part - everyone's more careful these days - but ten percent? No LOC? I have checking and savings accounts with this bank, my salary is six figures and is deposited automatically into checking every 2 weeks, I've worked the same federal job for 18 years, and my credit score is 789! What gives?

Michelle Singletary: So why do you still want their stinkin' money if they offended you so much?

Why do you need a line of credit or equity loan with a six-figure salary?

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Need some inspiration: Hi Michelle, LOVE the chats, keep 'em coming! I get down on myself for having student loans - a "mistake" I know you'd never make:) I got to wondering, what was the biggest money mistake you ever made? And what did you learn from it? It might help me to know that even you, my guiding money guru, made a money mistake:)

Michelle Singletary: Thanks but I make mistakes ALL the time. Typically they are small ones but I'm not perfect by a long shot (hey don't tell my sweet, fine husband that tho).

The biggest mistake I made was when I first started investing in my company 401 (k) plan. I sat next to a very, very, very conservative co-worker who was perhaps 10 years from retiring. He told me to put all my money in bonds. He hated the stock market. Feared it. So I listened to him. That was in the mid 1980s. I didn't change from that for a LONG time -- too long. I was in my 20s and missed a lot of the run up in the stock market.

So I learned that I needed to look at my own situation, my time horizon and be more diversified. I let his own fears and plans for his life dictate how I invested.

Never again.

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No savings: Hi Michelle,

Not matter what I do I just don't have the money to save for my life happens fund. I have cut back as much as possible, it's just that my financial commitments are a heavy load right now and not going to improve anytime soon. It's hard for me to get another job and I cannot imagine getting a roommate. I can pay my bills I just don't have any savings or emergency money. Any Ideas? Thanks.

Michelle Singletary: Imagine getting a roommate.

Seriously. Remove the roadblocks. If I could I would make money for people in financial trouble. But I can't.

All I have to give is my wisdom and experience working with people over decades.

If you can't get another job. If you can't cut anymore. If you can't....

Do what you can. Get a roommate. I advised a young single mother with a 3 year old to move from her one-bedroom apt. she couldn't afford to a condo with a roommate. She balked like you.

Now she have some money, not a lot, to save.

She stopped saying, "I can't."

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Baltimore, MD: Is there ever a situation where one can justify lowering a 401K contribution and replacing it with a 529 contribution?

We're a 2 income family, by necessity, in part because I still have student loans 10 years out of (a public) law school. I'm in the public interest field so I have never been able to attack them like my law-firm employed counterparts). I am looking at daycare costs next year that equal our mortgage payment. I've been diligent about looking honestly at our expenditures vs. what we bring in. I've crunched the numbers and not working is just not possible with 39K left on student loans, a modest car payment (on a used car) and our mortgage. I've been cutting everything else right and left (no longer eat out, no netflix, no morning coffee, let alone shopping for pleasure or impulse items, no haircuts, I dye my own hair now). Our family has an emergency savings fund if one of us lost a job that should last us about 3 months. But somethings gotta give and the only place left I can find is the 401K.

Michelle Singletary: Depending on the age of the kid, you have some time. Why don't you wait until you pay off the car and then use that money to help fund the college fund.

Or you could lower the 401 (k) to eek out some for the college fund. But at least keep contributing enough to get a match if you're still lucky enough to have one.

But mostly, I see stress in your words. Yes, saving for college and retirement is very important but breathe.

Your kid could go to community college then four year school. Stay at home instead of living on campus.

I just mean do what you can, even if it's just $10 a month. Every little bit helps, tied also with thinking about various options for college.

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Washington DC: Hi Michelle,

Love your columns, can't wait for the new book!

I lay awake at night worrying about money. It's crazy, I guess, because I have a good job, but a huge mortgage, and I am so afraid of unforeseen circumstances. Your comment to not live in fear hit home, but how does a person do that?

Thanks so much

Michelle Singletary: You just do.

You have to choose to be fearful. So choose not to be.

I choose faith.

But I couple that faith with planning. I can't plan for every possible thing that may go wrong but I try to put in place a good safety net.

For example:

-- I save what I can

-- I live below my means

-- I married well (federal gov't worker). Just kidding. But I did marry well in the sense that I married a man with the same financial values that i have. I vetted him. We went to counseling. We talk A LOT.

-- I try not to be arrogant and think I can't fall financially. That makes me spend better because I know life happen.

-- I pray

-- I serve others in need which helps me appreciate what I have so that I'm not always wanting so much more

-- I give lots of money away

All of this works to having financial peace.

You list may be different but put in it things that signify planning, serving, and giving and you don't have so much time to worry.

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Wheaton, MD: I agree that the current financial crisis has swept up normally hard working, average citizens and left some in dire need. But after reading "The Narcissism Epidemic, Living in the Age of Entitlement" by Jean Twenge, I'm convinced that many of us, and some of those now homeless, fell into the entitlement trap caused by narcissism. Twenge's theory is that since we're all told that we're "special", been praised without earning it, we've come to expect to be treated special, and buy or have things that are desired or popular, regardless of our ability to pay for them. So many of these big Mc Mansions may have been purchased by those who could not afford them, but whose egos could not allow them to live in older, less expensive homes and/or live within their means. Please understand I'm not saying all of these poor homeless formerly middle class people fall into this category, but from what I've seen on TV (Property Virgins and My First Place on HGTV) and read ('Busted"), lots of people, some of whom are still in their big houses, fell victim to this narcissistic need to live big and show off big. And yes, Twenge does mention the need to have the granite countertops, even for young first time buyers. - Wheaton, Formica countertop, linoleum floor owner with $30,000 in savings and emergency fund

Michelle Singletary: I do understand the theory and where you are coming from.

What we see now is a combination of a lot of things, including narcissism epidemic. The thing is how are we going to move forward to help even those who fell victim to this.

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Why do you need a line of credit or equity loan with a six-figure salary?: Believe it or not, some people with six figures still need to borrow money to make improvements to their home. The hope is that the value of the home increases more than the improvement costs. I know there is "risk" involved but that doesn't mean its always a bad idea, especially when handled responsibly.

Or maybe the person wants to enjoy a nice new bathroom, doesn't have the cash to pay for it up front, but could easily fit the monthly payments into their budget and is ok with paying interest on a loan. Is that really so horrible (assuming their other finances are in order)?

Michelle Singletary: Right, you mean the person may "want" stuff he or she doesn't have the money to pay for but yet can complain that the money changing is wrong for charging what clearly people are willing to pay because they can't wait to get want the want.

I'm not saying this is the case for the person who wrote in.

I was merely challenging the person to think about whether the loan/line of credit was really worth it.

Cuz in case you haven't noticed we are in a RECESSION partly because people bought, upgraded, slid into a jacuzzi tub they couldn't afford thinking they could handle the easy monthly payments UNTIL they lost their job or marriage or health insurance.

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Frederick, MD: Michelle,

I love your column and your chats. Your recent column on student loans was excellent. But I would like to read more on deciding when spending more on college is worth it....or not. When I was looking at graduate schools I contacted the placement office as well as admissions. I wanted to know what I could expect to earn as a result of my education "investment." Are there any sources out there that a student can use to determine whether the salary in a particular field is worth the time and expense of a particular college degree.

washingtonpost.com: After College, Student-Loan Sinkhole Awaits

Michelle Singletary: Thank you.

One of the best sites for really evaluating all this student loan stuff is www.finaid.org

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Alexandria, VA: To answer Bethesda's question about interest rates, if the federal government continues borrowing and spending money like a drunken sailor on shore leave, eventually interest rates will most definitely increase, along with inflation. (FYI... I'm an economist by profession).

Michelle Singletary: Thanks for helping answer.

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Philadelphia, PA: Hi Michelle, love the chats. My girlfriend of 2 years is around $50k in various debt and gives away/donates around $3-5k per year to various charitable events (not a tax writeoff since she does not itemize). I have no debt. I have no problem giving some to charity, but am I a bad person for thinking that debt should come before giving around 20% of her take home salary away? Right now it is her money and she can do what she wants, but I'm thinking of the future when we get married. Any suggestions for bringing this topic up without sounding like a meanie?

Michelle Singletary: How about helping her budget.

I think it's great she wants to give, but you are right to be concerned that she's not also taking ownership and properly attacking all the debt she's accumulated.

So say, "honey, I'm worried about how you are budgeting. Do you mind if I help you budget or recommend a source that could help you get rid of your debt."

Then help her or send her to www.debtadvice.org.

If she doesn't want the help, you are seeing the future with a wife who doesn't have a financial plan.

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Washington, DC: Serious Question: How do I stop spending money I do not have? (what is the first step).

Thanks.

Michelle Singletary: Seriously, do a budget. Write down all you debts.

Do that and that should scare you into stop spending.

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Alimony: Lawyer here. The "feminist"'s rant about alimony is based on a number of inaccurate assumptions. Alimony can be paid to an ex-husband as well as a wife in every state. It is rarely paid if the non-working (or under-employed) ex-spouse has the education and skills necessary to become employed and support himself or herself to a similar standard as that which the marriage provided. Secondly, unless the recipient spouse is disabled, alimony is always TEMPORARY. It stops when the recipient remarries. And, it can be discontinued if the supporting spouse loses her/his job or has other financial difficulties.

Michelle Singletary: Thanks for also setting the record straight.

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Unemployment: Thank you for your chats--love them! I have some friends and family members who are unemployed. Some have been unemployed for quite some time and are doing all they can to seek jobs. What can I do to lift their spirits?

Michelle Singletary: Help whenever you can. Sometimes it's just a phone call or offering to go over their resume or help with an upcoming job interview.

I recently spent several hours helping someone put together her PowerPoint for a job. I'm so sad she didn't get the job (in the nonprofit sector) but she was so grateful.

Just be there. And if you see they need financial help and you can afford, help that way too.

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Grad School or not: Be sure to consider whether an additional degree is a good long-term investment, not just worthwhile immediately.

In my workplace, the people with PhD's eventually move up faster, but it might take 20 years to notice a difference.

Michelle Singletary: Good point. Thanks.

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Re: Rockville, Md: My bank was just as nasty when I asked them to refinance my mortgage so I can reduce my monthly payments. I went to Lending Tree (online), they use several banks to make you the best offer. I closed just last week - and I lowered my monthly payment by $350 a month.

Michelle Singletary: Love your story.

Kicked them to the curve.

Love it.

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Lorton, Va.: I just returned to work after being laid off for 6 months. I had to take a paycut of $13,000. I was able to move in with a relative. Relative is getting married, and I am going to be forced to move. It's going to be tight paying for an apartment again alone on a lesser salary. There is no one else that I can move in with or roommate with. I will not have time to get a part-time job because I will be going back to school for my CPA, which I have saved cash to pay for. Any advice on making cuts to my budget? What to do?

Michelle Singletary: Can't you advertise or look at places for a roommate?

Your church, any civic organization you belong to, your current employer, etc.

Don't give up so easily on the roommate thing. Ahem, the post has a classified section.

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Alimony: Way to go Michelle! I work mostly with men who complain constantly about having to pay alimony and half their retirement savings to their ex-wives. These guys go to sea 6-8 months a year while their wives raise the children ALONE that whole time, meanwhile losing contacts and current skills in the marketplace. Darn right they are owed half for that relevant work they do. Oh, and my mom had to pay alimony AND college tuition to my dad when they got divorced, because he was the stay at home "mom", so it does work both ways.

p.s. I'm a proud feminist too!

Michelle Singletary: More on the alimony front.

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Boulder, CO: Michelle, you know I love you and your advice but I must give you a tsk, tsk on your newsletter today. Conde Nast just decided to fold 3 magazines leaving many employees in the lurch (Ruth Reichl, the editor of Gourmet, only learned they were shutting down her magazine the morning of the announcement!). Yes, some bridal magazines do feed the bridezilla beast, but I would like to remind you that many, many people have lost their jobs as a result. As you chided us for not having compassion by rejecting resumes with mistakes, let's have some compassion for all of those Conde Nast employees who lost their jobs this week.

Thanks, still your #1 fan! xoxo

Michelle Singletary: Sometimes you guys take me so seriously.

Of course I hate to see people lose their jobs.

But the reality is businesses do come and go and I certainly hope you aren't suggesting companies should stay open and go further into debt if they don't have the revenue to support the business.

I can comment on one aspect of a story without being cruel to the poor people losing their jobs, right?

But still loving you right back.

At least you guys keep me thinking.

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"I choose faith. But I couple that with financial planning".: Amen!

Like the Russian proverb: "Pray to God, but row for the shore."

Michelle Singletary: LOL!

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RE: How do I stop spending money I do not have?: Write down EVERY purchase for one month and you will be surprised/scared where your money is going. Budget Budget Budget, lol.

Michelle Singletary: True that. Forget that tip.

Thanks.

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Rockville, MD again: I rejected the bank's offer and am looking elsewhere. My question isn't what to do but, why would a bank behave that way? Do they not want my business? I want the line of credit to make structural repairs to my house which has serious foundation problems. I do not intend to use it except for that, but years from now (there's a ten-year drawdown) I may want to remodel the bathroom or kitchen.

Michelle Singletary: I see.

The do it because they can.

Sharks.

Take your business elsewhere.

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McLean, Va.: Our 6 year old son has been saving his allowance ($.75/wk for various chores) as well as some money his grandparents give him for just being their grandson (not exactly a good lesson, but what can you do?). He really wants to save it and put it in a bank account, but we are having a hard time finding an account that doesn't have a large fee (relative to his savings) for having a low balance. We want to encourage his wanting to save, but are getting frustrated. Any suggestions where he can feel like its his own and not just lumped in our larger savings account?

Michelle Singletary: We have a bank account for our 14-year-old that is tied to our account. As long as we transfer a little money every month we aren't charged a fee.

You might also check out a credit union.

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Harford County: Michelle,

I thought you might enjoy a story of progress. On this Tuesday last I paid off my car 2 years early. In two weeks I will make my final payment on the second of three student loans. Three years early! I'm left with about $7K in credit card debt which between the the student loan money, car loan money, what I have been paying, and hopefully with a good income tax refund my credit card debt should be gone in six months. I've been able to do this by living below my means yet still having an enjoyable life by participating in inexpensive hobbies!

Michelle Singletary: Love your testimony.

Keep going.

_______________________

Michelle Singletary: Well folks I must run. I have to finish my Sunday column.

I'm so, so sorry if I didn't get to your question. I'll answer some in my eletter and possibly my print column.

Thanks again for joining me today. Such good questions, comments and help.

Take care.

_______________________

Editor's Note: washingtonpost.com moderators retain editorial control over Discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions. washingtonpost.com is not responsible for any content posted by third parties.


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