ThredUP.com: Swap Outgrown Kid’s Clothing With Other Parents

ThredUP Logo

Update: ThredUP is no longer a clothes swapping site, but you can get a free $10 credit towards your first purchase of clothing at the new store.

Kids grow. Clothing doesn’t. That’s the basis for a new swapping site called ThredUP, which I’ve seen in multiple news articles recently. Another similar site is Zearly, but it seems like they are on hiatus.

Got clothes that doesn’t fit any more? Box up about 10 items (tops, bottoms, dresses) that fit the same age level and gender. They send you free boxes, you print a prepaid postage label online, and have it picked up from home or drop off at the post office.

Want some cheap clothes? Browse other people’s boxes and pick one. There appears to be feedback rating system for users. Each box costs $15.95 ($5 + $10.95 shipping). Some boxes have toys and books as well.

I don’t have kids, but I think I would definitely try this if I did, especially for babies and younger ones. At about $1.50 an item (regular price), it seems like a reasonable system. Any users out there?

Capital One 360 Launches Savings Account For Children

Capital One 360, with their popular 360 Savings Account, has just launched a Kids Savings Account specifically to help children learn to save and manage money. Here are the ways that the Kids account is similar to the Adult version:

  • FDIC-insured savings account.
  • No fees, no minimum balance requirements.
  • Pay interest, currently 1.00% APY.
  • Kids can log in and check their balance at any time with their own personal customer number and PIN.

Here are the main ways that the Kids account is different to the Adult version:

  • Kids cannot move money, only check balances.
  • Adult must sign in with their own separate customer number and PIN to transfer money in and out.
  • When the kid turns 18, the account will automatically convert to an adult 360 Savings Account.

I’m not sure how I feel about this account. I think I’d rather have kids using paper money that they can touch, and let them visit a human teller to deposit and withdraw money. Seeing the interest accumulate online would be nice, but the small 1% rate of growth right now might be discouraging. That said, everything is so digital now. I’ve met 8th graders that know more about Facebook and editing digital videos on YouTube than I do.

Life Planning Exercise: Creating My Perfect Day

I am currently reading The Art of Non-Conformity by Chris Guillebeau (review coming shortly). In one of the early chapters, he talks about an exercise where you write out how your perfect, idealized day would go in great detail, hour-by-hour. I’ve read about this method other places, but never actually write it down. As I go into it, I found myself getting really into it and making several changes throughout today. Here goes:

Early Morning
I wake up, naturally, after 8 hours of sleep. Many people don’t need that much sleep, but I do. I love waking up naturally, but will set an alarm as a backup, because… I have to wake up the kid(s) and get them ready for school. I still don’t have kids, but I really want them.

I make their lunch, and perhaps drop them off at school in my 10-year old Honda if it’s close enough. I take the dogs for a walk in the neighborhood park. I then do my exercise for the day. Most days it will be something active and fun, like swimming, bicycling, tennis, or running. To mix it up, sometimes with a buddy or group. Swimming in open water is fun, since I live by the ocean.

Morning to Early Afternoon
I shower and change into shorts and a t-shirt. I work at home and live in a temperate climate, so that’s what I wear every day. At the computer, I check the morning’s e-mails and do some work. Work consists primarily of reading books and online articles from thoughtful authors (not 24/7 cable news or superficial fluff), and then researching and writing on topics like personal finance, nutrition, web design, or graphic design. I actually only do specific jobs for clients occasionally, because I’m tired of dealing with customers. Writing is so much less stressful. I might also run a small e-commerce website, but nothing that requires constant attention. Part of the year, I teach something small at a local community college.

I only work 4 hours a day. I can do this because I’m smart with money and have saved up a big chunk. Mrs. MMB works half-time as well, still 9-5 downtown, but only 2-3 days a week. With a relatively simple lifestyle, our income still pays the bills with a little left over. Our portfolio is left to grow for “advanced” retirement once the kids are in college and Mrs. MMB quits completely around age 50. I feel like I’ll be doing something that earns income until at least 60.

Afternoon
I work until a late lunchtime, and then I take the dogs for another walk. If Mrs. MMB’s not working that day, we do this together. She loves to garden and much of our food comes from there. Some days, we walk to a local eatery with the dogs and dine al fresco.

I wait for the kids to come home from school or pick them up. We ate some snacks, then I help them with their homework. Next up: sports, 4-H, girl/boy scouts, or science club or whatever fills up the afternoon. I love being able to spend time with them. We shop every day at a local market for ingredients for that night’s dinner, before the after-work rush. Did I mention I never have to go to Costco or any megastores on the weekend?

Evening
Dinner is a family affair. Once a week, the grandparents come over for dinner or we go over to their place, since we live in the same city. After dinner and homework is finished, perhaps a DVD or pre-planned TV viewing. I could say “NO TV!!!”, and I’d still like to severely limit TV viewing in the house, but do think there is good content out there. Why not watch it together? Otherwise, we might play a board game or learn about that year’s Big Adventure. I am not a fan of video games at all, unless educational and done well.

I used to worry that once I had kids, I wouldn’t be able to travel anymore. However, I’ve been learning about parents who take their kids traveling around the globe for a year or longer. I don’t think that’s my style. I’d rather visit one single country/region for an entire month during the summer. I call it Big Adventure. Renting a house or apartment for the entire month would be more economical, and we could use that house as a base. During the rest of the year, we could research the country’s language and culture to plan out activities.

After the kids go to bed, I’ll probably be exhausted as well. If not, I’m sure I’ll poke around the internet some more before I pass out.

How would your perfect day go?

Talent Is Overrated, Deliberate Practice, & Tiger Moms [Book Review]

If you’re looking for a inspirational book to read for the new year, consider this one, but read on to see if you like what you’ll learn. :) In Talent Is Overrated, author Geoff Colvin explores what makes world-class performers different from everyone else.

What is the key to great achievement?

  • Hard work?, or
  • Innate talent?

Talent vs. Practice

One area where we often give the credit to talent to is musicians. Look at the “kid genius” Mozart, who famously composed his first piece at age 5. Well, Mozart started learning music at age 3 from a pushy composer father who loved to teach (and likely helped write many of his early works). He had been working at music for over 10 years by the time he wrote anything that was widely acknowledged to be of special quality.

In a separate study comparing music students enrolled in elite music schools with those in regular public schools, it was found that the average number of practice hours need to reach the same level of skill was the same for all students. Sure, the students in the elite group were often practicing 2 hours a day vs. only 15 minutes a day for the other kids. But no matter how you clocked those hours, quickly or slowly, nobody got there without putting in the same amount of hours.

Next, let’s look at sports and Tiger Woods. Woods was a prodigy, but he was also an only child to a army-trained teacher/father who started him playing golf at a mere 7 months old. He was playing and practicing on a real golf course by the age of two, and throughout his career was known for his intense practice habits.

The fact is, that almost every study that has looked for evidence of the sort of genetic edge that we call “talent”, has failed to find it. Instead, they find that without exception, every single top achiever has put in thousands upon thousands of hours of practice into their field. In addition, the amount of skill is almost directly proportional to the amount of hours put into it. Terms like the “10,000 hour rule” (as noted in the book Outliers) or the similar “10-year rule” have been created to describe how long it takes before true mastery is achieved.

Deliberate Practice

But wait, lots of people do the same thing, every day, for years. Why aren’t they all awesome? Researchers have also found that “practice” is too vague of a word. Instead, what creates excellence has been termed “deliberate practice”. Deliberate practice is not just hitting through a bucket of golf balls every day.
[Read more...]

The Essential Components of the Good Life

Here is YASAH – yet another study about happiness. Reader RJ sent this to me via this CBS Marketwatch article, but I highly recommend reading the actual study titled Meaning Really Matters: The MetLife Study on How Purpose Is Recession-Proof and Age-Proof [PDF].

Done as a follow-up to a previous similar study based on the research of Richard Leider, they expanded their targeted group to 1,675 people of ages 25-74. In it, they again found the following common components essential to living “the Good Life”:

  • Respondents define the Good Life in terms of the three Ms: Money (having enough), Meaning (time for friends and family), and Medicine (good physical and mental health).
  • Living the Good Life is highly related with having a sense of purpose and this in turn is interrelated with “vision” (having clarity about the path to the Good Life) and “focus” (knowing and concentrating on the most important things that will get you to your Good Life).
  • Meaning, closely associated with the importance of family and friends, remains the primary component of the Good Life for all age groups, despite instability in financial and other aspects of their life. People plan to spend time with family and friends above all else, regardless of age.

The problem is that there are often so many things in the present distracting and overwhelming us, it can be hard to maintain that sense of purpose.

Ohio CollegeAdvantage 529 Plan: Free $25 To Start

The Ohio CollegeAdvantage 529 Savings Plan is again offering a $25 refer-a-friend bonus if you open an account and deposit at least $25 by June 30, 2010. You can be a resident of any state, and there are no application or annual fees.

Rated a Top 529 Plan by Morningstar
In a recent article The Best and Worst 529 College-Savings Plans by Morningstar, the Ohio CollegeAdvantage plan was rated in the top 5 plans:

Features they liked included having a wide variety of investment options (including active/passive, multiple age-based options, and even ultra-safe CDs), as well as low total expenses. In-state resident can also deduct up to $2,000 of contributions per year, with excess carryover allowed.

My Personal Experience
So far, I am quite impressed with the Ohio plan. The website itself is functional and fast, there are a variety of investment choices (cash, index funds, active funds), they are upfront with the fees, and the expenses are very competitive – either the lowest or near the lowest in the nation. There are no inactivity fees, minimum balance fees, or other bogus fees.

I have gotten the $25 bonuses plus several referrals, with no complaints from the people I referred. I have also started an auto-debit from my checking account for $50 a month. Right now, half of my 529 is in the Vanguard inflation-protected bond fund. This is an investment option that is unavailable in most state plans. I did an analysis of conservative inflation-linked 529 investment options here.

I feel that since college is only at most 18 years away with a big lump-sum payment, I would prefer less volatility while marching towards that goal. This is in contrast to saving for retirement, where I currently have 35 years until I turn 65, and hopefully another 20 years after that as well.

Referral Bonus Instructions
Currently the newly referred person gets $25, and the referring person gets $50, and I’d love for you to help fund my kid’s college dreams. :D Here’s how:

  1. You can enroll online or via mail. The online process was quick and easy, and I didn’t have to mail in anything.
  2. The first step is to input your personal info and choose a login/password. Next, you’ll verify your e-mail and complete the application.
  3. After that, you’ll choose your funding amount and select an investment fund. Your initial deposit must be a least $25, and is funded using the account/routing numbers of your bank account. At the bottom, you will need to enter a referral code to get the bonus. Enter 2439350.
  4. In 1-3 days, your initial deposit will be taken from your bank account, and in 5-7 business days you will get your $25 bonus. The $25 will be deposited directly into the 529 account, and will be invested in the same thing as your initial deposit.

If a child has two parents, one parent may sign-up and then refer the 2nd parent to get another bonus, while both can list the same child as the beneficiary. If your child is not born yet or does not have a Social Security number yet, you can choose yourself or another family member as the beneficiary, and then later on fill out a Change of Beneficiary form.

Here is a screenshot of me getting my $25 bonus successfully and as promised:

Relationships and Money: Are You Communist, Socialist, or Capitalist?

I was catching up on some blog reading and caught an old post from Plonkee about the different ways that couples can manage their finances. The three different methods were categorized as communist, socialist, or capitalist. Rather controversial, eh? Don’t get too excited folks, just read on:

Communist: One Big Pot

According to Wikipedia, communism is a social structure in which classes are abolished and property is commonly controlled. Thus, no matter what each person earns, all their income is deposited into one central joint account, from which all expenses are paid from as well. All assets including property, investments, and cash are owned together.

Socialist: Earn More, Pay More

Under this structure, common shared expenses such as rent and utilities are paid via a joint account. Let’s say one person makes $75k and the other person makes $25k. Then if the monthly shared expenses are $1,000 per month, they would pay $750 and $250 respectively. The contribution is proportional to income.

Separate expenses such as entertainment, gifts, or clothing are paid for out of personal accounts. This allows each person to retain some individual control of their money.

Capitalist: You Pay Yours, and I’ll Pay Mine

Finally, we have the option where purely shared expenses are simply split straight down the middle. Differing income levels don’t change anything; If you make more then you keep more. Everything else is paid directly by each individual. Theoretically, each person is thus incentivized to keep their own expenses down, as nobody else helps to pay for it. There is “my money” and “your money”. This is often how platonic roommates manage their finances.

Just Call Me Karl
Although I usually don’t align myself as communist, I must admit that that is mostly how we manage our money as a married couple. It’s also helpful that we both work and earn comparable incomes (a least for now). We do add in a small “adult allowance” fund where we can spend money on whatever with no questions asked. Besides that, while we definitely don’t always agree on things, I think the combination of open communication and the passage of time has gotten us relatively comfortable with the “one pot” setup.

Now, I don’t think any one type is necessary better than the other, and know couples of each persuasion. I do have one question for the capitalist-types, though: What about retirement? Do you split that too? What happens if one person doesn’t invest adequately in retirement?

Happy Holidays!

Here’s to wishing you and your families a safe and happy holiday season. I also hope that we can all take some time to reflect on 2009, which was a very hectic year in our household.

Fidelity Cuts 529 Plan Fees, Changes Age-Based Asset Allocations

On December 1st, Fidelity Investments made significant reductions to the management fees on the 529 college savings plans that they manage. From this AP article:

Fees on indexed plans will be cut in half, while fees on actively managed and advisor-sold plans will be cut by a third, the firm said. Fidelity manages plans sold in Arizona, California, Delaware, Massachusetts and New Hampshire.

The changes mean a family with $50,000 in an indexed portfolio might now pay $125 a year in fees, instead of $250, assuming the amount in the plan remained unchanged. [...]

Fidelity, which is based in Boston, said total fees for its direct-sold indexed portfolios will now range from 0.25 percent to 0.35 percent of assets. Total fees for actively managed plans will now range from 0.59 percent to 1.04 percent of assets.

Here is a PDF of their current expense ratios for their active and passive investment options.

According to this WSJ article, they’ll also be changing up their age-based asset allocations a bit:

Fidelity also said it plans to increase the international equity exposure in both its direct- and advisor-sold plans’ age-based portfolios to 30% of the overall equity allocation from a current range of 0 to 20%, and plans to add an emerging-markets fund to its age-based portfolios.

Both changes will be phased in over the next 12 to 18 months.

The reason for this is hardly altruistic, as Fidelity is a privately-held for-profit company. They needed to do this in order to stay competitive. The only reason I have 529 fund at Fidelity is that I have had it connected to their 2% back credit card. I’m still happy with the change though, which follows their recent addition of index fund options back in August 2009.

Despite these improvements, I still plan on shifting everything eventually to my account at the Ohio CollegeAdvantage 529 Plan, which offers inflation-protected bonds (TIPS) at a very low expense which I think are a great “safe” option for saving up for college. (They also offer a variety of low-priced index options from Vanguard.) Fidelity has no such TIPS option.

Also, until December 15th (soon!), they are still running a promotion where you can get $25 for signing up, $50 for referring others, and $25 for starting up automatic deposits. (A couple could earn $150 free for their kid’s education this way.) If you need it, my CollegeAdvantage referral code is 2439350.

Ohio CollegeAdvantage 529 Plan: Free $25 Starter Bonus

The Ohio CollegeAdvantage 529 Savings Plan is again offering a $25 refer-a-friend bonus if you open an account and deposit at least $25 by December 15, 2009. You can be a resident of any state, and there are no application or annual fees.

Rated a Top 529 Plan by Morningstar
In a recent article The Best and Worst 529 College-Savings Plans by Morningstar, the Ohio CollegeAdvantage plan was rated in the top 5 plans:

Features they liked included having a wide variety of investment options (including active/passive, multiple age-based options, and even ultra-safe CDs), as well as low total expenses. In-state resident can also deduct up to $2,000 of contributions per year, with excess carryover allowed.

My Personal Experience
So far, I am quite impressed with the Ohio plan. The website itself is functional and fast, there are a variety of investment choices (cash, index funds, active funds), they are upfront with the fees, and the expenses are very competitive – either the lowest or near the lowest in the nation. There are no inactivity fees, minimum balance fees, or other bogus fees. The only bad thing I can think of is that every time I make a purchase I get a snail-mail confirmation with no paperless option, which seems wasteful.

I have gotten the $25 bonuses plus several referrals, with no complaints from the people I referred. I have also started an auto-debit from my checking account for $50 a month. Right now, half of my 529 is in the Vanguard inflation-protected bond fund. This is an investment option that is unavailable in most state plans. I feel that since college is only at most 18 years away with a big lump-sum payment, I would prefer less volatility while marching towards that goal. This is in contrast to saving for retirement, where I currently have 35 years until I turn 65, and hopefully another 20 years after that as well.

Referral Bonus Instructions
Currently the newly referred person gets $25, and the referring person gets $50, and I’d love for you to help fund my kid’s college dreams. :D Here’s how:

  1. You can enroll online or via mail. The online process was quick and easy, and I didn’t have to mail in anything.
  2. The first step is to input your personal info and choose a login/password. Next, you’ll verify your e-mail and complete the application.
  3. After that, you’ll choose your funding amount and select an investment fund. Your initial deposit must be a least $25, and is funded using the account/routing numbers of your bank account. At the bottom, you will need to enter a referral code to get the bonus. Enter *.
  4. In 1-3 days, your initial deposit will be taken from your bank account, and in 5-7 business days you will get your $25 bonus. The $25 will be deposited directly into the 529 account, and will be invested in the same thing as your initial deposit.

If a child has two parents, one parent may sign-up and then refer the 2nd parent to get another bonus, while both can list the same child as the beneficiary. If your child is not born yet or does not have a Social Security number yet, you can choose yourself or another family member as the beneficiary, and then later on fill out a Change of Beneficiary form.

Here is a screenshot of me getting my $25 bonus successfully and as promised:

* Javascript is required. If you can’t see any numbers, please use 2439350.

Ask The Readers: Parents Losing Home To Foreclosure

I just got a rather difficult question in my inbox, and thought that it would be a good idea to get some perspective and advice from my thoughtful readers to help another reader. Be gentle! I think this could happen to many of us.

Jonathan – what would you do in my shoes:

Parents are in their late 50′s, bought a house they can’t really afford (@7% interest rate) and are going to be foreclosed on within the year.

If I co-sign/add my income to theirs, together we make enough for them to qualify for a refinance @4.5% 5/1 ARM. Possibly long enough for them to sell the house in the next 5 years and recover some of their lost equity (80% of their savings were tied up in the downpayment that has almost all evaporated).

However, I obviously take a credit hit and a significant risk if one of them can no longer make even the reduced payment. I am single, without kids, and in my late 20′s, working an average job (moderate job security).

Thanks for any suggestions – your blog has spared me the same fate as my parents.. so far.

First, I’m glad to hear that you are trying to help your parents, even though they made a significant financial mistake.

Do you live in a non-recourse state, where they can’t go after other assets if you default on a mortgage loan? Have you confirmed that you can get the new loan with the current loan-to-value ratio? Your income might be enough, but they still might reject or require another downpayment. If so, how much does lowering the interest from 7% to 4.5% lower the monthly payment? Would your parents be able to afford the new payment without assistance? How stable is their income?

In the end, I would say that if this requires large cash injections from you and not just your credit score and income verification, it is risky to bet that your home value will rebound in 5 years. It might, or it might not in such a short timeframe. If they live in a non-recourse state, I would at least explore the possibility of having your parents let the house go and get by with bad credit and the rest of their savings. Can they rent a place for a lot cheaper?

However, if they can swing the new payment with your co-signature only, perhaps it is worth a try. The hardest part is probably convincing your parents to downgrade their lifestyle and housing preference to something more realistic. It’s a tough situation. What would you do, readers?

Personal Finance Education, Delayed Gratification, and Marshmallows

Many people agree that there should be more personal finance education in school. This is supposed to be one of the keys to making the average person save more money, have less credit card debt, and invest wisely. You know, teach a high schooler the wonder of compound interest and the related trap of credit card minimum payments.

But I’ve perhaps the problem is even more basic than that. I recently ran across something called the Marshmallow Experiment by Walter Mischel. Check out this video (hat tip to Rob Garcia of LendingClub):

Here’s a quick summary of the original 1960s study. A group of four-year olds were put in a room with just a chair and a table. The kids could pick either a marshmallow, a cookie, or a pretzel stick. The child was then given an option. They could either eat one marshmallow right away, or if they waited until the researcher left and came back, they could have two marshmallows. How long could they wait? The researchers continued tracking them and found that those with the ability to wait were better adjusted, had less behavioral problems, and scored an average of 210 points higher on the Scholastic Aptitude Test.

Teaching Delayed Gratification
Along the same lines, I think a core requirement of good personal finance “education” is teaching people delayed gratification. Imagine how many adults wouldn’t be able to wait a year to get $500 versus getting $250 today. If you can exercise such self-control, then you won’t buy things on credit cards because you “gotta have it now”. You’ll be able to save money towards a retirement that may be decades away. It will be easy to spend less than you earn.

How do you teach delayed gratification? Since it would require years of practice, you’d want to start early and the responsibility would fall heavily on the parents. From an interview with Mischel in a related New Yorker article:

“This is where your parents are important,” Mischel says. “Have they established rituals that force you to delay on a daily basis? Do they encourage you to wait? And do they make waiting worthwhile?” According to Mischel, even the most mundane routines of childhood—such as not snacking before dinner, or saving up your allowance, or holding out until Christmas morning—are really sly exercises in cognitive training: we’re teaching ourselves how to think so that we can outsmart our desires.

But of course, not all parents will do that. So the problem is then how do we systematically teach children this skill in school, which is what researchers are working on now. In my opinion, that would be the ultimate in personal finance education. Because if you don’t have the ability to defer gratification, then learning about index funds isn’t going to help very much.