5 Biggest Shocks Teens Get When Learning about Personal Finance: Lessons from a High School Economics Class

May 18, 2016

Parents of high school students get a chill when credit card applications first begin appearing in the mail addressed to their child. They worry whether their son or daughter is ready for the responsibility.

Dr. Bennie Waller
Dr. Bennie Waller


Judging from the confusion that Bennie Waller sees among the teens who come to his personal finance course, parents may have reason to be concerned.

“Until you are the one paying the bills, it’s difficult to understand the value of money,” says Professor Waller, director of the Longwood University Center for Financial Responsibility. “Young people today seem to have a lot of misconceptions about money that we need to change to help them get started off on the right personal and professional foot.”

In Virginia, every high school student is required to take a one-credit course in economics and personal finance to graduate. Longwood University is working with more than 20 schools across the state in delivering a dual-credit course (FINA250), allowing students to satisfy their high school requirement while also getting transferable college credit.

“The students we see are motivated students, many from honors programs,” says Dr. Waller. “And yet still their eyes are opened by what they learn about credit, loans and economic and financial issues.”

Here are the 5 biggest lessons learned by students in Personal Finance 250, according to Professor Waller.

The impact of student debt lasts far longer than expected.

While most student loan plans are meant to be repaid in ten years, recent research says the average student loan debt lasts for 21 years or more. This is analogous to a mortgage payment.

“Student loans are often seen as an easy means to an end, says Professor Waller. “But dragging high student loan debt for two decades can mean putting off buying a home or other big purchases. That is something many kids don’t think about when deciding how much to borrow for college.”

Paying your bills on time isn’t enough to get a good credit score.

While not paying charges for cell phone or electric bills on time can hurt a credit score, staying current won’t necessarily help when it comes time for a loan to buy a car or a home.

“Even a very high credit score is not valuable without a good credit history,” says Professor Waller. “It requires managing the right kind of debt wisely.”

Making minimum payments on credit cards can really cost you.

Credit cards are convenient and even a necessity in an increasingly cash-free, online economy. However, until you do the math, credit card charges can hide the true costs of purchases.

“When we look at a $10,000 credit card balance with a 21% interest rate, we see it will take more than 50 years to pay off when making only minimum payments,” says Professor Waller. “And statistics show that as many as 90% of people only make the minimum payment. That one really opens some eyes.”

A high credit score is about more than a good loan rate.

On TV, many companies today are selling the importance of monitoring credit scores. But what many young people don’t realize is how important a credit rating is to so many things, whether it is looking to get a loan or purchase insurance.

“For example, most insurance companies use credit scores to help determine rates,” says Professor Waller. “The belief is that if you are taking bad risks in your finances then you are more likely to be risky behind the wheel.”

Monthly payments are only part of the picture when getting a loan.

The moment a car is titled, the average automobile loses as much as 20% of its value. But that hasn’t stopped more and more people from financing auto loans over longer periods of time. After all, the monthly payment for a $25,000 car financed over five years is about the same as a $16,000 car paid for over three years.

“Too many people, even adults, think that if they can afford a monthly payment they got a good deal on the loan,” says Professor Waller. “What they don’t consider is the cost of  thousands of dollars more in interest they will pay over the additional years.”

Longwood is able to work with high schools to offer the dual-enrollment Personal Finance 250 course across the Commonwealth. For more information go to http://cfr.longwood.edu.

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Pricey Gas Leads to Lower Home Prices

Pricey Gas Leads to Lower Home Prices

When the cost to fill a tank is high, real-estate agents won’t drive as far to market a property, concludes a paper by faculty at Longwood University and Florida Atlantic University

A rise in gas prices can drive up the cost of everything from a gallon of milk to a cup of coffee. But it can reduce the cost of buying a home.

For every $1 increase in gas prices, home prices drop by $4,060, according to a working paper from faculty at Longwood University and Florida Atlantic University.

This effect is even more pronounced when a relatively inexperienced agent is handling the sale: The study finds that in such cases, a $1 rise in gas prices translates to a roughly $6,600 decline in house prices.

What accounts for this phenomenon? In part, says study author Bennie Waller, professor of finance and real estate at Longwood, high gas prices may lead agents to market properties less aggressively. Specifically, when prices are high, agents may try to minimize the miles they drive in showing homes.

A high gas price is “a fixed cost for all agents, but older agents can spread it out over lots of transactions, whereas younger, less experienced agents don’t have a lot of transactions to spread those fixed costs over,” he says.

Dr. Waller and his co-author, FIU professor Ken Johnson, looked at 17,122 homes listed for sale on a central Virginia MLS between 1999 and 2009, correlating this data with average monthly per gallon gas prices for Virginia as reported by the U.S. Department of Energy. Over the period studied, gas prices averaged $2.34 per gallon and ranged between a low of $1.11 and a high of $4.12.

Should sellers go to market before gas prices rise? No rush, says Timothy Hess, a petroleum markets analyst with the U.S. Energy Information Administration. According to agency projections, per gallon prices will average around $2.42 in 2015 and around $2.38 in 2016.


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Longwood University chosen as site of Vice-Presidential Debate

Once again, history will be made at Longwood.

The Commission on Presidential Debates has named Longwood to host the single vice‑presidential debate for the 2016 election.

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What will the U.S. housing market look like in 10 years?

HSH’s Standout Innovators and Thinkers

What will the U.S. housing market look like in 10 years?   It’s a surprisingly provocative question. Before the recession, the answer might have been wildly – and incorrectly – optimistic. Today we know better, but we also lack a crystal ball. To help separate hype from reality, we asked some of the most influential and innovative thinkers in the field of real estate, mortgages and housing economics about their forecasts and ideas. Internationally sought-after experts, they spoke of accelerating affordability issues, rising mortgage rates, a greater role for the rental versus ownership market, better natural disaster planning, and much, much more. To explore the future of homeownership in America, click on a profile below.  What’s your take on what housing will look like in 2025? Let us know your thoughts in our comment section.

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Area gas prices falling sharply

Area gas prices falling sharply – The Daily Progress: News

Area gas prices falling sharply

By Chris Suarez The Daily Progress

Anyone planning a late-summer road trip with serious mileage might be in luck — gas prices in Virginia and throughout the country are declining to some of the low levels that were seen at the beginning of the year and in 2009.

This time, however, the falling prices — nearing $2 per gallon — are not the sign of an impending financial crisis, as the overall economy is faring better than it did during the Great Recession.

Analysts attribute the plunge of gas prices nationwide to the declining price of oil, which had started to slide drastically last year, going from $107 a barrel last summer to as low as $43.46 in March.

The decline in gas prices this summer, however, has been fairly acute, as the price for a barrel of oil dropped by approximately 20 percent in July to similar lows vendors dealt with over the spring. Since early last week, oil was being traded for less than $50. The peak price of oil for the year, $61.43 a barrel, was reached June 10.

 “This could mean people saving more money that can be used to go out to restaurants or see a movie,” said AAA Mid-Atlantic spokeswoman Tammy Arnette. “As people usually go on vacation around this time of year, it also means people might make longer trips.”

There’s a variety of reasons why oil prices are down, but the main reason is the glut of oil reserves the U.S. holds, Arnette said.

“There’s been so much production that’s put downward pressure on the market,” she said.

Arnette also mentioned the recent nuclear deal with Iran is likely to increase supply globally, as Iran has been sitting on large oil reserves for several years due to trade sanctions.

Across Virginia’s metropolitan areas, most gas prices are rapidly slipping beneath $2.50 per gallon. On Monday, the average price for a gallon of self-service regular gas in Charlottesville was reported to be $2.38, a drop of 8 cents from last week, according to the AAA Daily Fuel Gauge Report.

In August 2014, the national average was at about $3.50 per gallon and $3.21 in Charlottesville. Since then, the national average has dropped by about 85 cents to $2.65 per gallon.

People planning a driving trip for the holiday season might have even better luck than motorists traveling this summer, as prices could sink below $2 a gallon, according to analysts.

GasBuddy.com senior petroleum analyst Patrick DeHann said Virginia’s gas prices historically have been lower than the rest of the country and neighboring states because of the relatively low gas taxes passed on to wholesale fuel sales.

“The big difference in gas prices is in the regions — for example, the Atlantic, the Gulf and West Coast,” DeHann said.

“The prices within these regions should be about the same, but those price differences are found in the taxes,” he said, using the roughly 30-cent price discrepancy between Virginia and Pennsylvania as an example.

But even with a bump in the state gas tax this year from 3.5 percent to 5.1 percent per gallon in wholesale transactions, prices in Virginia are still expected to be some of the lowest nationally.

Despite national news reports of increased sales of SUVs and pickup trucks, the Virginia Automobile Dealers Association does not expect lower gas prices to cause an increase in Virginia auto sales overall.

“People know that gas prices are cyclical,” said association spokesman Tucker Bloom, adding that sales are still expected to be positive, but not as good as when the recession ended initially and consumer confidence returned, increasing demand.

The real estate market could get a boost from the lower gas prices, however, according to Bennie Waller, a professor of finance and real estate at Longwood University.

By reviewing real estate data from 1999 to 2009, Waller and other researchers found a correlation for quicker closings on real estate listings when gas prices were low.

“There are multiple reasons for our conclusions,” Waller said, “People have more disposable income and consumer sentiment is better, but ultimately, real estate agents were inclined to show multiple properties to more people more often.”

Barring an environmental or manmade emergency that would severely hamper oil production or refinement, prices are expected to steadily continue dropping off even if demand for gas spikes, Arnette said.

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Eight Experts Weigh in on Managing Student Debt

Eight Experts Weigh in on Managing Student Debt

So what’s the best way to deal with student loans?

According to Bennie D. Waller, Chair of Accounting, Economics, Finance and Real Estate as well as Director of the Center for Financial Responsibility at Longwood University, it starts before graduation day. Students need to think about the demands of their chosen careers, and if the cost can really be justified.

“Students need to first consider taking on too much student loan debt in conjunction with their choice of degrees/career. [They] should resist borrowing if expected salaries of their degree does not substantiate the amount of student loan debt they are considering. For example, many students want to be an actor, but very few ever make it to Hollywood. How can they best decide? Cost/benefit analysis.”

Full Article here

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An Iran deal would help drivers – and homesellers

Virginia Pilot
Philip Walzer
July 9, 2015.

Whatever happens in Iran and Greece, gas prices almost surely will fall during the remainder of the year, analysts say.

That will benefit not just drivers, but also homeowners looking to move, according to a Virginia researcher.

A drop in gas prices pumps up the average sales price of a house while slicing the time it takes to sell it, said Bennie Waller, a professor of finance and real estate at Longwood University.

Full story

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Are You Ready to Own Your First Home? 6 Questions to Ask Yourself Now

Are You Ready to Own Your First Home? 6 Questions to Ask Yourself Now

NEW YORK (MainStreet) — If you feel like it might be the right time to finally buy your first home, your excitement is probably mixed with a bit of apprehension. After all, owning a home is a huge financial commitment, from paying that pricey down payment to keeping up with monthly mortgage bills. And without a landlord to call, you’ll also be taking on a slew of new responsibilities to maintain the home and property (think raking leaves, shoveling snow and fixing leaky sinks). Of course, owning a home can offer many attractive benefits, including increased space and privacy and the ability to build wealth over time.

How can you determine whether you’re ready to take on the responsibilities of homeownership? We asked a handful of real estate and financial experts to weigh in. Here are six key questions they suggest asking yourself now.

Can you cover upfront costs?

Hopefully you’ve been socking away your hard-earned cash over these past few years because you’ll face some expensive upfront costs when purchasing a home. For starters, you should have enough money saved to cover a 20% down payment in order to secure the best possible interest rate on your mortgage and put yourself in the best negotiating position with your lender, says Bennie Waller, a professor of finance and real estate at Longwood University in Farmville, Va.

Full Story here

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The Closer the Broker, the Quicker the Close

The Closer the Broker, the Quicker the Close
Homes Closer To Brokers’ Offices Sell Faster – WSJ

Proximity to your real-estate agent’s office can translate to a faster sale, a Journal of Housing Research study finds

Homes Closer To Brokers’ Offices Sell Faster – WSJ

It is well known that location is key to selling real estate. Ocean views, a good school district, access to transportation—each can boost a home’s marketability.

Now add to the list proximity to your agent’s office.

A recent study in the Journal of Housing Research from faculty at Longwood University in Farmville, Va., finds that for every mile between a property and its listing agent’s office, average time on the market goes up 0.36% and the overall likelihood of selling goes down 0.5%.

Read full story

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Getting the Most Out of Your Home Inspection

Getting the Most Out of Your Home Inspection

Buyers should check the credentials of the home inspector they’re hiring, especially if the inspector comes recommended by their real estate agent. If a home purchase deal falls apart because of problems found in a home inspection, the agent won’t sell the house and earn a commission, says Bennie Waller, a professor of finance and real estate at Longwood University in Farmville, Virginia.

If there are concerns about a specific system — such as a pool, HVAC unit or septic system, for example — then it can be worth the extra cost to hire an expert, Waller says.


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