Apple CEO Defends Company's Offshore Tax Policy

Posted today at 11:52am

Justin Sullivan/Getty Images(WASHINGTON) -- Apple CEO Tim Cook, in Washington, D.C. to answer questions about his company's avoidance of billions of dollars in U.S. taxes, told a Senate hearing the tech giant followed the law and "comprehensive tax reform" must be passed to even the playing field for multi-national companies.

In his testimony, Cook called for a simplification of the U.S. corporate tax code that will allow the "free flow of capital back to the United States."

"We not only comply with the laws, but we comply with the spirit of the laws," said Cook, whose company has more than $140 billion in cash parked overseas.

Cook was accompanied by Apple's chief financial officer and senior vice president Peter Oppenheimer and the company's head of tax operations, Phillip Bullock.

The testimonies of Cook and Oppenheimer followed the first panel, which included testimony from J. Richard Harvey and Stephen Shay, law professors at Villanova University School of Law and Harvard Law School, respectively.

During the first panel, Sen. Carl Levin, D-Mich., and Sen. Rand Paul, R-Tenn., exchanged stern words regarding the hearing hosted by the permanent subcommittee on investigations, which Levin chairs.

"Frankly, I'm offended by the tone and tenor of this hearing," Sen. Paul said, adding he was offended by the government "bullying and berating" one of America's "greatest success stories." After Paul said the committee should apologize to Apple, Levin said Paul was welcome to apologize to Apple himself.

Levin questioned the nature of Apple's holding companies abroad, which own Apple subsidiaries.

Bullock said interest earned abroad is subject to U.S. taxes, while Levin pointed out particular foreign holding companies under Apple do not file corporate taxes with the United States.

Sen. John McCain, R-Ariz., asked whether Cook was "dragged" to the committee, which Cook denied with a laugh.

"I think it's important that we tell our story," he said.

McCain asked whether Apple has an unfair advantage over domestic-based, smaller companies that are not able to have holding companies abroad.

"No, sir, that's not the way that I see it," Cook said, explaining Apple's profits earned outside the U.S. are not taxable in the U.S., which is why Apple set up holding companies abroad beginning in 1980 before the iPad, iPhone, or even the first Mac computer.

"The way that I look at this, there is no shifting going on," Cook said.

On Monday, Apple released an advance copy of Cook's testimony. Its 17 pages of self-defense are clear, blunt, and unambiguous: Apple, Cook declares, "does not use tax gimmicks." It pays "an extraordinary amount" in U.S. taxes -- nearly $6 billion last year, making it "likely the largest corporate income tax payer in the U.S." Its effective tax rate last year, he says, was approximately 30.5 percent.

Cook implies that Congress, intent on removing a speck (figuratively speaking) from Apple's eye, may perhaps have overlooked the 2-by-4 in its own: an outdated tax code.

"Apple," he says, "welcomes an objective examination of the U.S. corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy."

He went on to recommend reforms.

Referring to the way Apple manages to lessen its U.S. tax bill by moving money around overseas, he concludes: "While some Subcommittee members may have differing views on these tax policy matters, Apple hopes the Subcommittee will see that these recommendations aim to create meaningful change and go well beyond what most U.S. companies propose."

On Monday night, the subcommittee took a swing at Apple by releasing a 40-page memorandum, which, after a 16-page highlights-reel, gets down to business, asserting that Apple has used a variety of "offshore structures, arrangements, and transactions to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than 2 percent."

"One of Apple's more unusual tactics," says the Subcommittee, has been "to establish and direct substantial funds to offshore entities that are not declared tax residents of any jurisdiction."

These entities are, in effect, corporate men-of-the-world.

One such entity, Apple Operations International, which was established in 1980, says the memo, is currently sauntering about with $30 billion in its pocket. Yet, during the four years during which it earned that sum, it "paid no corporate income taxes to any national government."

While the subcommittee stops short of accusing Apple of having broken any U.S. law, it finds the company to have circumvented the U.S. Tax Code's Subpart F, whose purpose is "to prevent multinational corporations from shifting profits to tax havens to avoid U.S. tax."

So adroitly has Apple peeled Subpart F, says the memo, that from 2009 to 2012, it managed to avoid "$44 billion in taxes on otherwise taxable offshore income."

On Monday, ABC News quoted Sen. John McCain as saying: "Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America's largest tax avoiders."

Subcommittee chairman Sen. Carl Levin, speaking Monday with reporters, said that while Apple might be a golden goose, it had played fast and loose with some of its eggs.

"It's like saying you haven't shifted the golden eggs offshore," Levin said, "after you've shifted the golden goose offshore."

Copyright 2013 ABC News Radio

Microsoft to Reveal Xbox 360 Successor

Posted today at 11:23am

Microsoft(NEW YORK) -- After eight years on the shelves and having sold some 70 million units, Microsoft's Xbox 360 is finally getting a successor on Tuesday.

The Xbox reveal comes a bit late to the party as the last of the big three home console makers to announce a new system. Exactly three months ago on Tuesday, Sony introduced the PlayStation 4, which will be out this holiday season and Nintendo released its Wii U late last year.

So what does Microsoft have to put on the track in the forthcoming gaming console race? We'll get details on Tuesday at Microsoft's event in Washington state at 10 a.m. PT/ 1 p.m. ET.

In the meantime, here is a guide as to what you can expect:

New Hardware

No, this isn't just another one of Microsoft's software-updates-to-Xbox events. The company is expected to show off the new Xbox hardware, which is said to be powered by an eight-core AMD processor and a very powerful graphics processor.

Codenamed "Durango," the console, gaming site Kotaku reports, will have 500GB of storage space, 8GB of RAM and USB 3.0 connectivity. It might have a Blu-ray drive.

Kotaku also reports that the Kinect camera and sensor, which attaches to the Xbox now to put players in the games, will be upgraded to a full 1080p sensor. The site adds that Kinect, which ships separately now, will be included with every Xbox. The Verge reports that it will also have advanced voice command functionality.

No word on what the controllers will look like and if they will rival Sony's DualShock 4 Controller.

Less likely -- but still possible -- features may include an augmented reality headset that looks something like a cross between Google Glass and the Occulus Rift. This theory emerged after documents leaked last summer, pointing to AR on the roadmap for Xbox.

Microsoft Research has also been experimenting with a projection device called the Illumiroom, which may factor into its plans to transform the next generation of living rooms into fully immersive environments.

A New Name

"Durango" is but one of many codenames the next Xbox has gone by, and while the final name is still up in the air, the Internet has had a field day with guess-work.

Reddit seems to believe that Xbox Infinity (or jokingly, xfinity) will be the triumphant title. "Xbox 720" has been kicked around as the logical successor to the 360 name, though fans, developers and domain registration documentation has also posited NextBox, Loop, Xbox 8, Kryptos and Yukon as potential nomenclature.

New Gaming Services

Of course, that new hardware will enable some really stunning gaming graphics. Similar to the PlayStation 4 event, we expect Microsoft to demo the next-generation gaming platform with some graphical oohs and aahs.

Microsoft has said that it won't be detailing the launch titles until the E3 gaming show in June, but all signs point to them showing off at least some Microsoft-created games -- like Kinect Sports -- to exemplify the graphics.

There's speculation that the next Xbox would require an Internet connection or an always-connected state. With that, we expect there to be talk of social or connected gaming.

New Content and Video Services

But those that think the Xbox is just a gaming console should think again. Microsoft is bound to focus on the entertainment and content aspects of the hardware that lives in the living room.

While there are already a number of media services integrated into the Xbox 360, including streaming video services and content stores, there are greater reports that Microsoft wants to take over the cable box.

According to The Verge, a feature will allow it to integrate with a cable or set-top box, allowing it to display your cable content alongside other Internet content.

And in keeping with that always-on theme, an online connection will allow for more streaming and always-connected TV services.

WATCH: Yahoo, Tumblr CEOs Dish on Merger

Posted today at 11:05am

ABC News(NEW YORK) -- Yahoo CEO Marissa Mayer says she's not worried about the adult content on her new acquisition -- Tumblr -- and she'll make sure that people who don't want to see it won't.

Meanwhile, 26-year-old Tumblr CEO and co-founder David Karp will stay on, and he's growing more comfortable with the notion of advertising on his mostly ad-free site.

Mayer and Karp made the comments on ABC's Good Morning America Tuesday during their first broadcast interview since the $1.1 billion acquisition.

In announcing the deal on her very own Tumblr account, Mayer vowed "not to screw it up." She promised to let the network of 50 billion blog posts function independently.

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World Nutella Day? Not So Fast, Company Says

Posted today at 10:46am

Simon Dawson/Bloomberg via Getty Images(NEW YORK) -- Ferrero, the Italian company that makes Nutella, has scrapped a superfan's global tribute to the chocolaty spread. Sara Rosso started World Nutella Day back in 2007, dubbing February 5 the day Nutella's legions of fans can celebrate the stuff.

However, after years of fans sharing recipes and their love for the hazelnut and chocolate spread on her site NutellaDay.com, Ferrero slapped Rosso with a cease-and-desist letter, legally warning her from posting about the trademarked name or using its logo again.

World Nutella Day has 40,000 fans on Facebook and nearly 7,000 followers on Twitter.

On NutellaDay.com, Rosso posted, "On May 25, 2013, I'll be darkening the World Nutella Day site [and] nutelladay.com," calling, the cease-and-desist letter, "a bit of a surprise and a disappointment."

She explained that "over the years I've had contact and positive experiences with several employees of Ferrero...and I've always tried to collaborate and work together in the spirit and goodwill of a fan-run celebration of a spread I (to this day) still eat."

Copyright 2013 ABC News Radio

JPMorgan Shareholders to Vote on Separating Dimon's Roles

Posted today at 7:46am

Andrew Harrer/Bloomberg via Getty Images(TAMPA, Fla.) -- A shareholder showdown is scheduled Tuesday at the annual meeting of JPMorgan Chase in Tampa, Fla.

A vote is expected on a proposal to separate the jobs of chairman and CEO at the big bank. If the effort -- which was started by several large pension funds -- is successful, it would be a major blow for Jamie Dimon, who now holds both jobs.

Under Dimon’s watch, JPMorgan has been more profitable than most other banks; its share price held up very well despite the 2008 financial crisis.

But last year’s “London whale” trading losses on risky trades exposed the bank to widespread criticism and federal investigations.

Some corporate government experts say JPMorgan needs a more independent board with better risk controls.

Top 14 Jobs That Don't Require a College Degree

Posted today at 5:20am

Medioimages/Photodisc/Thinkstock(NEW YORK) -- While one's earning potential increases with a college degree, you don't necessarily need to spend $40,000 a year for a diploma for a job that pays as much.

Jobs search site CareerCast.com released a list of 14 of the best jobs without a college degree.

Tony Lee, publisher of CareerCast.com, said opportunities for high school grads and post-high school training are increasing.

CareerCast.com pulled the 14 jobs from its 200 Jobs Rated Report, which uses data from the Department of Labor and Bureau of Labor Statistics. The site judged the jobs on criteria, including environment, income, stress and outlook, or expected employment growth through 2020, as forecast by the Labor Department.

The highest-paid job by median salary in this year's list is web developer, which has a median salary of $75,660.

"Web developer has really taken off as a career for computer-savvy job seekers who either are self-taught or took a few college-level courses but didn't graduate, and who are comfortable enough with their skills to make a meaningful contribution," Lee said. "Demand is so great in this field that not having a college degree isn't a huge turn-off to many employers, especially the smaller start-up firms."

Here is a list of CareerCast.com's best jobs that don't require a college degree, in order of median salary:

1. Web developer
Median Salary: $75,660

2. Communications equipment mechanic
Median Salary: $54,710

3. Electrician
Median Salary: $48,250

4. Paralegal assistant
Median Salary: $46,680

5. Plumber
Median Salary: $46,660

6. Industrial machine repairer
Median Salary: $44,160

7. Glazier
Median Salary: $36,640

8. Automobile body repairer
Median Salary: $34,660

9. Administrative/executive assistant
Median Salary: $34,660

10. Bookkeeper
Median Salary: $34,040

11. Pest control worker
Median Salary: $30,340

12. Skincare specialist
Median Salary: $28,920

13. Receptionist
Median Salary: $ 25,240

14. Hair stylist
Median Salary: $22,500

Gas Prices Jump Across the US

Posted yesterday at 6:17pm

iStockphoto/Thinkstock(WASHINGTON) -- Gas prices across the country are still rising ahead of one of the year's busiest travel weekends. The weekly average price of a gallon of regular gas is $3.67, up 7 cents from a week earlier, according to data from the Department of Energy.

The biggest price jump in the country has been recorded in Minnesota, with a record high of $4.29, a rise of 43 cents in the just the last week.
Minnesota is ground zero for the high prices with a record high of $4.29, a rise of 43 cents in the just the last week. Other Midwestern states and parts of the Rockies are also seeing big spikes because of refinery outages and the mandatory switch by gas stations over to summer fuel blends to comply with federal clean-air standards.

This price rise can significantly increase the price of a summer trip. Filling up your gas tank for a drive from Minneapolis to the Grand Canyon could cost up to $200 more today than it would have a month ago.

There may be some relief on the way though. As the summer gets going, prices are expected to start coming down in June. For now though it will be a pricey holiday weekend at the pump, likely the most expensive since 2011.

While prices remain high some tips on how to save:

Keeping your car out of the sun can, in fact, help you save some gas, this keep the gas from evaporating out of your tank.
Also pump only when you need to and skip the mini fill ups because you end up wasting time gas hopping.
Finally skip the AC when not on the highway. This will help you get the best mileage out of your car.

Yahoo! Gives Flickr a Makeover

Posted yesterday at 6:07pm

David Paul Morris/Bloomberg via Getty Images(NEW YORK) -- It's a big day for Yahoo. A few hours after announcing its $1.1 billion acquisition of Tumblr, Yahoo announced some major updates to its Flickr photo-sharing service.

"Tonight is about Flickr," Yahoo CEO Marissa Mayer said at an event in New York City Monday evening. "It is about that other 'R' brand and how we can make Flickr awesome again."

To that end, Yahoo announced three main changes to Flickr: a cleaner design, a new Android app and much more storage space than any competing photo service offers.

The new design scraps all the white space and blue links for large photos. Every user profile has a full-lead image or a cover photo, and below that a user's large photos are displayed in a grid. When users visit other profiles, they will see the same layout. There's also a photo stream page, which will bring in photos from people you follow.

Those big photos are a crucial part to the new parts of the service, Mayer and SVP of mobile products Adam Cahan said Monday evening. Those photos are uploaded in full resolution. "We never want you to compromise a single pixel at Flickr," Cahan said from the stage.

While Facebook and other photo services compress photos when uploading, Flickr will upload the full resolution image -- every pixel at the full size, no degradation. Google announced last week that its photo service, which is integrated into Google Plus, will also allow users to view and upload full-resolution images taken on phones or with digital cameras.

Yahoo, however, is planning to stand out from Google in one key way when it comes to photos. Yahoo will offer everyone a full free terabyte of storage space to users. Google offers 15GB of free space; it charges $49.99 a month for a terabyte of space.

"No other tech company has ever offered a terabyte of storage," Cahan said. A terabyte, which Yahoo says is basically like offering unlimited storage, can house more than a half a million photos (537,731 photos to be exact).

Yahoo plans to roll out the new features Monday at Flickr.com and release a new Android app. The company also plans to remind people about Flickr, which was once a very popular photo-sharing service before the days of Facebook, with a new marketing campaign. The advertising efforts will kick off with 11 billboards in New York's Times Square.

Mayer, who took over as CEO of Yahoo in July 2012, has worked to turn the company around. In addition to the Tumblr acquisition, which is her largest acquisition to date, she has announced refreshes to Yahoo Mail and Flickr's iPhone app.

Copyright 2013 ABC News Radio

Senate Probe Finds Apple Avoids Billions in Taxes

Posted yesterday at 4:23pm

Feng Li/Getty Images(WASHINGTON) -- A new Senate investigation has found that Apple Inc. has used a complex web of offshore companies – particularly three in Ireland – to avoid paying billions of dollars in U.S. income taxes.

Apple executives will visit Capitol Hill on Tuesday to respond to the findings contained in a 40-page review by the Senate Permanent Subcommittee on Investigations. It is the first time CEO Tim Cook and the Apple executives will have appeared before a Senate committee.

The committee is releasing its findings to build support for a major overhaul of the nation’s tax code.

The company is not accused of breaking the law, but rather using loopholes in the American tax code.

“It’s like saying you haven’t shifted the golden eggs offshore after you transferred the golden goose offshore,” Sen. Carl Levin of Michigan, chairman of the committee, told reporters late Monday at the Capitol.

The Senate committee, which conducted similar investigations last fall of Microsoft and Hewlett Packard, accused Apple of shifting profits overseas by using a cost-sharing agreement to transfer intellectual property offshore.

The investigation found that Apple negotiated a tax rate of less than 2 percent with the government of Ireland – far lower than the normal rate of 12 percent. An Irish subsidiary of Apple, which was not registered as paying taxes anywhere, had sales totaling $74 billion from 2009 to 2012.

“Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders,” Sen. John McCain said on Monday. “A company that found remarkable success by harnessing American ingenuity and the opportunities afforded by the U.S. economy should not be shifting its profits overseas to avoid the payment of U.S. tax, purposefully depriving the American people of revenue.”

The findings of the investigation were set to be released at 7 p.m., but Apple sought to get ahead of the report by releasing its testimony Monday. In a 16-page response, Apple vigorously defended its business practices and described its company as “likely the largest corporate income tax payer” in the country — with $6 billion in 2012 alone.

“Apple does not use tax gimmicks,” the company said in a statement. “Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the U.S. in order to avoid U.S. tax.”

While Apple will be singled out at the hearing on Tuesday, it is hardly the only company that keeps its profits off-shore.

A JPMorgan report found that more than 1,000 U.S. companies have an estimated $1.7 trillion in earnings overseas. Apple has reported having $145 billion in cash, but analysts estimate the company only has $45 billion available in the United States.

Stocks Clip Recent Rallies, Close Lower

Posted yesterday at 4:19pm

Hemera/Thinkstock(NEW YORK) -- Investors on Monday took a timeout from the bull market. Declining stocks in the same top-performing sectors pulled the markets down.

The Dow Jones Industrial Average lost 19.12 points, or 0.1 percent, closing at 15,335.28 Monday. The Nasdaq Composite closed off two points, or 0.1 percent, at 3,496.43. The S&P 500 fell 1.18 points, or 0.1 percent, to 1,666.29.

The major markets rallied over the last week with help from strong corporate earnings, with the Dow climbing 1.6 percent, and the Nasdaq and S&P adding 1.8 percent and 2.1 percent, respectively.

As for this week, investors are likely cautious ahead of Federal Reserve Chairman Ben Bernanke's testimony to Congress on Wednesday. They'll be looking for signs that the Fed's easy monetary policy may be ending -- a factor that's been driving stock indeces to record highs.

Meanwhile, Yahoo! shares advanced following reports that the company is buying the popular blogging site, Tumblr, for $1.1 billion. The move is intended to attract more advertising and younger users for the internet company.

Copyright 2013 ABC News Radio

Yahoo! Buys Tumblr for $1.1 Billion

Posted yesterday at 4:15pm

FRED DUFOUR/AFP/Getty Images(NEW YORK) -- Yahoo! is investing big time in social media. The company announced on Monday that it has purchased Tumblr, the popular blogging and social media network, for $1.1 billion in cash.

"I'm delighted to announce that we've reached an agreement to acquire Tumblr!," Yahoo CEO Marissa Mayer announced on her own Tumblr blog Monday morning.

Mayer stresses in her Tumblr post and in an official company statement that Yahoo will "not screw it up," meaning Tumblr. The company plans to keep the platform an independently operated business with David Karp, the Tumblr's founder and CEO, remaining on.

Tumblr allows users to create their own blogs, follow other blogs on the network and like them, and reblog posts.

"We're not turning purple," Karp announced on Tumblr's official Tumblr News page. "Our headquarters isn't moving. Our team isn't changing. Our roadmap isn't changing. And our mission -- to empower creators to make their best work and get it in front of the audience they deserve -- certainly isn't changing."

While Yahoo promises not to change Tumblr's product, the companies will now work together to create advertising opportunities. Mayer also says that the companies together will create a very large media network.

"On many levels, Tumblr and Yahoo! couldn't be more different, but, at the same time, they couldn't be more complementary," Mayer said in a statement. "Yahoo is the Internet's original media network. Tumblr is the Internet's fastest-growing media frenzy."

Mayer, 38, took over as Yahoo CEO in July 2012 after over 10 years at Google. At Yahoo she is aiming to turn the company around, investing heavily in mobile products and reinvigorating current products, including Yahoo Mail. She has also overseen the acquisition of other companies, including Summly, Astrid and GoPollGo.

Tumblr, however, will be the largest Yahoo acquisition to date under Mayer's stewardship. She and the Yahoo Board, which voted on the acquisition over the weekend, are hoping Tumblr is one of the answers to making the company a real tech player again.

Founded in 2006, Tumblr has just 175 employees and has become an extremely popular blogging and social media network. According to Tumblr, 90 million posts are posted on Tumblr every day, with 900 posts per second. There are a total of 100 million blogs on the service.

Food Delivery Services GrubHub, Seamless to Merge

Posted yesterday at 4:10pm

GrubHub/Seamless(NEW YORK) -- It's late, you didn't have time to make dinner, and now you're in the mood for sushi. Chances are, you reach for your phone, fire up either the Seamless or GrubHub app, sort by restaurant, select your meal, place your order and wait for the delivery person to knock on your door.

Soon, those two food app companies will become one. Seamless and GrubHub announced Monday that they will be merging.

However, that doesn't mean the apps themselves will become one, at least for now.

"We have the luxury of having two amazing brands right now. Honestly, we don't have plans to consolidate brands at this time," Matt Maloney, CEO and co-founder of GrubHub, told ABC News. "We are looking to position ourselves as a combined unit within this massive industry."

The deal still awaits regulatory approval to become final.

Maloney will become the CEO of the combined company, while Seamless CEO Jonathan Zabusky will serve as president. The name of the combined company or the terms of the deal have not been released yet.

So why combine the companies if not for making the ultimate food takeout app? Maloney said it's all about driving more business to restaurants and creating a better experience for takeout fiends.

"The concept here is you have two companies which are very complimentary, solving much of the same problems on the same day," he said.

He pointed out that Seamless has built an "incredible iPad app," but GrubHub's tablet app for those looking to order from home isn't great. GrubHub, on the other hand, has in-restaurant tablet technology, which Seamless doesn't. The two companies can take advantage of the other's technology.

Additionally, the acquisition will expand the respective restaurant networks of both services. Those looking to order food in 500 cities across the U.S. to will be able to order from 20,000 local takeout restaurants under the combined company.

Other companies like Delivery.com and ChowNow are much smaller.

According to GrubHub and Seamless, last year the online and mobile platforms of both companies sent approximately $875 million in food sales to restaurants, resulting in combined revenue of over $100 million.

Ultimately, though, Maloney said, it's about the future of food delivery -- getting those sushi rolls faster and in a new way.

"We are going to be able to do some really cool stuff to redefine online ordering," he said.

Copyright 2013 ABC News Radio

Dominos Brazil Tests Smellvision in DVDs

Posted yesterday at 2:50pm

iStockphoto/Thinkstock(NEW YORK) -- If you’re traveling in Brazil, pop in a DVD and find yourself crazing pizza, then Domino’s has you right where they want you.

Domino’s independent franchisees in the South American country have partnered with an ad agency there to use DVDs embedded with the scent of pizza to lure in movie watchers.

Ten discs available in ten video rental stores throughout Sao Paulo and Rio de Janeiro will carry the unmistakable scent of pizza, thanks to the discs being stamped with thermal ink and flavored varnish, according to the trade publication Advertising Age.

When the discs heat up in the DVD player, so too does the thermal ink and varnish, so when the movie watcher ejects the DVD, they get a whiff of a pizza-like smell along with it.

The DVDs look like mini pizzas and contain the tagline, “Did you enjoy the movie? The next one will be even better with a hot and delicious Domino’s Pizza.”

The “smellvision” DVDs are only being tested by Domino’s in Brazil. A spokesman for the Michigan-based pizza chain says home movie watchers and Domino’s lovers in the U.S. can rest their noses.

“These are independently owned stores in Brazil and this is a program they’re doing in that country for those stores,” the spokesman told ABC News. “We wish them well and hope it is successful.”

Copyright 2013 ABC News Radio

Three Easy Financial Lessons for Your Kids

Posted yesterday at 2:48pm

iStockphoto/Thinkstock(WASHINGTON) -- It's graduation season. Did your teenager have to take a financial literacy course to don that cap and gown? Probably not.

According to the Council for Economic Education, as of 2011, 22 states required high school students to take an economics class -- the "supply and demand" type, not the "how to balance your checkbook type." Only 14 states offered personal finance as a high school class, either on its own or as part of the economics curriculum.

In a recent Credit.com telephone survey conducted by GfK Roper, more than 60 percent of parents said U.S. kids are not learning enough about how to manage their own money. More than 90 percent said they want financial literacy to be a mandatory high school course.

So why don't these parents teach their kids financial responsibility themselves? Because they don't think they can. When the National Foundation for Credit Counseling asked adults to grade their financial knowledge, 41 percent said they would give themselves a C, D or F.

Here are three tips from ABC’s Good Morning America consumer correspondent Elisabeth Leamy to help parents get started:

1. Don't take stuff that's not yours.

That's the kindergarten version. Here's the high school version: Don't buy stuff with money that's not yours. In other words, when you go off to college in the fall and you're offered all sorts of shiny credit cards, take a polite pass. Credit card debt is devastating. Save up your own money to buy your own stuff.

2. Be on time.

In kindergarten, we learn the importance of getting to class punctually so we don't get marked down. In high school, kids should learn the importance of paying their bills on time, so they don't get marked down. "Payment history" makes up the single biggest chunk of your credit score, 35 percent. That means simply paying your bills on time boosts your score tremendously and yet many adults believe paying late is no big deal. If you're a procrastinator, automate your payments to come straight out of your checking account so you get this right.

3. Get a good report card.

In kindergarten you get a report card. As an adult you get a credit report. Your credit report is a history of all your financial transactions and how well you handled them. Did you take on too much debt? Did you pay on time? You then get a credit score of between 300 and 850 based on that report. Your credit score is a numerical predictor of how likely you are to pay your debts.

Banks prefer to lend money to people with scores of 720 and above, so that's what we should all try for. Why? Because having a lower score costs you money. More math: If you have a credit score of 720, you can get a car loan at about 6 percent. If your score is 620, just 100 points lower, your interest rate will be about 12 percent. Over the course of a 3-year loan, for $25,000, the lower rate will save you $2,736 in interest!

A good credit score is crucial. And yet when EverFi, an education technology company, asked high school students what a good score is, most said 500 and more than a third believed 300 was a good score! Yes, yet another survey -- one of dozens I found as I researched this column. If we spent half as much time teaching kids financial literacy as we do studying their lack of it, that would be a start. And we can start with those basic lessons we all learned in kindergarten.

Copyright 2013 ABC News Radio

Survey: US Economy Expected to Grow Through 2014

Posted yesterday at 5:36am

Comstock Images/Thinkstock(NEW YORK) -- The economy is expected to pick up strength between now and the end of 2014, according to the latest outlook survey from the National Association for Business Economics (NABE).

"The panelists are estimating 2.4 percent growth in real GDP (gross domestic product) from the fourth quarter of 2012 to the fourth quarter of 2013 and they suggest an improvement in real GDP growth to 3 percent in 2014," says Dr. Nayantara Hensel, chair of the NABE Outlook Survey Committee.

Hensel says the 49 panelists surveyed are more upbeat about consumer spending, the housing market and unemployment.

"The panelists are predicting an improvement in the unemployment rate for this year and next year, in fact they're suggesting that by the fourth quarter of 2013, the unemployment rate will be at 7.4 percent, by the fourth quarter in 2014 it will be at 6.8 percent," she says.

But they see one area of concern: government spending cuts.

"The panelists suggest an even stronger decline in government spending this year relative to last year, which negatively impact GDP growth," Hensel says.

"The economy only grew about two and a half percent in the first quarter of this year and in large part that was because of the sharp 11 and a half percent drop in military spending," she notes.

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