Annually, the United States Government invests millions of dollars in protecting consumers from abusers who commit fraud daily. Regularly, the most severely affected in this type of situation are the young and the elderly, and why is that? These abusers take advantage of a person’s vulnerability and lack of education about financial products and services.
Financial fraud encompasses a lot of things, but a perfect example is the famous saying “to give a pig in a poke.” This saying reflects exactly what financial fraud is. It’s buying something to solve problem A when yours is problem B.
Here are some examples:
- A lady buys life insurance when her intention was buying an education fund for her children.
- A man buys a mutual fund that automatically charges annual fees, aside from the cost of councel.
- An old man buys life insurance as a pension fund without understanding the risk.
These are all examples of people who definitely didn’t know the concept of financial fraud, giving the scammers a chance of committing any kind of fraud with them.
Not everything’s like this, there are many good financial products, very capable people in the industry and great solutions to your financial questions. In the end, the majority have been made to help, but when these products are sold by claiming to be other products, when they’re not explained properly or have hidden costs, this is called fraud.
But how can we avoid them? Here are some tips:
Ask about fees and annual and total costs: Knowing that we all have to make money in some way, it’s important to understand how the person who is selling you the product will get paid. Remember that money affects behavior.
Understand the product well: Before signing for that product you’re so interested in, try to explain it to someone close to you. If you can’t do it and don’t understand it entirely, don’t buy it!
Ask about penalties before the agreement: sometimes a product must be valid for 10 years before it’s worth something, or if it’s paid as a fixed term deposit, you’ll lose a large part of your profit. Another case is having to pay a penalty if you cancel it. All these things must be clear before placing your signature on any purchase contract.
In the same way that you work hard to get a patrimony, you must work hard to keep it and protect it. Start with yourself, start educating yourself and learn how to protect yourself, your money, your effort and your family.