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Family Conversations About Money

Money can be a blessing and a challenge, and families of all shapes and sizes deal with this aspect of life. Some families handle this area more successfully than others, but as a parent, being able to have conversations about finances gives you the opportunity to impact your children, regardless of their age, in significant ways.

In general, discussing money can be one of the most challenging conversations, and the thought of talking about this with your children only adds to the problem. Even if you feel comfortable discussing hard topics with your family, knowing this topic can be daunting.

Whether you have regular discussions with your teenager about how much money they would like to have for their weekend activities, or you are talking with your adult children about dealing with college debt or a mortgage, these interactions can be prickly or even explosive.

Nevertheless, engaging in conversations about money is crucial for your family’s well-being and your children’s financial success. While there may be short-term challenges, applying some basic principles and helping your family put them into practice is a worthwhile endeavor.

Outlined below is a framework that addresses your Position, Principles to employ, and Practices you can utilize when your children live at home.

When they live at home 

Position: Teacher

When your children are at home, your primary role is to teach them wise financial principles, how they can put those into practice, and what are the lessons they can learn from their successes and failures. It’s important to note that teaching is not synonymous with telling. Great teachers ask good questions, because it helps the student (in this case your children) learn to think for themselves and apply what they learn.

Any conversation that is a dialogue, as opposed to a classroom lecture, is usually more enjoyable and effective. While it will take some extra preparation to devise a few good questions, planning with your spouse or seeking advice from those further along the journey can be beneficial.

Here are a few resources:

Regarding money

https://capitaloneshopping.com/blog/teaching-kids-about-money-9848d817c7fb

Asking open-ended questions

https://www.strong4life.com/en/parenting/communication/conversation-starters-for-kids-and-teens?s_kwcid=AL!15640!3!666932766224!b!!g!!conversation%20questions%20for%20kids

Principle:

Begin with the basics and start early as that’s when children are most impressionable and learn quickly. Make discussions about money a normal topic and try to craft a creative or fun exercise to teach them wise financial practices.

Addressing financial priorities involves allocating money based on what’s most important. In theory, this sounds obvious, but in actuality, many Americans can be short-sighted in their financial decisions. Even for parents who are strategic in handling money, it’s essential to impart wise principles to their children, because children don’t always see or understand what their parents do with their finances.

A helpful framework at any stage is:

Give | Invest/Save | Spend

Give

Even if giving isn’t a normal routine for you, it’s helpful for children to learn the value of helping others. In addition, it’s good for them; the physical and mental health benefits associated with giving (or serving) are well-documented. (Benefits of Giving: Cleveland Clinic article)

Some benefits include:

  • Boosting self-esteem
  • Elevating happiness and combating feelings of depression
  • Lowering your stress: by reducing your levels of cortisol, the stress hormone that can make you feel overwhelmed or anxious
  • Lowering blood pressure
  • A longer lifespan: studies show that people who volunteer tend to live longer than those who don’t.

Possible discussion with your child: “What would you like to give to? How can we give or serve together as a family on a Saturday morning or afternoon? “

Invest/Save 

Teach the Power of Compound Interest:

One of the most important and motivating concepts in investing is compound interest. It’s a fun lesson to teach your child, and you might enjoy learning more on this topic as well. Below are a few websites that can help. While you may need to adjust them for your child’s age, consider creating a trivia game or using coins or candy for a fun and engaging way for them to learn.

https://wealth.visualcapitalist.com/visualizing-power-compound-interest/

https://www.ramseysolutions.com/financial-literacy/teaching-compound-interest

Possible discussion for this topic: Ask your child what is a more expensive item they want and how much money they will need to save to be able to buy it. Having a separate “Save” category, distinct from “Invest,” allows them to set short-term goals as they save for something they really want.

Spend

Help Your Children Develop a Spending Plan:

For younger children, this is simply a fun discussion about what they would like to buy and how can they divide their money so they can buy several of those items.

When your children are older, and they start to ask for money to go to the movies or for gas, use this as an object lesson. Instead of giving them money when they ask for it, sit down with them a tell them how much you plan to allocate each month.

Then help them develop a plan for how much they need to set aside for gas or going out to eat with friends on the weekend or other events.

Help them realize there is flexibility with this plan. If they drove more than they normally do over a few weeks, remind them they can reallocate funds from their movie/events fund to cover gas expenses. Or maybe they can share rides with a friend and use the money they saved to go to a sporting event or a concert. (Without using the word, you’ve actually taught them how to make a budget, plus a spending plan sounds more fun anyway.)

Practice

Establish Ground Rules:

Consider giving them an allowance that’s tied to their chores. This teaches them the value of contributing to the household while also managing their finances effectively.

Guide them in dividing their money into categories to meet future needs. A suggested allocation template is 10% for Giving, 10% for Investing, 10% for Saving, and 70% for Spending.

For younger children, make their allowance a fun activity. Discuss their plans for giving or saving and after allocating the first 30%, they can choose how to use the remaining 70%.  A fun activity to accompany this is to ask them if they want to take some money from their spend category and go buy something fun as an afternoon outing.

“Seeing is believing”: If they can see their money growing it’s tangible and more motivating. For the younger children, a helpful idea is to give them a piggy bank that’s clear and also has 4 compartments (readily available online). As they see their money grow, it reinforces the importance of saving. This also allows you to be creative, as you can add money to their invest and save categories to reinforce the previous lesson of their money earning interest.

As they enter the Tween or Teenager stage, continue their allowance. Their needs will increase but so does their ability to contribute to the household. Help them apply these principles on a larger scale by opening a checking or investment account with them. As you give them their weekly or monthly allowance, assist them in planning so they have what they need at a later date.

As they grow older, teaching opportunities transition from primarily instructing to asking questions that prompt them to reflect on their decisions and consider alternatives for improvement. While setting ground rules at home can be challenging, it provides an opportunity to witness their development and prepare them well for the next phase.

While these are some beginning steps to take, throughout this process you are helping your children learn to handle money wisely. You are also building a solid foundation of having meaningful discussions on the topic of money.

To learn more about CapSouth Wealth Management and our services, visit our website  or call 800.929.1001.

Article by:  Clay Cook, Associate Advisor

CapSouth Partners, Inc, dba CapSouth Wealth Management, is an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice. This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth). CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from this article. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

 

 

 

 

 

 

 

 

Home Improvement – The Good and The Bad

The National Council on Aging recently shared a story about a scammer who targeted a homeowner in Massachusetts.

The victim alleged that a contractor damaged his home’s foundation and didn’t return to finish the work—even after taking thousands of dollars in payments.

Since 2007, around 109,000 home improvement scams have been reported to the Federal Trade Commission (FTC), resulting in about $207 million in losses in roughly the same period.

But that may just be the tip of the iceberg, since many victims of scams do not report the crime.

Sadly, scammers often seek out older homeowners, who they expect to be more trusting, wealthier, and more likely to have memory or cognitive problems.

The value of home improvement

Of course, there are many legitimate home improvement companies out there. Many businesses suffered during the pandemic lockdowns, but homeowners funneled an estimated $420 billion into remodeling projects in 2020 alone, according to Money, as lockdowns and social distancing curtailed outside entertainment.

Making improvements to your home not only enhances your enjoyment but can also increase the return on investment (ROI) if and when it is time to sell.

The projects you decide to tackle may be influenced by the ROI, your personal choices, or a combination of these and other things. For many of us, our home is the largest purchase we will make. You may want to consider ways to increase its value.

According to the National Association of Realtors 2022 Remodeling Impact Report, hardwood floor refinishing and new wood flooring provide the top return, 147% cost recovery and 118%, respectively.

Insulation upgrades offered 100% cost recovery.

Bathroom renovation and kitchen upgrades don’t top the list in terms of investment, but do improve your own enjoyment of your home. They provided 67% and 63% return on cost, respectively.

Of course, these are simply averages. Location plays a big role in the value of your upgrades. And it goes without saying that a very expensive renovation in a modestly priced house will lead to a diminished ROI.

If you are planning to sell your home, an experienced real estate agent can help you find the sweet spot between outlays and returns. Don’t think your home has to be perfect to list it; we are typically our own worst critics!

The dark side of home improvement

Home remodeling isn’t as simple as walking into Walmart or Home Depot and making a purchase. There is a high level of comfort that a major retailer will provide a good product and stand behind its warranty.

Home improvement companies, however, are everywhere and exist at every level of quality. Some are trustworthy, and their work stands out. Others are looking to make a fast buck. Quality of work isn’t a high consideration.

Then there are actual scammers who make empty promises and leave you, your finances, and your home worse off than when you started. They have one goal—take your money and leave you with little value.

Trust but verify

How can you tell if a contractor might not be reputable? According to the FTC, these behaviors are red flags:

  • Scammers knock on doors, claiming to be “in the area” looking for business.
  • Scammers claim they have materials left over from a previous job, which will save you money.
  • They pressure you into an immediate decision.
  • They ask you to pay for everything upfront and/or only accept cash.
  • They ask you to get the required building permits.
  • Scammers suggest you borrow money from a lender they know.
  • They won’t sign a contract, but insist on a handshake deal.

These seem almost obvious, but con artists don’t become con artists without learning the art of persuasion. They put you at ease. They evoke trust and your guard comes down.

Here is how it might work: A friendly home improvement tradesman might knock on your door and tell you they have noticed a problem with your house. They offer to inspect the issue at no cost and then provide a quote that seems reasonable because they just happen to have an oversupply of materials from a prior job, so they can give you a deal.

When you agree to their proposal, they insist on a large deposit or 100% payment upfront. Or they might request a payment method that isn’t common, such as an online money transfer or prepaid debit card.

Once your cash is in their hands, they disappear.

Step back for a moment and review this scenario. Somebody you don’t know knocks on your door and demands a big cash payment for work they haven’t yet performed. They would have to be pretty charming because that’s a huge red flag.

Homeowners are often targeted by scammers posing as contractors after a natural disaster, promising low-cost repairs and pressuring them to act quickly. But again, after taking the deposit, the service provider may disappear, or the work may be poorly executed or left incomplete.

Anyone can be susceptible to these scams. Following Hurricane Katrina, I served on a mission trip in New Orleans, hanging drywall in the very nice home of a real estate agent who thought he had done the right things…he had insurance, filed a claim, received the proceeds, hired a contractor, paid the contractor…and then the contractor disappeared. The stress of the crisis and perceived imminent need caused him to let his guard down regarding a questionable contractor.

Another scenario is when a project snowballs. After a contractor starts your project, they may try to persuade you that there are additional, costlier problems that require your immediate attention. If you refuse to authorize additional work, they may threaten to abandon the project, leaving it unfinished.

Another move is to intentionally perform low-quality work to ensure repeat business.

Be alert. If something doesn’t feel right, you are under no obligation to move forward.

How to avoid scammers

Here are some ways you can greatly reduce your odds of being victimized.

  • Consider only contractors who are licensed and insured.
  • Get recommendations from family and friends.
  • Check with the local Home Builders Association and consumer protection officials to see if they have complaints against a contractor.
  • Research a business online and read reviews but keep in mind that they may not be perfect. Instead, focus on the center of gravity, i.e., the bulk of reviews, and how complaints are handled.
  • Get written estimates and read the contract carefully.
  • Don’t pay the full amount up front. A downpayment will likely be required, but avoid those who want full payment upfront.

Loan scams

Remodeling projects are often financed by cash in the bank or a home equity loan.

Be careful about your financing:

  • Never agree to financing through your contractor without shopping around and comparing loan terms.
  • Never agree to any loan without understanding the terms of the loan.
  • Don’t sign a document that you haven’t read or one that contains blank spaces.
  • Don’t let anyone pressure you into signing an agreement.

Once again, let me remind you to be alert. If something doesn’t feel right, you are under no obligation to move forward.

If you have been the unfortunate victim of a scam, report the crime to your state attorney general’s office, the state’s consumer protection office, the BBB, your local media’s call for action lines, and the National Association of Homebuilders.

Many home improvement companies pride themselves on their workmanship. You can greatly reduce the likelihood of falling prey to a scam by taking some simple precautions and learning about the reputation of the company you are hiring.

Remember your advisor

We are here to help. Your advisor is not just here for periodic check-in meetings on your investments and long-range plan. We are here to do life with you and be partners with you in big decisions. Considering a home remodel? Considering selling or buying a home? Reach out to us and allow us to provide any guidance we might have on the process and how it fits into your overall picture.

As always, it’s a privilege to know that you have chosen us as your financial advisor. Thank you for the trust you have placed in us. To learn more about CapSouth Wealth Management and our services, visit https://capsouthwm.com/what-we-do/

Article by: SCOTT MCDOWALL, CFP®

CapSouth Partners, Inc, dba CapSouth Wealth Management, is an independent registered Investment Advisory firm. This material is from an unaffiliated, third-party and is used by permission. Any opinions expressed in the material are those of the author and/or contributors to the material; they are not necessarily the opinions of CapSouth. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice. This material contains external links to third party content (content hosted on sites unaffiliated with CapSouth). CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from this material. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to a third party entity.

Time is Everything

Given my profession, I’ve often wondered,” What are the most commonly used words or phrases in finance?”  What would you think?  Money, the stock market, Interest rates, rate of return, buy, sell, gains, losses? And depending on the day, some may not be suitable for mixed company, am I right? I don’t have an answer, really, and your guess is as good as mine. I would imagine time would have been one of those “also receiving votes” in the poll above, don’t you think?  The time value of money, for example. Or when’s the best time to buy or sell. The most popular use of that word, for me anyway, is when discussing timing the market vs. time in the market. It comes up quite frequently. So much so, I’ve recorded videos on the subject which have been shared with hundreds of investors. It’s that important. But this weekend, I witnessed two defining moments where time expanded the lives of some and tragically departed from others.

On a perfect Saturday afternoon in September, my wife and I traveled to a small, remote town in northwest Georgia to witness the wedding of one our best friend’s daughters. We’ll call this young bride, “Kaitlyn.”  And we’ll call her that because that’s her name.  She’s a brilliant, accomplished, and beautiful young lady who recently graduated from Auburn with honors – in three years – and all while working a full-time job. (I know, sickening.) And she’s marrying one of those “too-good-to-be-true” type of guys. His name is Garrett, of course. You know him, one of those handsome, chivalrous, strong, scraggily bearded leader-types who doesn’t need a set of pronouns to show he’s a man. (They still exist, folks.) Back to our friend. He adopted Kaitlyn many years ago and is as wonderful a father as the day is long. He’s also one of those too-good-to-be-true types – just with a little less hair and a little more weight. As the sun was setting across the hills of north Georgia, the tribute he offered to his daughter was one of those only a father of girls could deliver. A sweet glimpse of their relationship over the many years as father and daughter. He filled a paternal void in Kaitlyn’s life and became her protector, provider, care giver, and just what God knew she needed – a dad. A few memorable phrases used in his speech that evening:  There was the time, Do you remember that time, and I look forward to the time…

Fast forward 19 hours…

She was a beautiful, vibrant, young lady. A beloved daughter, sister, and cherished friend to many in the community. She was only 16 and tragically killed in an automobile accident earlier that week. And with no warning, she was gone. We attended her visitation on Sunday afternoon along with what must have been thousands of friends, family and acquaintances wanting to pay their respects. They waited for hours to love on her family and perhaps share stories of how she lived and loved so mightily.  The funeral home was adorned with hundreds of pictures of this sweet young girl surrounded by friends, families, and even one of her and her approaching homecoming date.  As we moved through the procession, I couldn’t help but think back to my friend’s speech just 19 hours earlier – There was the time, Do you remember that time, I look forward to the time.  And I imagined what questions were running through her dad’s mind at this moment. It was heartbreaking. If our world shares a common belief, it’s that parents shouldn’t have to bury their children. Children shouldn’t have to mourn their friends. And a sweet young lady shouldn’t have to lose her life. But as we’re all painfully aware, life doesn’t always work out that way. All of us will experience loss. It’s inevitable. And it’s a matter of time.

Forty-eight hours ago, this article was to have covered a vastly different topic.  But forty-eight hours ago, I hadn’t experienced a wedding and a wake. I am ill-equipped to even begin to capture the raw emotion of saying good-bye to a daughter until such time the Lord sees fit for a reunion. Each day, we witnessed two stories on this notion of time. Time spent, time hopefully to be shared again soon, and time to long for yet never get back. I’m apologetically incapable of expressing the weight that the word time carries for many families this evening. My prayer for all of us is that we’re blessed to make the most of what we have of it.

And God willing, maybe I’ll be able to write about that another time.

CapSouth Partners, Inc, dba CapSouth Wealth Management, is an independent registered Investment Advisory firm.

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