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The Abacus team updates clients on the impact of coronavirus on markets, the economy and client portfolios. The team also discusses the CARES Act.

The Coronavirus Aid, Relief and Economic Security (CARES) Act provides support for those affected by COVID-19.
Download the CARES Act PDF

Relief for Individuals

Recovery Tax Rebates

• rebates for the 2020 tax year of up to $1,200 per individual (or $2,400 for joint return filers), plus $500 per child under 17
• phase out for single individuals with incomes (AGI) between $75,000 and $99,000, and joint return filers with incomes between $150,000 and $198,000
• phased out for single individuals and joint return filers (with no children) with incomes exceeding $99,000 and $198,000, respectively
• the IRS will use the taxpayer’s 2019 tax return if filed or alternatively the taxpayer’s 2018 tax return to issue the advance tax rebate

Stimulus Payment Calculator

Deadlines for the following have been extended to July 15, 2020

• filing of federal income tax returns and federal income tax payments by individuals, estates, and trusts (usually due April 15, 2020)
• federal deadline for 1st quarter 2020 estimated tax payments has also been extended to July 15, 2020
• deadline to make IRA contributions for 2019 is also extended to July 15, 2020
• extended deadline applies to 2019 Health Savings Account, Archer Medical Savings Account, and Coverdell Educations Savings Account

Filing and Payment Deadline Q&A

Charitable contributions

• individuals may deduct cash contributions in 2020 up to 100% of their AGI with the suspension of the 60% income limitation of charitable deductions for cash contributions
• above the line deduction for cash contributions up to $300 to certain charitable organizations for taxpayers that elect not to itemize deductions
• Exclusion – charitable contributions carried over from a prior tax year (before 2020) are excluded from this temporary relief and are subject to previous limitations in the tax code
• Exclusion – charitable contributions to private non‐operating foundations, supporting organizations and sponsoring organizations to fund donor advised funds do not qualify for the modified percentage limitations for 2020

Charitable contributions – Corporations

• the percentage limitation on the corporate income tax charitable deduction increased from 10 to 25 percent of the corporation’s taxable income for 2020
• for charitable contributions by partnerships or S corporations each partner or shareholder must separately elect to use the modified percentage limitations
• any charitable contribution exceeding the limits discussed above may be carried forward and used in later years subject to certain limits

Relief for Retirement Accounts

Required Minimum Distributions waived for 2020

• 2019 RMDs due by April 1, 2020 (if delayed to January 1, 2020 or later)
• 2020 RMDs from company and plans and IRAs
• 2020 RMDs for plan, IRA and Roth IRA beneficiaries
• applies to IRA beneficiaries subject to the 5‐year rule who inherited from 2015 to 2020, the 5‐year rule becomes a 6‐year rule

Required Minimum Distributions taken this year can be undone if they are eligible to be rolled over. To be eligible:

• must be within 60 days
• there must not have been an IRA‐to‐IRA or Roth IRA to Roth IRA rollover in the 12 months preceding the receipt of the 2020 RMD
• non‐spouse beneficiaries cannot undo RMDs already taken (since they cannot do a 60‐day rollover)

QCDs

• if all or part RMD was transferred to a charity as a QCD, amount excluded as income
• once an IRA owner reaches age 70 1/2, they can still do a QCD whether they are subject to RMDs or not

Retirement account distributions – additional relief provisions for “affected individuals”

• the 10% early withdrawal penalty is waived on distributions up to $100,000 from qualified retirement accounts for coronavirus related purposes made on or after January 1, 2020
• distributions may be recontributed within three years from the date the distribution without regard to annual contribution limits
• tax is due, but the taxable income related to the distribution can be spread over three tax years
• affected individuals not subject to the 10% penalty can still take advantage of the three‐year income tax deferral and payback

Loans from employer plans

• maximum loan amount increased from $50,000 to $100,000 (up to 100% of account balance)
• applies to loans 180 days from bill’s date of enactment
• payments on loan may be delayed for a year

Unemployment Compensation

Unemployment Compensation

• regular state unemployment benefit increased by $600 a week for up to 4 months
• extension of regular benefits extended 13 extra weeks
• extends benefits to a group (self‐employed and independent contractors) that typically don’t qualify for assistance
• elimination of first week waiting period

U.S. Department of Labor Resources
South Carolina Unemployment Insurance Q&A

Small Business Provisions

Paycheck Protection Program Overview

• loan designed to provide direct incentive for small businesses to keep their workers on the payroll
• eligible recipients may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount
• up to the lesser of 2.5 times your average monthly payroll for the last 12 months, or $10 million dollars
• up to $100,000 per employee
• loan payments deferred for six months with interest accruing
• provides funds to pay up to 8 weeks of payroll costs including benefits
• funds can also be used interest on mortgages, rent, and utilities (incurred or in service before February 15, 2020)
• no collateral or personal guarantees required
• no government or lender fees
• loan has a maturity of 2 years, can be prepaid without penalties and fees
• interest rate of 1%

Maximum Loan Calculator
US Treasury Fact Sheet

Eligibility

• small businesses with 500 or fewer employees (including sole proprietorships, independent contractors and self‐employed persons), affected by coronavirus/COVID‐19. Note ‐ some industries with more employees may qualify under certain circumstances.

How to apply

• program open until June 30, 2020, however, apply quickly due to funding cap (banks currently taking pre‐applications)
• lenders may begin processing applications on April 3, 2020 (small businesses can apply April 3 and self‐employed April 10)
• review the sample Paycheck Protection Program loan application and gather the required documentation
• loans are obtained through current SBA approved banks and FDIC lenders

Find a Vendor

Documents needed to apply

• evidence of business start date (Tax ID issuance and LLC formation documents)
• payroll Records from the last 12 months.
• annual profit/loss statement

Loan forgiveness

• borrowers must submit request for loan forgiveness to lender
• SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities
• at least 75% of the forgiven amount must have been used for payroll
• forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels
• forgiveness will be reduced if full‐time headcount declines, or if salaries and wages decrease

Other considerations:

• consider also applying for the EDIL at SBA.gov now that they have a streamlined application and you may qualify for the forgivable $10,000 grant (you may be able to have both the EDIL and the PPP depending on your expenses).
• if you have multiple businesses, you can apply for a separate loan for each entity since each loan will correspond with a unique federal Employer Identification Number (EIN)

Small Business Guide and Checklist

Employee Retention Credit for Employers Subject

• businesses and non‐profits that do not receive Small Business Administration (SBA) loans eligible for forgiveness may be entitled to claim refundable credits against their quarterly payroll tax liabilities.
• eligible employers can receive a credit against payroll taxes equal to 50% of wages paid to employees not working due to the business’s mandatory COVID‐19 related shut down or for experiencing more than a 50% decline in gross receipts compared to the same quarter in the prior year.
• the quarterly payroll tax credit applies to the first $10,000 in aggregate wages per employee (per year). The employee retention credit applies only to wages paid after March 12, 2020, and before January 1, 2021.

Payroll Tax Deferral

• payroll tax deferrals apply to all employers, with no requirement to show specific COVID‐19 related impact
• defers the employer share of payroll taxes from the period beginning on March 27, 2020 and ending December 31, 2020.
• the deferred tax liabilities are to be paid 50% by December 31, 2021 and the other 50% by December 31, 2022.
• you cannot take advantage of this program if you take advantage of the loan forgiveness portion of the Paycheck Protection Program.

Net Operating Losses (NOL’s)

• allows for a five‐year carryback of NOL’s and eliminates the 80% of taxable income limitation for NOL’s that arose during 2018, 2019 and 2020 by businesses.
• the carryforward period for NOL’s remains unchanged.
• businesses will be allowed to carryback the 2018 NOL five years, to amend or modify returns back to 2013 in order to take the carryback claim.
• eliminates the excess business loss limitation rules related to pass‐through entities and sole proprietors for the years 2018, 2019 and 2020

Business Interest Expense Limitations

• increases the limitation to 50% from 30% of the taxpayers adjusted taxable income for 2019 and 2020
• the 2019 taxable income amount may be used for the 2020 limitation if you elect to do so

Qualified Improvement Property Technical Fix

• it corrects a TCJI error and defines life of qualified improvement property to 15 years, retroactively, for property place in service after 2017 allowing bonus depreciation to be taken on this special class of asset

X. Alexandra Chastain

The Abacus investment team updates clients on the fast moving coronavirus and its impact on markets, the economy and client portfolios.

Charles B. Flowers

“Facing death with a sense of practicality, equanimity, and clarity is the ultimate gift you can leave your children, friends, and loved ones.”
– Coventry Edwards-Pitt, Aged Healthy, Wealthy & Wise

Mrs. Edwards-Pitt continues by saying, “one of the very kindest things a person can do for his or her family for emotional peace of mind is to contemplate how he or she would like the end of life to unfold and to communicate those wishes openly, honestly, and uniformly with every family member who might have an emotional investment in the outcome.” Abacus believes this advice also includes funeral and burial wishes.

While no one wants to dwell on his or her own immortality, your death is inevitable. You do not have control over the time or circumstances of your death; however, you can exert control over your future by planning the way in which your loved ones remember and celebrate you. Arranging these details ahead of time is a gift to your family and friends when they are aware of your post-death wishes. Having a road map takes the stress of making tough decisions away from your loved ones and gives them a sense of serenity and peace of mind when mourning your loss. A pre-determined plan also makes it easier for your loved ones to be in agreement about your wishes. Have the difficult conversation and record your wishes to ensure your family and friends understand and can execute your plan.

Have the conversation.

Talking about your death and funeral and burial plans can feel scary and difficult. However, a talk around these issues before a sickness or illness is easier for planning since there are no “extra” emotions for the parties involved. How should you begin the conversation around your post-death wishes? Determine whether or not your family would rather have a more formal or informal discussion. You may want to schedule a family meeting in which you review all your wishes, or you may opt to have an informal conversation by mentioning another person’s death and how that circumstance has made you think about your own plans.

Record your wishes.

Write down what you want. A template form like Funeral and Burial Wishes from beginthediscussion.org is a place to start. Make sure you tell your family where your decisions are recorded. The location, such as a filing cabinet, USB drive or fire-proof safe, should allow for easy access after your passing. You may wish to consider the following as you make your plans:

Write the obituary.

Many individuals choose to write their own obituary. If you are not comfortable with this task, consider listing items you wish to be featured in your obituary. Create a list of newspapers or websites where the obituary is to be published.

Funeral or memorial service.

Do you wish to have a funeral or memorial service? Name individuals you wish to be involved in making the arrangements. Designate a location for the service.

• Will the service be religious or secular? Would you like a viewing or wake?
• Do you want an open casket (or closed) if you are buried?
• If there will be pallbearers, whom do you want to serve?
• Do you want speakers at the service?
• Do you want flowers at the service?
• What music or songs would you like played?
• Do you want any scripture or readings?
• Do you want friends and family to send flowers, or would you prefer memorials be sent to a certain organization(s)?

Burial service.

Do you want to be buried? If yes, think about the following:

• Do you want to be embalmed or not?
• List the location of the plot in the chosen cemetery. Make sure to include original paperwork for ownership of the plot.
• What color and type of casket would you like? In what clothes do you wish to be buried?
• Record what you would like listed on your tombstone.

Do you want to be cremated? If yes, consider the following:

• Do you want to be interned? Include documentation for ownership of space at a columbarium or mausoleum.
• Do you want your ashes scattered? Include specific details and/or maps of locations where you want your ashes spread.

Hopefully making these decisions around funeral and burial wishes will give you a sense of control over your life. Pre-planning is truly a gift as your loved ones are able to remember you peacefully and celebrate your life during an emotionally charged time.

Laird W. Green

No matter where you live in the United States, there’s a good chance you’ll have to deal with one or more natural disasters or severe weather events. Each part of the country experiences at least one peril or another. Some states have hurricanes or tropical storms, while in other states it’s tornadoes, snow, hail, floods, earthquakes, or some combination of events.

South Carolina survived the 1,000-year flood of 2015 and was dealt back-to-back “blows” by Hurricanes Florence and Michael in late 2016. These events left mass destruction behind for our residents and Insurance CAT teams, FEMA, military and red cross were deployed to our state. South Carolina is not alone: remember hearing the names Harvey, Intra, Marie and Nate? Remember the loss of $5,700 homes and businesses during the wildfires in Northern California? Across the country we see extreme weather events and natural disasters causing mass destruction and loss. The National Climate Assessment stated “warming-charged extremes have become more frequent, intense, widespread or of long duration.”

How does the insurance industry respond to extreme weather events?

In the short term there will likely be an immediate increase in rales, followed by higher deductibles and limitations on coverage in the longer term. According to William Kelsey, president of the Housing Partnership Insurance Exchange,”… the insurance market was overdue for an upward correction. Homeowners in some high-risk areas could face big increases and, in some areas, may have difficulty getting insured at all There is a growing concern about what climate change may bring, which may soon put more upward pressure on insurance rates.”

While the insurance industry may be more short- term and sales focused, the reinsurance industry which insures the insurers, is thinking long term and pays attention to computer modeling, trending and forecasting. If the re-insurers raise their rates, insurance companies will have to either absorb the cost or pass it along to their customers.

Insurers could redraw the risk maps, which could also affect your premium rates. If you live in an area affected by recent storms or fires, it may already be designated high-risk zone and you may already be paying more for your insurance. But in newly affected areas of the country, conditions are changing, and your property may be designated as high risk in the future because of recent increased extreme weather events; higher risk equates to higher premiums. Considering recent extreme weather events, we may see insurance carriers tighten underwriting, as well as the terms end conditions of the policy.

What’s your zip code?

When it comes to weather- related events and your risk, where you live matters. In the Southeast, we are well acquainted with floods, hurricanes, thunderstorms, and tornadoes- all which are relatively common occurrences. Damage to your home that follows a thunderstorm or tornado will probably be covered by a typical homeowners policy, while you’ll need to have separate policies to insure against other weather-related risks.

What about hurricanes in the Southeast?

Homeowners in the Southeastern states are at risk of being hit by a hurricane at any time between June to November. A basic homeowners’ policy will not cover flood-related damage, even if the flooding is caused by or happens during a hurricane. As a result, consider a separate flood policy or an endorsement to add flood as a covered peril to the homeowners policy. For example, if you insure your home dwelling for $200,000, and the policy has a 5-percent deductible, then you will have to pay for the first $10,000 of hurricane-based claim before your insurer will begin paying your claim.

It is not unusual for these kinds of deductibles to be divided into two separate categories, with one focusing on hurricane-specific damage and the other focusing on damage that’s tied to other storms or events that involve heavy winds.

Here come the flood waters, am I covered?

Floods are the most common of all the natural disasters in the United States. Homeowners insurance usually doesn’t cover damage caused by flooding. If your home is in a high-risk area, and you obtained your mortgage from a federally regulated or insured lender, you’ll be required to buy flood insurance through the National Flood Insurance Program. If you live in a moderate- or low-risk area, you are not required to have Flood Insurance.

Besides private insurance companies, the federal government offers flood insurance coverage through the National Flood Insurance Program.

If you are interested in learning about Flood Insurance or find out if you are in a Flood Zone, visit www.floodsmart.gov to learn more. If you are interested in purchasing Flood Insurance speak to insurance agent about purchasing this coverage. It is likely if you live in a Flood Zone that the insurance company will require an Elevation Certificate. Flood Policies have a 30- day waiting period which means you cannot go out and purchase a Flood Policy today and have it in place tomorrow. Flood Policies, unlike your all perils deductible on your Homeowners Policy, have separate deductibles few each dwelling there are two types of Flood Insurance; Primary Flood Insurance and Excess Flood Insurance.A Primary Flood Insurance Policy typically offers $250,000 of coverage for your dwelling (home) and $100,000 for your personal property (contents). Excess Flood policies can be purchased for additional protection.

What about earthquakes?

South Carolina earthquakes occur with the greatest frequency along the coastline of the state with an average of 10-15 earthquakes a year below magnitude 3. The largest was the Charleston Earthquake of 1886 which measured at 7.3 magnitude.

Damage caused by an earthquake is not covered by your standard homeowners insurance policy. The more recent versions of a standard homeowner policy have very limited coverage for household water damage-leaks and pipes-and expressly exclude coverage few a flood event and any type of earth movement.

Earthquake insurance coverage is expensive, and premiums are rising. Less than 10 percent of the state’s residents carry coverage against the earth moving beneath their property, according to Russ Subisky of the S.C. Insurance News Service. Earthquake Insurance policies typically have a percentage of the dwelling limit deductible. For example, if your home is insured for $250,000 dwelling limit and you have a 10% deductible, then your responsibility for any claim damages would be $25,000. The closer your home is to a fault line or sits on soil types with greater exposure to loss in an earthquake, the more limited insurance options you may find available because of the extreme risk of earthquake loss.

While it is still difficult to attribute individual weather events to climate change, experts predict such extreme weather to occur more often. In the United States, disasters hit highly populated areas which increases the cost of such events. Think supply and demand of resources. These weather events not only affect the property owner, but also directly affect the insurance industry.

Karlyn M. Jones

A family meeting is simply a gathering of family members who are all impacted by or involved with an issue. You might have a family meeting to review mom’s estate plan, to craft a plan for your aging parents’ health care, to stage an intervention for a family member struggling with addiction, or to discuss family business planning. As you can imagine, the agenda and planning for each of these different types of meetings looks different, but there are some steps you can take to support success for any type of meeting.

What makes a family meeting successful?

Do your homework before the meeting. The host should take time with individual family members prior to the meeting to understand their goals and priorities, share necessary planning information, and address “hot buttons” that could derail success.

Create an agenda. Set realistic time frames for each topic. Ask different family members to lead portions of the meeting to increase participation and energy for the discussion.

Share the meeting goals with attendees so everyone has a clear vision of the meeting purpose.

Be thoughtful in scheduling the meeting time and location. Christmas morning probably isn’t the right time. Find a neutral location where all attendees will feel comfortable and welcome.

How would a family use the family meeting ground rules?

Families can use the ground rules as is or as a starting place for creating their own rules of engagement. Share the ground rules with the family before the meeting so everyone understands expectations. Some families find it helpful to assign different family members the role of “policing” certain rules. For example, maybe one family member can help others to be mindful of frequently checking their phone or email during the conversation. Another family member might listen for people making “we” statements when an “I” statement would be more honest and direct.

The ground rules aren’t necessarily everyone’s natural tendencies, expect that it might take a little practice to make these ground rules part of standard family interaction.

What else might families consider when thinking about family meetings?

Families, especially those with a family business or shared assets, may find it helpful to spend the time to craft a family mission statement. A family mission statement allows the family to articulate shared goals and values and can serve as a guiding point for structuring governance or a decision-making policy.

Families who learn to communicate and make decisions together build the trust which is necessary for family unity and long-term success.

1. Be present
2. Be respectful in words, body language, and action
3. Listen
4. Be patient
5. Own your views as your own
6. Be willing to edit what you say so it comes across better
7. Tolerate tension in yourself and in the group
8. Avoid indirect communication

zzzBethany M. Griffith

With spring upon us, nearly 3 million college students are preparing to proudly accept their hard-earned college diplomas and storm the “real world.” With their ambition, ingenuity, and creativity, many of these graduates are bound for success and will truly make an impact for good on the world.

If you count yourself as one of these, congratulations! You will soon discover that life after college is full of opportunity for both professional and personal growth. First, though, let’s talk about what you need to know when it comes to managing your finances:

1. A budget is your buddy.

When you hear the word “budget,” maybe you shudder. Perhaps a budget sounds constraining. Actually, a budget can be your best buddy when it comes to living as a responsible adult. By deciding in advance where you will spend your hard-earned money, you create freedom for yourself by being in control. Many great budgeting apps are available, such as Mint and Wally.

2. We all have bad luck — build your emergency fund.

No matter how well you plan, the unexpected is inevitable-your dog gets sick, your car transmission fails, or you drop your iPhone into the river while taking a selfie. You need a pot of money set aside to cover emergencies so that you avoid using credit cards and going into debt. The rule of thumb is to keep 6 months of expenses in your emergency fund. If that seems daunting, start with 2-3 months and build from there.

3. Don’t ignore your student loans.

You may be graduating with student loan debt, and if so, you are not alone—nearly 70% of students will graduate this year with student debt. Check your original promissory note for your repayment terms, build your monthly loan payments into your budget, and stick to those payments. If you have multiple loans, consider consolidating the loans into one so you’ll have just one payment to make each month. You may be eligible for an income-based repayment plan which—not surprisingly—bases your payment on your income instead of requiring you to pay a fixed rate which may be disproportionate to your starting salary. Some companies even help their employees pay student loan debt, so ask your Human Resources department if any options exist.

4. It’s never too early to save for retirement.

I know what you’re thinking: you are only graduating from college and I’m talking about retirement YES! While your employer provides your paycheck today, one day you will need to pay yourself, and you absolutely cannot wait until then to figure it out. Most employers offer a 401(k) or other employer-sponsored retirement plans in which you can put away a percentage of each paycheck. Many employers also provide a matching contribution of 3-5% into the plan. Take advantage of this match by putting away an equivalent percentage—otherwise, you are leaving “free” money on the table.

5. Don’t skip renter’s insurance.

You will likely rent a place to live as you get started, and it’s important to protect yourself from theft, property damage (like a fire), or someone being hurt at your rental property. Renter’s insurance is the answer, and many people don’t realize how inexpensive it is. Let’s say someone breaks into your home and steals your new MacBook Pro. For an average cost of $12 a month for insurance (equivalent to a couple of your favorite fancy drinks at Starbucks), you could be compensated by the insurance company for your loss. It’s a trade-off worth making.

6. Appoint an advocate — sign a healthcare power of attorney.

No one likes to think about getting into a severe accident, but it can happen. If you become seriously hurt and are unable to make healthcare decisions for yourself, you will no doubt want someone who knows you well to make medical decisions on your behalf. If your parent isn’t the right person for you, choose another trusted adult, like an aunt, uncle or older sibling to serve as your healthcare power of attorney. Each state has its own form for designating an agent. You can easily find yours through an online search.

7. Knowledge is power — stay educated about your finances.

A plethora of advice is at your fingertips. LeamVest.com is one great resource with short blog posts on money, life, career, and debt. If you want to read more about building wealth, consider The Millionaire Next Door, by William D. Danko.

8. You’ve earned this — treat yourself.

You will likely work hard for your paycheck-maybe harder than you once thought! Don’t forget to do something special for yourself (within your budget). Perhaps it’s a yoga class, a gym membership, or a nice dinner out with friends at a new restaurant Whatever you choose, do so with gratitude for the money you have earned.

Leaving the safety and structure of college can be a bit daunting, but it’s also exciting. Allow managing your finances to be an experience that creates good habits, healthy decision making, and personal rewards. You get to be in control, and you will do great Good luck!

Ann J. Beckwith

Years ago, Abacus’s Founder, Cheryl Holland’s 13-year-old daughter asked to manage her own clothing budget. Cheryl knew she had a teachable moment, but dollars and clothes and a teenager raised any number of worries. Cheryl had visions of watching her daughter walk to school wearing flip flops in the winter aer spending sensible shoe money on a party dress. Together, they set a budget and created a list of items to purchase from the budget. Of course, the 13-year-old made mistakes, such as purchasing pricey jeans that she outgrew within the year (with no parental rescue for new ones).We all understand that mistakes have value, especially for children. Cheryl’s daughter became savvy about shopping sales, gained confidence in her financial skills, and, most importantly, the family had more meaningful conversations about money.

I, too, am anxious that my children develop the skills to have healthy money habits as adults; where do I start?

Abacus recommends thinking about developing your children’s financial skills in age-appropriate stages. As Joline Godfrey discusses in Raising Financially Fit Kids, match the 10-basic money skills listed below to the developmental capacity of your child. Godfrey’s book provides guidance on responsibilities and practical activities for each stage.

Stage 1 (ages 5-8)

Children are learning about sharing with others and the difference between right and wrong. Children can count dollar bills and coins. They can understand the purpose of money and can perceive the difference between needs and wants.

Stage 2 (ages 9-12)

Children are changing in many ways. Children can make change and balance a checking or savings account. Children can understand what items costs vs. how much money they may have in their bank account. Children can make value decisions around purchases.

Stage 3 (ages 13-15)

Children begin to learn to think independently. Children begin earning money at this age and can understand their bank statements and interest earned in savings accounts. Children learn to compare prices to save money on one item so that they can spend more on another item or put more money towards saving.

Stage 4 (ages 16-18)

Children can think more logically and plan thoughtfully. Children can read and understand their paycheck. Children can link their goals to savings. Children understand investing basics.

Should my child earn an allowance or receive an allowance; what is your professional perspective?

Parents achieve the highest success teaching their children valuable money skills when parents provide an allowance which is not tied to chores or behavior. Allowance is a tool to help children learn about finances. Parents should determine what amount of allowance they deem appropriate at each of the stages. Children should be guided to spend, save, and give some of their allowance each week or month. Whatever decisions children make about their allowance is theirs to make. Not making smart decisions during these stages will help strengthen their financial skills.

Creating a plan to empower children with strong financial habits can be a daunting and overwhelming task, especially if your parents did not teach you about finances. But with guidance and care, each family can create financial literate children.

1. How to save
2. How to get paid what you are worth
3. How to spend wisely
4. How to talk about money
5. How to live within a budget
6. How to invest
7. How to exercise the entrepreneurial spirit
8. How to handle credit
9. How to use money to change the world
10. How to be a citizen of the world

Laird W. Green

As a 27-year-old financial advisor, between my friends and clients, I am frequently questioned about whether or not to the rent or buy. Owning a home has many benefits. Who doesn’t want to customize a house and take pride in the home they have created? Being a homeowner is also a rite of passage into adulthood and a symbol of financial well being. However, a common misconception is that renting is throwing money away, and owning prohibits this waste of money. This may or may not be true, depending upon your circumstances.

A rent vs. buy analysis is not a one-size fits-all deal. Each individual’s or couple’s decision will be unique to their circumstances. The following analysis is an illustration of the cost (or benefit) of renting vs. buying in a general scenario for someone in our area. The following variables will be used in the analysis. (Note that rounding may cause some calculations to appear off by one or two dollars.)

House Price

$215,100 (9/30/2017 median sales price of existing homes in the South)

Mortgage Rate

3.83% (National average for 30-year mortgages for the week ended 9/28/2017)

Property Tax

0.57% (Per the tax foundation, South Carolina’s average property tax rate)

Repairs and Maintenance

1% of home price each year (Rule of thumb: will be less in some years and more in others)

Homeowner’s Insurance

$75/month (Per Zillow, approximately $35 a month per $100,000 of home value)

Rent

$80l/month (Per census bureau, the average rent in the South was $725 as of 12/31/2014. Rent increased 1.6%/year in the South from 12/31/2009 – 12/31/2014. I assumed rent grew and would continue to grow at 2% from 12/31/2014 – 12/31/2021, and I took the average rent from 12/31/2016 – 12/31/2021 of $801.)

Marginal Tax Bracket

25% (Under current legislation for 2017, this tax bracket ranges from $37,950 – $91,900 single and $75,900 – $153,100 married filing jointly.)

Utilities

Equal to renter’s insurance.

Life Insurance

Equal to renter’s insurance.

These variables pass the eyeball test as reasonable assumptions here in Columbia. If you make a 20% down payment on the house of $43,020, your total monthly bills for ownership would be $1,161 ($805 mortgage payment + $102 property taxes + $179 repairs and maintenance + $75 homeowner’s insurance). Those bills are actually reduced by $438 when you consider $156 of tax deductions for interest expense and property taxes and $281 equity being built by mortgage payments,* which gives you a true cost of ownership of $724 a month compared to $801 a month for renting (or $77 of monthly savings). That means ownership provides annual savings of $924!

While $924 a year is a material amount of savings, you made a down payment of $43,020. That $924 is only a 2.15% annual return on $43,020. That’s not a fantastic return—and over the financial long-term horizon of 30 years, you will likely do better in the stock market Also, I assumed a 20% down payment, which means you avoid mortgage insurance. Banks are willing to lend you money for a mortgage for less than a 20% down payment (20% down). However, to lend you money at less than 20% down, a bank will require you to purchase and maintain private mortgage insurance until you own 20% of the house. Private mortgage insurance costs about 0.5% of the home’s value each year.

On the other hand, if you were to only put 10% down, your cost of ownership would increase from $724 a month to $833 after the larger mortgage payment and the introduction of mortgage insurance, which is more than the $801 monthly cost of renting—and would cost you a $21,510 down payment! From a purely financial standpoint, this is certainly a situation to avoid.

The Tax Cuts and Jobs Act (TCJA) has roughly doubled the standard deduction. For individuals for whom the above scenario applies, that likely means you will no longer itemize deductions, causing you to lose out (or largely lose out) on the mortgage interest and property tax deduction, raising your monthly cost of ownership to $880 in the 20% down scenario (and to $1,026 in the 10% down scenario). The TCJA almost exactly reverses the cost of ownership in the 20% down scenario from a $924 annual benefit compared to renting, to a $948 annual cost compared to renting. Note this change does not necessarily mean you will owe more tax, it simply means the direct tax benefit of a home purchase is replaced by a higher standard deduction, which can be received by home purchasers and renters alike.

Look closely at your personal financial situation when making a rent vs. buy decision. Also, be sure to weigh the non-financial benefits of each alternative when making your decision. However, do not purchase a house under the assumption you are throwing money away by renting because that might not be the case. Home purchases are the largest financial decisions most people make. As with any large long-term financial decision, consult with a trusted professional when making a home purchase decision.

*Based an average monthly interest expense and principal payment in the first 5 years of the mortgage.

William R. Jeter