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As We Move Forward

8/30/2021

 

Advantages of Using a Debit Card Over Other Forms of Payment

 

Young girl sitting in a cafe, and shopping online using her debit card.

Many are still of the mindset that “cash is king” or that credit cards are the best form of payment to use because of the various reward programs they promote. However, debit cards do have several advantages that once considered, might have you rank them as the best option in your wallet.

First and foremost, they offer a form of discipline that is highly beneficial in today’s debt heavy society. The amount a consumer can spend with a debit card is the amount available in their account. Too often with a credit card, purchases are made with the intent to pay back the charge at a later date, only to accrue interest and eventually insurmountable debt. The appeal of accumulating points or miles is negated by the added interest and fees that easily build up from utilizing open credit. Using a debit card forces one to limit purchases or prioritize what is necessary for the funds allotted so as not to overspend, avoiding such a scenario. Debit cards can be customized to have daily, weekly or monthly limits so budgets can be followed as strictly as one would like. Debit cards are a great tool to avoid overspending and maintaining a budget.

A debit card also offers peace of mind should it be lost or stolen. If your wallet was stolen, any cash inside could be used without a trace and a credit card can be swiped several times before you have a chance to alert the credit card company. However, in order to use a debit card, a PIN is needed, imposing another obstacle for the thief. This allows you to cancel the card before it can be used fraudulently. In addition, all fraudulent charges would be refunded by your financial institution, protecting you further.

Debit cards currently also offer reward programs for their consumers. Points and funds can be chosen to go to cancer research or travel, just like a credit card. Debit cards can be used in any transaction a credit card can, and it is much more convenient to carry than any amount of cash. Also, most banks offer debit cards without fees as opposed to many credit cards that charge yearly fees.

Lastly, you do not need to worry about filling out an application or the state of your credit score to receive a debit card. Poor credit will prevent you from receiving a credit card but funds in a checking account will guarantee you a debit card. Overall, a debit card offers the same protection and perks as a credit card without the interest, fees and typically accrued debt that results from utilizing a credit card. A debit card is also much safer than cash and more convenient.


8/11/2021

New Child Tax Credit Payments 

Father and son sitting on sofa in lounge reading a book together.

Effective July 15 2021, important changes have been made to the Child Tax Credit. These changes include monthly payments per child through the age of 17 for qualified families for the tax year of 2021. A portion of the advance Child Tax Credit will be made directly to qualifying parents through monthly checks. The remaining payments will be applied when qualifying parents file income tax returns. The IRS has set-up a site to provide information that assists qualified parents with determining and where necessary registering for advance Child Tax Credit payments. The IRS online tool is available at https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021. You can also go to www.IRS.gov for answers to questions related to the changes made to the Child Tax Credit in 2021. 

It is important for parents to beware of schemes trying to have them sign up for the Child Tax Credit on illegitimate sites. Scammers are always trying to find ways to steal personal information. To educate parents about these scammers, the IRS has launched a site providing tips on how to spot and avoid scams related to the advance Child Tax Credit payments. The site is located at https://www.irs.gov/newsroom/dont-fall-for-tax-scams-about-the-child-tax-credit-youtube-video-text-script. Parents should avoid anyone asking them to verify their personal information, by phone, text, email or social media, with the purpose of qualifying for the advance Child Tax Credit payments; this is a scam and not the IRS. Remember the IRS does not leave pre-recorded message. The IRS will not leave a voicemail stating that there is a warrant issued for someone’s arrest. The IRS does not leave a message on a phone. All of these are scams and are not from the IRS. 

The advance Child Tax Credit payments are intended to assist with the financial expense associated with everything from the cost of food, diapers, school supplies and other living expenses. It can also be used as savings or for unexpected emergencies. 

No matter how the child tax credit payments are utilized, the goal is to improve the lives of your family by providing additional funds to the family budget. 

Important Note: Nothing in this article constitutes investment, tax and/or financial advice. All investments have risk and may not be suitable for everyone. You should seek advice from an independent financial or tax advisor. The mention of products, services and business in this article does not constitute an endorsement or recommendation. 


8/4/2021

Raising Financially Responsible Kids

Woman and her little son are drawing and smiling while sitting in office.

One of the most important lessons a parent can teach their child is good money management. Shockingly, this topic is rarely discussed in detail or in an educational manner within families. Research indicates that adults that were made aware of the value of money and had financial discussions during childhood are 60% more likely to be financially stable, maintain savings and 75% more likely to earn more than $50,000 per year. Financial education is not provided by the academic system in the majority of states so if a parent wants to ensure their child is informed it is up to them.

A parent can start by simple explanations of how the family finances are planned. Begin by pointing out events or spending opportunities that are avoided for the sake of savings or other upcoming purchases. List the overall budget and opportunities for improvement. Give kids the chance to offer ideas on ways to cut spending or increase income.

Emphasize the benefits of saving for your children by creating a visual demonstration. Perhaps have a large glass jar so they can be excited about the idea of seeing the jar fill to the top as an accomplished goal. Also, consider bringing your children along to open a minor savings account at a local bank. This is a great opportunity to accustom them to how a financial institution operates. If your children are mature enough, use this chance to also detail the concept of compound interest and the immense advantage their young age provides.

Another imperative concept is the worth of money and how it is earned. At such a minor age this idea can be described easily by imposing a budget. Funds can be attained through gifts, chores, neighborhood jobs or the tooth fairy. A percentage of each dollar can be allocated to savings versus spending. Kids can be asked to rationalize if purchasing a toy is worth completing additional chores or jobs.

Introduce children to the idea of investing early on. Saving money is secure but will never provide a return on their money as an investment. Small amounts of money, even a few dollars, can be invested in fractional shares, providing the same lessons of risk and return for mere dollars. Kids can relate to stocks that they are familiar with such as sports brands, entertainment or favorite foods. At the end of the day, win or lose, a valuable lesson will be learned and the amount risked is minimal.

As your children get older, be sure to explain the different types of debt. Good debt is money invested to potentially make more money, such as purchasing a bike to run a paper route that will earn more than the cost of the bike. Bad debt is borrowing money that will accrue interest to be repaid or no return, such a credit card debt or an unnecessary purchase you cannot afford.

Being open with your children about the manner in which you go about making decisions regarding your finances and the result of those choices, good and bad, will pave the way for when they will eventually encounter those same situations as adults. Having witnessed how well or badly a parent’s choice played out will be a guideline for them to repeat the same steps or choose a better path. Entering adulthood with a basis of financial understanding is extremely valuable and will provide an advantage to be financially stable and successful.


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