financial

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A variety of significant mortgage rates inched upward over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages both were driven higher. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also climbed.

As inflation surged in 2022, so too did mortgage rates. To rein in price growth, the Federal Reserve began bumping up its federal funds rate — a short term interest rate that determines what banks charge each other to borrow money. By making it more expensive to borrow, the central bank’s goal is to reduce prices by curtailing consumer spending.

After hiking interest rates 10 times since March 2022, the Fed pumped the brakes at its June meeting. The central bank’s federal funds rate will remain at a range of 5.00% to 5.25% for the time being, although the Fed hasn’t ruled out the possibility of further increases if inflation doesn’t continue to moderate. The Fed will decide whether or not to raise rates at its next meeting on July 26.

The most recent Consumer Price Index, a popular gauge of price growth, shows that the Fed’s string of rate hikes is having its intended effect. Annual inflation is now at 3.0% for the 12-month period ended in June, which is the lowest it’s been in more than two years.

The Fed doesn’t set mortgage rates directly, but it does play an influential role. Mortgage rates move around on a daily basis in response to a range of economic factors, including inflation, employment and the broader outlook for the economy. A lower inflation rate is good news for mortgage rates, but the potential for additional hikes from the central bank this year will keep upward pressure on already high rates.

“Mortgage rates will continue to ebb and flow week to week, but ultimately, I think rates will stick to that 6% to 7% range we’re seeing now,” said Jacob Channel, senior economist at loan marketplace LendingTree.

Rather than worrying about mortgage rates, though, homebuyers should focus on what they can control: getting the best rate they can for their financial situation.

To increase your odds at qualifying for the lowest rate available,take the steps necessary to improve your credit score and to save for a down payment. Also, be sure to compare the rates and fees from multiple lenders to get the best deal. Looking at the annual percentage rate, or APR, will show you the total cost of borrowing and help you make an apples-to-apples comparison among lenders.

30-year fixed-rate mortgages

The 30-year fixed-mortgage rate average is 7.19%, which is an increase of 1 basis point from one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one — but often a higher interest rate. Although you’ll pay more interest over time — you’re paying off your loan over a longer timeframe — if you’re looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 6.52%, which is an increase of 1 basis point from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a bigger monthly payment. But a 15-year loan will usually be the better deal, as long as you can afford the monthly payments. You’ll usually get a lower interest rate, and you’ll pay less interest in total because you’re paying off your mortgage much quicker.

5/1 adjustable-rate mortgages

A 5/1 ARM has an average rate of 6.25%, a rise of 6 basis points compared to a week ago. You’ll usually get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 ARM in the first five years of the mortgage. But since the rate changes with the market rate, you might end up paying more after that time, as described in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an ARM may be a good option. If not, changes in the market could significantly increase your interest rate.

Mortgage rate trends

Mortgage rates were historically low throughout most of 2020 and 2021 but increased steadily throughout 2022. Now, mortgage rates are well above where they were a year ago. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices in some regions to ease. But that’s only part of the home affordability equation.

“Interest rates have been much higher in the past and people bought homes and financed homes at those rates,” said Daniel Oney, research director at the Texas Real Estate Research Center at Texas A&M University. “But it’s been hard for people to react to such a rapid increase in just a short amount of time.”

Even though the Fed hit pause on rate hikes in June, mortgage interest rates will continue to fluctuate on a daily basis. That’s because mortgage rates aren’t tied to the federal funds rate in the same way other products are, such as home equity loans and home equity lines of credit, or HELOCs.

As long as inflation continues to trend downward, though, mortgage rates should decline slightly towards the end of 2023. The most recent housing forecast from Fannie Mae calls for the average 30-year fixed mortgage rate to close out the year at around 6.3%.

“Mortgage rates have been volatile for some time now and while they could eventually start trending down over the next six months to a year as inflation growth continues to cool, their path is probably going to be bumpy,” Channel said.

We use data collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders across the country:

Current average mortgage interest rates

Loan type Interest rate A week ago Change
30-year fixed rate 7.19% 7.18% +0.01
15-year fixed rate 6.52% 6.51% +0.01
30-year jumbo mortgage rate 7.21% 7.20% +0.01
30-year mortgage refinance rate 7.34% 7.33% +0.01

Rates as of July 24, 2023.

How to find the best mortgage rates

You can get a personalized mortgage rate by connecting with your local mortgage broker or using an online calculator. When looking into home mortgage rates, think about your goals and current financial situation.

Things that affect the mortgage rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a good credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.

The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider other costs such as fees, closing costs, taxes and discount points. Be sure to speak with multiple lenders — like local and national banks, credit unions and online lenders — and comparison shop to find the best mortgage loan for you.

How does the loan term impact my mortgage?

One important factor to consider when choosing a mortgage is the loan term, or payment schedule. The mortgage terms most commonly offered are 15 years and 30 years, although you can also find 10-, 20- and 40-year mortgages. Another important distinction is between fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are stable for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (usually five, seven or 10 years). After that, the rate adjusts annually based on the current interest rate in the market.

When choosing between a fixed-rate and adjustable-rate mortgage, you should consider how long you plan to stay in your house. Fixed-rate mortgages might be a better fit for people who plan on living in a home for a while. While adjustable-rate mortgages might have lower interest rates upfront, fixed-rate mortgages are more stable in the long term. However, you may get a better deal with an adjustable-rate mortgage if you only intend to keep your house for a couple years. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. It’s important to do your research and understand what’s most important to you when choosing a mortgage.

Source: cnet.com

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Care homes operators have warned that a recent surge in mortgage rates and a delay to government reforms will sound a “death knell” for some UK providers.

The number of registered care homes fell to 12,224 on May 31 from 12,280 at the start of the year, according to data shared with the Financial Times by carehome.co.uk, a care home review site.

The rate of closures in England slowed in the first half of 2023, compared with the same period in 2022. However, a rise in mortgage rates threatens to increase the burdens on the care sector, compounding rising food and fuel prices and funding shortfalls.

“We are facing some extremely challenging times,” said Nadra Ahmed, chair of the National Care Association, a professional body. “There are vulnerable providers out there right now and there are a lot [of homes] that will be on the market.”

The challenges encountered by some operators would make their businesses “unviable”, she added, citing Pelham House in Kent as one of the latest to hit financial trouble. “Sadly they had to make the decision after 40 years to shut their doors,” she said.

“If you’ve got mortgages that’s going to have an impact on your ability to repay your borrowings.”

The Bank of England increased interest rates by 0.5 percentage points to 5 per cent in June in an effort to tame inflation, leading to rises in monthly mortgage repayments for borrowers on variable rates.

While interest rates are not expected to climb by as much as previously estimated following better than expected June inflation data last week, care providers are already feeling the heat.

Jay Dodhia, chief executive and co-founder of Serene Care, which he established with his wife Palvi

Jay Dodhia, chief executive and co-founder of Serene Care, established with his wife Palvi, renovates and runs failing care homes. He said its model had been resilient but cautioned that rising interest rates could be particularly challenging for new builds.

“Most care homes are [on] variable rates — even when rates were very low it was very hard to get fixed rates on care home mortgages,” he said. “As the variable rate or the underlying BoE rate crept up, so have our interest payments.”

“Everything in isolation will affect you, if you put it all together — the rising inflation, utilities, food costs, staffing challenges . . . it could be a death knell for several [providers],” said Dodhia.

The number of councils in England reporting care home closures in their area rose to about 44 per cent at the end of May 2023, according to the Association of Directors of Adult Social Services, a charity.

Natasha Curry, deputy director of policy at the Nuffield Trust, said in 2019, before the coronavirus pandemic, the level was about a third.

“With borrowing rates also rocketing, it’s not a surprise that we’re seeing more closures of care homes and I think it’s inevitable that trend will continue,” said Curry.

Natasha Curry, deputy director of policy at the Nuffield Trust, said the trend would continue © Emile Holba

During the Covid crisis, an injection of emergency government funding had helped to stabilise the market, cushioning the impact of falling occupancy rates. But that funding had ended.

Cathie Williams, joint chief executive of the Association of Directors of Adult Social Services, said councils had a duty to provide “continuity of care” for residents if a home closed.

But a decade of austerity, Brexit, the pandemic and staff shortages compounded by surging living costs had contributed to “a considerable lack of resilience” in the sector.

Where care places existed, “it tends to be because they’re in the wrong place or the wrong kind of care home or the quality is not good enough”, she added.

Health leaders warned of the effect of diminishing capacity in social care on the wider health system. Matthew Taylor, chief executive of the NHS Confederation which represents health organisations across the UK, said health leaders knew “all too well the impact that a lack of social and residential care has on the NHS”.

The support provided to residents in care homes could prevent avoidable hospital admissions. Moreover, a lack of available care home places for patients who could otherwise have been discharged from hospital could create “a log jam effect in A&Es with long ambulance waits”, Taylor added.

“The good news is we can see the rate of closures slowing in England and Wales although unfortunately Scotland has seen a rise,” said Richard Stebles, head of business intelligence at carehome.co.uk.

“In order to stay sustainable, we are likely to see care providers trying to attract more privately funded residents who pay higher fees than those funded by the local authority.”

Dodhia said the average fee for publicly funded social care bed should be £900 per week. But local authorities are often paying about £600 to £700 a week; some are willing to spend just £490 a week.

Care home operators had hoped for more funding from local authorities following a “cost of care exercise” that sought to generate a shared understanding of the cost of adult social care. But some councils struggled to increase payment and reforms were pushed back to October 2025.

Providers have also fought to access the £200mn earmarked for the NHS crisis plan, which aimed to move patients from hospitals to care homes.

A “winter discharge fund” had been announced, said Dodhia, but “local authorities didn’t really want to spend it”. He added: “They knew that as soon as that funding ran out then the residents would be left vulnerable, because they can’t continue to fund [the scheme].

“We heard about all these great support plans but we didn’t see any of it,” he said.

The Department of Health and Social Care said it was investing up to £7.5bn in social care over the next two years — “the biggest funding increase in history” — to boost capacity in social care, including £1.4bn that local authorities could use flexibly, including to pay social care providers more.

It added: “Despite the pressures the adult social care market faces, the number of adult social care locations registered with the Care Quality Commission has remained stable, and there are 6,600 more home care agencies in England now compared to 2010.”

Source: ft.com

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Affordable housing advocates cheered the move.

“The Underserved Mortgage Markets Coalition (UMMC) has long advocated for a rule making on the Equitable Housing Finance Plans and the undersigned coalition members are pleased to see a proposed rule to ensure the longevity of the EHFPs,” said the UMMC, which counts 29 member organizations as part of its collective. “The coalition has long expressed that for the EHFPs to be effective and to continue after this administration, it is critical that FHFA promulgate a rule that will be closely modeled on FHFA’s “Duty to Serve” (DTS) regulation and create a pattern of practice of releasing similarly robust amounts of the EHFP performance data.”

The UMMC and other groups have for months been lobbying FHFA Director Sandra Thompson to discuss formalizing the equitable housing finance plans.

Following multiple revisions, the GSEs in early April announced updates to the equitable housing finance plans, which included Freddie Mac expanding special purpose credit programs, increasing the availability of accessory dwelling units (ADUs) and manufactured homes, as well as the launch of a correspondent lending program to assist smaller financial institutions with access to Freddie Mac’s multifamily financing.

For Fannie Mae, it too is looking to expand the special credit purpose programs geared toward helping people in majority Black and Latino communities. Fannie also touted a “social index” to help translate investor interest in socially conscious investing into savings for underserved borrowers and its series of changes to valuation modernization, which it says will reduce bias, improve accuracy and reduce costs.

Industry stakeholders have 60 days to comment on the proposed rule.

Source: housingwire.com

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Voya Financial, Inc. is a combination of insurance, retirement, and investment product and services conglomerate. The company serves the financial needs of approximately 13 million customers – both business and consumer – throughout the U.S.

The vision of Voya is to become America’s Retirement Company – and it is well on its way, as the firm helps its customers to meet the challenges of saving for retirement through its more than 7,000 dedicated employees.

Need help finding a different form of insurance coverage, such as burial insurance plans, auto insurance coverage or health insurance, we can help find the best company to work with according to your needs!

The principal businesses of Voya include Insurance Solutions, Investment Management, and Retirement Solutions. Each component has a very specific focus. These are broken out as follows:

  • Insurance Solutions: The Insurance Solutions component of Voya is considered to be a top-tier provider of term policies, as well as a top-ten provider of medical stop-loss insurance coverage in the United States. On the individual life insurance side, Voya currently has more than $2 billion in gross premium via its term, universal, and variable life insurance products. This component of the business also consists of Employee Benefits whereby Voya currently serves nearly 4.5 million individuals.
  • Investment Management: On the investment management side, Voya holds in excess of $207 billion in assets under management for both external and affiliated institutions and for individual investors. The company has a focus on investment solutions, with a clear emphasis on fixed income, equities, and multi-asset income strategies.
  • Retirement Solutions: Retirement Solutions is a leading provider of retirement products and services in the United States. This section of Voya’s business has roughly $375 billion in assets under management and administration and it serves approximately 47,000 institutional clients, and more than 5 million individual retirement plan investors. In addition, more than 2,300 financial advisors are also served in this area, as well as more than 417,000 retail fixed annuity product customers.

History of Voya Life Insurance Company

In the scope of financial services companies, Voya is quite new. It actually made its debut in April 2014 – and completed its overall re-branding in September. The company’s name originated as an abstract name that was coined from the word “voyage,” and it reflects both momentum and optimism.

The company actually came from the former ING US – and after two years of transforming the strategy, the financial profile, and the culture of the company, ING began to trade as a public company on the New York Stock Exchange under the ticker symbol VOYA in 2014.

While it has only a short history, Voya has strived to impress. In 2014, the company was named one of the World’s Most Ethical Companies by Ethisphere Institute, as well as a top-five retirement plan provider based on number of plans, participants, and assets. In addition, the company is also a top-tier independent broker dealer network in the U.S. a top-tier provider of life insurance, and a top-10 medical stop-loss coverage provider in the United States.

Products Offered By Voya

Voya offers a wide range of insurance and financial products. For individuals, the choices include life insurance, annuities, IRAs, workplace retirement plans, employee benefits, and college savings options.

On the life insurance side, options include the following:

  • Term Life – Term life is the most basic of all coverage options. This is because term provides just pure death benefit protection only, with no cash value or investment build up. Term life is also typically the most economical form of life insurance protection, especially for those that are needing a larger death benefit amount such as a 1 million dollar life insurance policy. This can especially be the case when the applicant for coverage is young and in good health at the time of application. If you are not in the best of health and feel a no exam life insurance policy would be best for you, we can help find the carrier to best suit your needs. Term coverage is sold for a set period of time – typically a certain number of years. Voya offers several term life options, including the Voya TermSmart, and the Voya ROP (Return of Premium) Endowment Term.
  • Universal Life – Universal policies are a type of permanent life insurance protection. This means that the policy is not sold for a set period of time but rather, it will last for the entirety of the insured’s life – provided that the premium is paid. Universal coverage offers both a death benefit and a cash value. Cash value growth is tax deferred, meaning that the policy holder does not have to pay any income tax on the cash while it accumulates inside of the policy. Universal policies are also quite flexible in that the policy holder is allowed to adjust the frequency of premium payments in order to meet his or her changing needs. The death benefit of the policy can also be adjusted up or down, within certain guidelines, as well.
  • Indexed Universal Life – Indexed universal policies provide death benefit protection, as well as the ability to build funds inside of the policy based upon increases in underlying market indexes. Even if the indexes perform poorly, however, the policy holder is safe based on the policy’s guaranteed minimum interest rate. Like other types of permanent coverage, the funds that are inside of the policy are allowed to grow tax deferred. For indexed universal life insurance, Voya offers the Voya Indexed Universal Life – Global Choice, and the Voya Indexed Universal Life – Guaranteed Death Benefit products.
  • Variable Universal Life – Variable universal coverage provides death benefit protection and the flexibility of universal life insurance plans. Policy holders also have the ability to build funds in their policy using variable investment options from the market. Funds in these policies can also grow on a tax deferred basis. Voya offers the Voya Variable Universal Life – CV, and the Voya Variable Universal Life – DB plans in the area of variable universal life insurance.
  • Survivorship Life – A survivorship policy insures the lives of two people – and the death benefit is paid out when the second person passes away. These policies are oftentimes used for estate planning strategies. They can be especially beneficial as the premium on a survivorship policy is generally less costly than that of two separate policies. Voya offers the Strategic Accumulator Survivorship Universal Life policy, as well as the Voya Survivorship Variable Universal Life-CV plan.

Financial Strength Ratings

Voya is a strong company, and it has been provided with very good ratings from the ratings agencies. These marks are as follows:

A.M. Best Fitch Ratings Moody’s Investor Services Standard & Poor’s

A A- A3 A-

Advantages and Disadvantages

Although not at the very top of the list, Voya is considered to be an extremely strong contender in the life insurance arena. The company has very strong ratings in terms of financial ability for paying out claims, and it offers a nice array of different products for meeting a diverse mix of client needs.

As with some of the other life insurers, however, if an applicant has any type of adverse health condition, he or she may be at an impasse in terms of how to proceed through the “traditional” application channels – especially if applying directly through the company. In this regard, it is best to instead work with an agency or company that specializes in higher risk insurance cases.

Obtaining Life Insurance Quotes

Any time you are seeking coverage, it is always best to obtain quotes from several different insurance carriers. This will allow you to review various policies, as well as premium prices, and to truly see what types of plans are available to you.

Just as with other types of important purchases, you wouldn’t typically opt for the first and only item that you see. So, with life insurance, it is important to keep in mind that this is in most cases going to be the financial security that your loved ones will be counting on to pay their living expenses, erase large debts, or eliminate substantial tax obligations. With that in mind, you will want to ensure that you are obtaining the very best coverage that you can.

When you’re ready to begin shopping for policies, our recommended partner, Root Financial, can help. They work with the top life insurance carriers in the nation today, and can get you all of the information that you need in order to make a well informed decision. They can also assist you with decisions such as:

  • What type of coverage to purchase – term, whole life, or universal
  • Determining how much benefit will be enough
  • Finding the best carrier that will meet your protection needs, as well as your premium budget

In addition, should you have any type of adverse health condition, Root financial specializes in helping people find the carriers that are more apt to cover various applicants. So whether you are a smoker, a diabetic or just in good health, this can save you countless hours of time and frustration throughout the application process. Use the form on this page to get started with your own set of quotes.

Source: goodfinancialcents.com

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Are you curious about the concept of a duplex apartment and eager to explore its unique features? Look no further! In this comprehensive Redfin guide, we will delve into everything you need to know about duplex apartments. Whether you’re hoping to move out of your cramped Houston apartment or you’re considering buying a property in Baltimore, this article will provide you with a detailed understanding of this distinctive residential arrangement. From its architectural design and layout to the benefits and considerations, join us for a comprehensive overview of duplex apartments so you can make an informed decision about this increasingly popular housing option. 

What is a duplex apartment?

A duplex is a form of multi-family housing characterized by a building that contains two separate units. Duplex apartments can be vertically divided, with each level having its own entrance, or they can be horizontally divided, sharing a common entrance but with distinct living areas on each level. 

 In cases where outdoor space exists on the property, it is typically shared between the residents of both units or partitioned accordingly. A duplex building is owned by a single individual who may choose to reside in one of the units or not. The owner has the option to rent out either one or both of the units to tenants. Similar to duplexes, triplex and fourplex buildings are other types of multi-family housing, accommodating three and four units within the same structure, respectively.

Understanding the difference: duplex vs. apartment

A duplex refers to a building divided into two separate units, typically sharing a common wall, with each unit having its own entrance. This arrangement offers a sense of privacy and independence, as well as the opportunity for rental income. On the other hand, an apartment is a self-contained living space within a larger complex, typically consisting of multiple units in the same building. Apartments often offer amenities such as shared facilities, maintenance services, and a centralized management system.

Pros of living in a duplex

Spaciousness

Duplexes often offer more space than traditional apartments, with separate living areas, bedrooms, and sometimes even outdoor areas like patios or yards. This additional space provides residents with a greater sense of freedom and flexibility to personalize their living environment.

Homeownership potential

In some cases, duplexes are owned by individual landlords who rent out one unit while residing in the other. This arrangement can present opportunities for aspiring homeowners to live in one unit and generate rental income from the other, potentially helping with mortgage payments and building equity.

Noise reduction

Duplexes typically have fewer shared walls compared to apartments, which can result in reduced noise transfer between units. This can contribute to a quieter and more peaceful living environment, making it appealing for those seeking a balance between privacy and community.

Cons of living in a duplex

Limited availability

Duplexes may be less common in certain areas compared to apartment complexes, so finding a suitable duplex for rent or purchase can be more challenging. It’s important to thoroughly research the local housing market to determine the availability and pricing of duplex units.

Responsibility for maintenance

Unlike apartments where maintenance and repairs are typically handled by the landlord or management company, duplex residents are often responsible for the upkeep of their unit and the shared areas. This can involve additional time, effort, and expenses, depending on the terms of the rental agreement or ownership arrangement.

Potential lack of privacy

Despite the separation between units, living in close proximity to neighbors can sometimes compromise privacy. Noise, shared spaces, and occasional visual intrusions may diminish the feeling of complete seclusion typically associated with detached single-family homes.

Limited outdoor space

In many cases, duplexes have a smaller lot size compared to single-family homes. This can result in limited outdoor space, making it challenging for residents to have extensive yards or dedicated outdoor areas. Shared outdoor space might be required, which could require coordination and compromise with the other unit’s occupants.

What to consider when renting a duplex

Privacy vs. community

Duplexes offer a unique living situation where you share a building with another household. While this can foster a sense of community and potentially lead to friendships with neighbors, it’s essential to assess your personal preferences for privacy. Determine whether you are comfortable with shared walls, common outdoor spaces, and potential noise levels from the neighboring unit. It’s crucial to strike a balance that aligns with your lifestyle and social needs.

Rental agreements

Thoroughly review the lease agreement and ensure you understand the terms and conditions. Pay close attention to provisions related to maintenance responsibilities, utility payments, and potential restrictions on modifications or subleasing. Additionally, clarify the process for resolving any disputes that may arise with your landlord or the other tenant in the duplex. A clear understanding of the rental agreement will help set expectations and avoid any potential conflicts down the line.

Budget and affordability

Evaluate the rental price in relation to your overall budget and financial goals. Take into account not just the monthly rent, but also any additional costs such as utilities, maintenance fees, and potential shared expenses with the other tenant. Assess your current financial situation and ensure that renting a duplex aligns with your long-term financial plans. It’s important to strike a balance between finding a comfortable and suitable living space while ensuring it fits within your budgetary constraints.

Is a duplex the same as a condo?

While both can involve owning a portion of a building, a duplex is typically a single building divided into two units, whereas a condo is a type of ownership in which individuals own individual units within a larger complex. 

Is a duplex apartment right for me?

The suitability of a duplex apartment depends on your lifestyle, preferences, and specific housing needs. Consider factors such as desired living space, privacy requirements, responsibility for maintenance, and availability in your desired location. Assessing these factors will help determine if a duplex apartment aligns with your living preferences and goals.

Source: redfin.com

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During my family’s Christmas celebration, I learned a little more about my oldest nephews. I don’t see them often, so it’s hard to know what interests them. This year, I learned that six-year-old Alex likes art. You can bet I’ll be encouraging this productive hobby — the only other two things I know he likes are dinosaurs and video games. I was also pleased to learn that his older brother, Michael, likes money.

“I have $86 saved,” Michael told me. “It’s for my trip to Florida.” The two boys were taking a trip over Christmas break to visit their grandmother.

“That’s great,” I said.

“And grandma is going to give us each $100 to spend at Disney World,” Michael added, “but I might save some of it.”

Michael turns nine tomorrow. To encourage smart money behavior, I sent him a book for his birthday. While compiling my guide to personal finance books as gifts, I was intrigued by Growing Money: A Complete Investing Guide for Kids. This book by Gail Karlitz received rave reviews. Kris and I both read it recently, and we think it’s perfect for Michael.

The first thing the book covers is inflation. Many adult books never mention the subject, so it’s refreshing to see a book aimed at grade-schoolers put it front-and-center. “In 1960,” Karlitz writes, “a kid with a quarter cold buy a pizza and a slice of pizza for 15¢ and a soda for 10¢. Today, you’d probably need at least $2 to buy the same meal!” (Or $4 if you live in my neighborhood.)

Growing Money has good chapters on banks and bonds, but most of the book is devoted to the stock market. Karlitz has written a brilliant chapter on how stocks work, using a hypothetical pizza parlor as an example. By keeping the scope small and understandable, she’s better able to convey concepts like equity, dividends, and IPOs. (She doesn’t always use those terms, however.)

The book also contains chapters on the history of the stock market, how investors make money, and how to buy and sell stocks.

The final chapter introduces the “Growing Money investment game”. Using $10,000 of imaginary money, participants buy and sell investments following the rules of real-life investing. The goal is to see how much money each person has at the end of six months. Yes, this is just like any other stock market portfolio game, but it’s aimed at kids. I think it’s an excellent way to introduce children to the stock market. When my Michael finishes the book, I think I’ll challenge him to a duel!

Growing Money offers a solid introduction to saving and investing, but it does have some weak spots. Only one page out of 120 is devoted to mutual funds. Because the book is aimed at children, taxes are barely considered. Still, its strengths outweigh its weaknesses.

Though this book is designed for children, I think most adults could profit from reading it, too. Actually, it’s a great book for parents to read with their kids. Growing Money provides clear, concise explanations of important financial concepts. It’s the sort of book to buy for your nephew, but read yourself before you pass it on.

Source: getrichslowly.org