Financial Literacy for Women and Girls
I recently assisted my 12-year old daughter in starting a Chase First Checking Account. It hasn’t been as easy as I would imagine, with not being able to deposit directly into it from the branch and only transferring funds from my account, however, I really do like the concept.
The checking account allows her to have a debit card to access the account for purchases using the debit/credit portion of the card through transfers made from my accounts at Chase. They do have minors savings accounts if your child wants to deposit funds into an account and have access through the branch.
My daughter is a straight-A student and a creative. She loves sports and all things baking, however, keeping track of cash-on-hand is not currently at the top of her priority list. The Chase First Checking debit card has been very helpful in allowing some independence to use at the store or for purchases when I’m not with her which builds her financial literacy through responsible usage of the card. I really do appreciate the flexibility and independence she’s developing with it.
It feels like these are the beginning steps to financial literacy and I’m on board! As an entrepreneur, and small business owner, I’m very passionate about financial literacy. I’m familiar with the importance of having access to capital for my business, Return on Investment (ROI), and how vital (in my opinion) it is to own real estate.
How Real Estate Builds Financial Literacy (and Wealth!)
1. Mortgage Payments are Applied to Both Principal and Interest
In the first seven to eight years, the majority of the mortgage payment is interest paid to the lender. Although a smaller amount is applied to principal, it’s still applied and that is something. As principal is paid down, it can become available again in the form of equity. As home values rise, the difference between the amount owed and the value of the home is considered equity. This can be taken out in the form of a percentage of cash-out a lender will approve, transferred onto another real estate purchase, or completely taken when a property is sold. There are tax implications depending on the occupancy status among other variables.
2. Roommate or AirBNB for Rental Income
This has been increasingly popular especially in states like California where the cost of living is exceedingly higher than the average in the United States. Did you know some loan programs will allow you to use the boarder income to qualify on a refinance? You typically need at least 12 months of rental/boarder income to use a portion of it. This is a great way to supplement income and the mortgage payment if you can make it work for you. I’ve learned a great checklist goes a long, long way. Make a list of the pros and cons of either option. I’ve rented an AirBNB on a converted garage at the beach. The unit was near spotless and my daughter and I had a great time walking to the beach, breakfast, riding bikes, and enjoying ourselves in the unit. The owners lived in the front house and did not disturb us. It was a great set up!
3. Purchase with Multiple Borrowers
When I purchased my first condo, I was very scared. My salary was a respectable $75k a year, I had a partner with solid employment and income, and yet, I was still grappling with being committed to this mortgage that left me feeling overwhelmed. Since I was five, I’ve figured out how to hussle when I really want something. When my mother bought my sister and I the latest fad cereal, Cinnanom Toast Crunch, and we hated it, I sold it in dixie cups in our apartment complex to pay my mom back the $5 it cost. In the 80’s $5 cereal was no joke, a lot of money.
So when the time came to purchase real estate in my 20’s, I came up with a spreadsheet for my parents asking them to invest a small percentage every month. I think it was my parachute or safety net. The fact that I crunched all the numbers, reviewed home market forecasts and literally could not stop talking during my pitch, was definitely a moment. My parents said no. And I was incredibly thankful they did. My property value increased by $75k before the home was even built. I sold it within a week of owning it and bought a house. Sometimes even the best laid plans are a blessing in disguise.
Buying a home now for the first time in California, can be daunting. Considering a roommate, roommates, investment from the folks, friends, or investors are all options available. I’ve completed these transactions for borrowers and encouraged them to consider a trust and honest conversations about percentage owned, and short/long term plans. These can be life savers if the friendship or relationship breaks down. I have clients that are two friends that purchased a duplex now worth over $250k in equity.
Real Estate for Life
I know I’m a broken record, but I truly believe (and have seen) how real estate builds financial wealth. Even if purchasing is a long term plan while you rent now to save for it, DO IT!!
