MONEY 101

Revised 5-9-08

Here are a few things I found VERY interesting regarding financial services. If you knew this already, click here.

Why am I blogging about this? Good question. ha! Okay, no really, there's a reason for this. It started out like this. I met Brett's father who is a Financial Wiz...really smart with money...and has been a Financial Advisor for about 30 yrs. Anyway, he is always willing to share his knowledge about different ways people can save money, grow money, and more importantly, how to PROTECT themselves and their loved ones. And besides this, Brett has been attending traning meetings at Mass Mutual for the past month and learns a few things here and there. So, this is just what I've gathered from discussions with Brett and his dad.... Disclaimer: don't quote me on anything, please. I'm NOT an expert, nor do I claim to be. As with anything -- do your research. Sidenote: I would love it for anyone to add to this blog and divulge their wisdom with everyone. Come on, I like know! =)

1. Life Insurance. Seriously? I know, I know. If you were like me, you probably cringed at the very thought. Well, as it turns out, my complete ignorance and unnecessary apprehension regarding Life Insurance served me wrong. I am so grateful to have people who enlighten me everyday! Who? L.I. (life insurance) is for everyone! Seriously. Married, single, young, and old alike. You may not think so now, but stay with me. Here's a common situation I think we can all relate to:

Sione and Kuipo have been married for a year and are looking forward to their baby's birth. Sione and Kuipo have jobs and both contribute to paying their monthly expenses. Now that they'll be expanding their little family in a few months with the birth of Sina, Sione and Kuipo are looking to protect each member of their family, just in case.

Options. You have basically TWO options: "Term" or "Perm" (as my husband puts it). It's common for the majority of younger people to invest their money in Term Insurance. Why? Because premiums (payments) are cheaper than premiums for Permanent Insurance. BUT, Term will protect you only for a specific amount of time, as long as you pay the premiums. In addition, the premium's are not guaranteed, meaning they may increase. Oh, and we musn't forget, there's NO cash value. Cash Value? Here's how I understand it. Paying your monthly premiums ensures you have continued protection. With that, you accumulate cash value because the money you're putting into premiums is being invested in the market (stocks, bonds, etc.). So, the money you put into your plan ultimately grows between 4-6% (probably more than you would get in a regular savings account) and can eventually add significantly to your death benefit. All the money you are growing is never taxed! (meaning you never have to pay taxes on it. yay!!) Plus, you may take out a loan from your policy if you so wish; however, you must pay any interest on top of putting the money back OR you don't have to pay anything back. Period. The only downside to taking money out is you lessen the total amount of your death benefit that could decrease the amount of money left for your loved ones. Bottom line, it's like having your own bank. Flipside. On the other hand, Perm Insuance is lifetime protection and doesn't expire, well only if you turn 100. The best part of it all, drum roll please...you add CASH value along with protection (a.k.a. death benefit). So, here's the continuation of the little adage I mentioned above.

Sione: Kuipo, what chu tink? Perm or Term.

Kuipo: I tink we should get Perm cuz it sounds mo' betta.

Sione: Why?

Kuipo: What chu mean why! What if you went ma'ke (die), den what?

Sione: Ok, ok.

(Perm may not be for everyone, mind you.)

Perm Insurance. Protects you for the remainder of your life. This is a long-term investment. If you chose this over Term, you may thank yourself in the long haul. Simply put, because you are adding cash value to your investment. Not only are Sione and Kuipo getting protection, in case one of them are to die, they are growing their money within their Perm Life Insurance Policy. They have the option to withdraw money, take out a loan, or keep it there and let it continue to build.

Personal application. Brett came home one day and told me he learned something he never considered before. So I asked him what it was. He said he learned that parents have the opportunity to take life insurance policies on their children. "Okay...," I said, apparently not getting it. He continued explaining that we could take a policy out on Scotty. At first I was appauled. How could he even think of that! What an aweful thing to say! But I kept quiet so he could finish what he wanted to say. He told me if we did that for Scotty now, the cash value would grow by the time he was ready for his mission, or college, or both! Then it clicked and made complete sense. If we did that, all the money we put in would grow significantly by the time he turned 19. And remember, this is a 100% complete tax advantage so you never have to pay a dime to the IRS. How great is that!

Alright I'll stop here. I am sure there are details that I might of left out or overlooked. You are more than welcome to add to this or correct me if I was misleading in anyway...and remember to check this out for yourself. because it mattereth.