(This timely series first was published in the Tri-State Defender during last year’s holiday season. We are running it again this season as a public service.)

About the series:

As African American families gather over the holidays, they can make life much easier for generations to come by scheduling a few important conversations in between the laughter.

This week our discussion focuses on simple strategies for protecting the family’s wealth.

Last week: Safety issues and emergency preparedness

Next week: Leave your children a legacy of health

Homeownership is one of the largest financial assets for many African American families but, over the last several years, many families lost homes as a result of predatory lending and servicing practices.

From 2003 to 2005, the average net worth of American families increased 12 percent, according to researchers Frank Stafford and Elena Gouskova, professors with the Institute for Social Research at the University of Michigan. 

In constant 2005 dollars, overall average net worth, including home equity rose from $275,600 to $309,600. But during that period, the average net worth of African American households fell slightly, from $59,900 to $59,500.

Parents can protect their offspring by taking time to discuss finance with children and engaging the family in projects that build their financial knowledge and increase financial literacy.

When young people don’t understand the importance of credit scores and adults don’t protect their money or their financial rights, they are more likely to fall victim to ploys that drain their wealth.

So, get the children together and go over the actions every adult member should take to protect themselves, and safeguard the inheritance that future generations can use to build businesses, attend college, and attain economic security.

Do’s and don’ts

1) Check your credit score and understand how it impacts your life.

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. The three companies have set up a central web site, a toll-free telephone number, and a mailing address through which you can order your free annual report.

Here’s the contact information:  web site — annualcreditreport.com, toll-free number — 1-877-322-8228, mailing address — Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You may download a request form at ftc.gov/bcp/conline/edcams/credit

2) Check your monthly bank statements.

This scenario can happen. After paying your monthly credit card bills, you go to the ATM to discover your account is overdrawn. You can’t understand why because your records show a sizeable balance. The bank tells you that one of your credit card companies submitted an electronic check conversion. You sent the company a check for $100. A clerk made an error in the electronic check conversion and keyed in $1,000 instead of $100. Your bank paid the credit card company $1,000, rather than the $100 you had intended to pay.

Protect yourself from electronic check conversion errors and learn your rights.

Always review your monthly account statement. Contact your financial institution immediately if you see a problem. Were you charged the wrong amount? Were you charged twice for the same transaction? You have only 60 days (from the date your statement was sent) to tell the financial institution about a problem. Depending on the circumstances, the financial institution may take up to 45 days from the time you notify it to complete its investigation.

3) Don’t sign any documents you don’t understand, and don’t borrow trouble.

Don’t hand over your hard-earned cash to individuals or businesses whose policies target homeowner equity.  Understand the mortgage process, and be an informed consumer. Don’t take out a loan without conferring with a trusted family member who is knowledgeable about credit. Learn to identify the characteristics of predatory lenders:

Repeatedly refinancing a loan within a short period of time and charging high points and fees with each refinance.

“Packing” a loan with single premium credit insurance products, such as credit life insurance, and not adequately disclosing the inclusion, cost or any additional fees associated with the insurance.

Charging excessive rates and fees to a borrower who qualifies for lower rates and/or fees offered by the lender

Internet resource link:

http://www.dontborrowtrouble.com/en/anti_predatory.html

Wills and Estate Planning

Homes that have been in families for generations are being lost in the African- American community because individuals with property die without a will, tying up their estate in legal limbo and incurring unnecessary expenses.

Each year, take a moment to discuss wills with your family members. Make certain the executor knows where you keep your financial papers, documents and information he or she may need in the event something happens to you. Keep the information in a secure location, such as a safety deposit box or home safe.

There are many software programs that will allow you to do an official will without incurring the expense for a lawyer. Quicken Will Maker Plus is one, or visit an informational site such as legalzoom.com.

Among the information you must include:

• Amounts of all debts, including mortgages, car loans, and credit card accounts

• Copies of existing wills, trusts, divorce decrees, prenuptial agreements and any other legal documents that might affect a will

•  Names and contact information for relatives and friends who are included in your will. Update this list as people change phone numbers or residences.

A list of assets, including:

• Real estate

• Savings (bank accounts, CDs)

• Financial Investments (stocks, bonds, mutual funds, CDs)

• Life insurance policies (attach policy number and copies of policy)

• 401(k), IRA, pension/retirement accounts

• Information regarding business ownership (and paperwork)

• Cars, boats, planes and other vehicles

• Jewelry

• Collectibles

• Artwork

• Antiques

• Furniture

• Other property of sentimental value

Internet Resources:

Family Economics & Financial Education:

http://fefe.arizona.edu/educationalResources.php

Financial Planning Association:

http://www.fpanet.org/public/tools/articles/FPP0805.cfm