DEAR DAVID: Personal Finance and Life Letters from a Grandfather to a Grandson

By Richard Kapp

What do you do when your high school senior grandson asks in a nighttime text:

Hey Granddaddy, so I know you're probably asleep by now but I just wanted to ask what you think about money. What would be the best way to make the most over a "long" (like 10-20ish years) period of time? Savings, investing, side business[es]? Going into the military, having a long period of time being able to save or invest, or build a good business to be able to gain the most amount of money possible?

And then buying. What is the best way of buying things (like houses and cars...big things), in cash at once or like over a period of time (even though there's interest)?

Split it up cause there's different parts. Thank you lots. Love you!

• Language: English
• Publisher: Covenant Books, Inc.
• Release date: Mar 26, 2024
• ISBN: 9798891123564

Book preview

Table of Contents

Title

Copyright

Preface

1: Money

2: Work

3: Responsibility

4: Budget

5: Business

6: Taxes

7: Banks

8: Risk

9: Investing

10: Stocks

11: Bonds

12: Real Estate

13: Commodities

14: Accounts

15: Stock Market

16: Funds

17: Credit Score

18: Cars

19: Housing

20: Giving

21: Taxed

22: The Rule of 72

23: Millionaire

24: Dream

25: Job

26: Poverty

27: Education

28: Wills

29: Contracts

30: Marriage

31: Addiction

32: Fraud

33: Net Worth

34: Divorce

35: Quality

36: The End

About the Author

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DEAR DAVID: Personal Finance and Life Letters from a Grandfather to a Grandson

Richard Kapp

ISBN 979-8-89112-355-7 (Paperback)

ISBN 979-8-89112-356-4 (Digital)

Copyright © 2024 Richard Kapp

All rights reserved

First Edition

All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods without the prior written permission of the publisher. For permission requests, solicit the publisher via the address below.

Covenant Books

11661 Hwy 707

Murrells Inlet, SC 29576

www.covenantbooks.com

To David,

because you asked the question.

Preface

Dear David,

This is the letter you did not get because I waited until near the end of our conversation to write it. I had not originally planned to pull all the letters together. It was only after many of them had been sent to you that I thought that what you had asked was not being universally asked by other students; maybe they were not curious, or they did not know to ask—or even maybe (like many students) they were embarrassed to ask because someone may make fun of them. When I was in high school, we had a mandatory course called (as I remember, it may have had a simpler name) civics and economics, where we went through both US government (branches, responsibilities, elections, the Constitution, and Declaration of Independence) and money (budgets, taxes, earning money, saving money, retirement).

From what I have seen during the education of my grandchildren, a course like this may no longer be available to everyone or mandatory or even offered at all in some districts. But it makes sense to me at age seventy-five that everyone should have a basic understanding of how the government, life, and money work. I have seen too many people of ages younger than myself (but much older than you) who have no idea how any of it works, and, indeed, they think that government and money work in entirely different ways than they do. I will tell you about my experience with money, life, and sprinkle in a little about related government subjects.

Your text is important to set up the reason for these letters during your senior year of high school:

Hey, Granddaddy, so I know you're probably asleep by now but I just wanted to ask what you think about money. What would be the best way to make the most over a long (like 10–20ish years) period of time? Savings, investing, side business[es]? Going into the military, having a long period of time being able to save or invest, or build a good business to be able to gain the most amount of money possible?

And then buying. What is the best way of buying things (like houses and cars…big things), in cash at once or like over a period of time (even though there's interest)?

Split it up cause there's different parts. Thank you lots. Love you!

You can understand why I answered and sent you letters on a variety of money and life subjects. One of your cousins had previously asked similar questions but more about how investing worked. I bought her some courses to watch, but your questions were more personal and specific, so you received these letters instead.

In the United States, we have freedom of speech, although some people are trying to cancel out some speech because they do not want to hear anything they disagree with. This makes for a very uneducated population, a population that cannot discuss liberal and conservative ideas and come to a unified agreement or a friendly agreement to disagree. And some subjects—like earning and using money and personal responsibility and how to live—that are foundational to our way of life, when they are brought up, people actually get offended as if the speaker is personally attacking how they want to live. Rather, an educated person would want to investigate new ideas or old ideas presented in a new format to be able to understand another person's thinking.

My bias is toward conservative social and financial topics, but I am always ready to listen to a discussion of my ideas and the ideas of others to foster dialogue. So sprinkled throughout the letters are commentary on government practices and personal practices as they relate to money—and, occasionally, I get off track. If there are errors in my calculations or money facts, that is my mistake, and I apologize now. If you think there are errors in my expressed opinions, they are my opinions (free speech, remember), and perhaps you need to do some investigation to make sure your opinion is correct for you.

The letters you received from me will differ some from what is in this book. I have made some modifications, and others have made some modifications during the editorial work to get this into book form. So save your paper copies, they are the only ones that exist in the original form.

Let me know what you think.

Hope you enjoy the read,

Granddaddy

1

Money

Dear David,

You have asked me some pretty deep questions, but questions that a young man or woman ought to know a lot about. Those series of questions started with what did I think about money, how to save, how to spend, and eventually how to retire. There are a few basic things to understand first.

Money is a tool, nothing more. If I have too much, it could be a problem. If I do not have enough, it is a problem. If I have enough, it is a blessing that I can use, and everyone has a different amount that is enough. Comparing the amount I have with the amount someone else has will create in me the sins of greed or envy or pride. So in this letter, let us concentrate on the issue of life and its relationship to the tool.

My life should be like a stool that has three legs, which is very stable since three legs touching a surface does not wobble. Four legs can rock, and two legs will fall over. In my life, those legs are God, family, and work—in that order. If I am missing one of those, I can fall over. If I add something else in the list, I can wobble because that is too much for me to deal with.

For me, God is the three-faced deity that we call Father, Son, and Holy Spirit as I am a Christian and have Jesus Christ as my personal Savior. But for other people, their god may be the same or different. The important thing with our discussion of money is that we all recognize that we are not at the top of the heap. We are each a cog in this machine we call life. Even if I were a multibillionaire, there would always be something/someone greater than myself. If it is my intention to be the richest, I might end up with no family—because that would consume some of my wealth—and certainly with no god because I have made myself or my money a god. And, like Dickens's Scrooge, I would have nobody but myself and ultimately be very unhappy, which is not much of a (balanced) life.

Family is what I make of it. It can be a nuclear family such as you live with two parents and two children. Or it can be a blended or even nontraditional family. In the case of a young soldier, his family—after he leaves his birth family or the family that raised him—may well be the men and women with whom he serves. Or during college, her family may become or come from the friends she makes or the sorority she joins. Your family may be a work family, and then you add a home family as well. But family is the relationships that allow us to be useful to others and have companionship. As John Donne wrote, No man is an island.

Work is also what I make of it. Currently for me, my occupation is a professional engineer, and has been for over fifty years of my life. It has afforded me the opportunity to be a father and husband, a friend, a church member, a community member, and in the near future a retiree. Work will consume much of each day's time, and if used incorrectly, it can destroy the other two legs of the stool.

There were times in my life when I was too much involved with each of the three legs, and during difficult times, that may be necessary. But to allow church to always take time from God, family, and work is not right. To allow work to always take time from God and family is also not right. And to allow family to be my sole concern at the cost of community, God, and earning enough money to allow the family to live is a problem. A well-lived life must have balance. And into that balance, we inject money, which will allow us to have and do. Money is a tool, not a goal; it can become an obsession. However, I cannot allow it to control me and my decisions since that will hurt my life and that of those around me. It is a tool.

So what is money? Long ago, if you wanted something to eat, you might trade it for time doing something for someone else, or maybe you had a utensil that you made to trade. Always you were doing that in a very local area. As history continued, that trade became difficult because you needed to carry all your wares or food a longer distance to find what you wanted or to supply what someone else wanted. Money (pretty stones, shells, beads) were used as a means of exchange if it had a commonly understood value. Once the standard was established, money was just a method of exchange—a tool—for goods and services. If I know what my goods or services are worth, then I can accept money for them and feel as if I have done a good day's work. If I then want something from someone else, I can pay money for what I think is the appropriate value for that good or service.

Let you and me get to the meat of the questions in later letters since this one is just about the basics. Later letters will discuss earning money, banks and bank services, saving money, spending money, credit and borrowing and bad credit, risk, types of investments and investment vehicles, taxes, and insurance. But not in that order. Since I will pick and choose depending on how I feel at the time I start each letter. Just understand that each letter is from my experience or understanding and is not a course in economics or tax or investment policy—but of common sense and some bad choices along the way of my life (but not always getting into the details).

With love in my heart for you,

Granddaddy

2

Work

Dear David,

How do I earn some of that tool, money? That is where work comes into the discussion.

When I was twelve or thirteen, I delivered newspapers in the afternoon during the week and in the morning on Sunday before church. This was at Otis AFB on Cape Cod, where I was a dependent of an air force officer, your great-grandfather on your mother's side of your family. I learned how to handle money, make change, and sometimes lose money when one of my deliveries left without paying. I was supposed to collect each week, and I also learned that if I waited a week (sometimes in the business world that is called giving credit—the equivalent of a loan) some client would forget that they did not pay or they moved to another base without telling me and I never got that money from them. But the newspaper business wanted their money for the product I was delivering, so I very simply did not make that lost money for that week.

If I lose money in business, why should I work? Well, it takes making some mistakes to learn about people and how to handle that money. It made me not wait another week, and if someone was not home on Saturday (when I would collect for the week), at six, Sunday morning, I was ringing their doorbell. An unhappy airman would come to the door, but I would get paid. During that time, I saved my money and bought a push gas lawn mower; and in the summer, I would mow grass around the neighborhood.

For a young boy, I was flush with money. I could go bowling, to the movie, started a coin collection, and continued my stamp collection without asking my parents for cash. You would have thought I was rich because I had enough—enough to do what I wanted and still give an offering to the church we attended and save money in a federal credit union savings account. Now my needs were not great at thirteen, but they were completely covered because I was working.

We left Otis for Izmir, Turkey, where Dad was stationed for about three years. I brought my lawn mower, but we did not have a lawn, so I sold it for double the original new price to a Turkish gentleman who had a gardening and lawn care service. He had been using a push reel mower like Dad's that I had been using before I bought the power mower. This increased his income, and I was not hurt by the transaction at all. I learned that a product or service is worth what someone is willing to pay for it. I did not cheat the man because with the transportation costs and local taxes, the mower was actually worth three times the original price. That is what is called a win-win. Everybody in the transaction is happy.

While I was in Izmir, I also delivered the military paper to the other American families that lived in the city. I had enough money, once again, to fund my young life needs and continue with my coin collection, including Turkish coins (that I can show you if you want) along with ancient Greek coins that I picked up at a local dealer. One of those is in a necklace that I had made for Nana. We can also show that to you if you are interested.

We moved to Shaw AFB in South Carolina, where we lived in Sumter, off base. I did not work there but had saved money, so I was not hurting for cash. After a year, Dad retired to Greenville, South Carolina, where I now live and work. In Greenville, I started my first real job. As a high school junior, I went to work at a convenience store at minimum wage. Minimum wage was—wait for it, wait for it—$1.25 an hour. So when I worked full time during the summer, my check was $50, less taxes (we will discuss taxes later as well as inflation which we are experiencing now at the highest rate in forty years). That was a lot of money for a teenager when gas was ¢19–¢29 a gallon, and a movie might have been $1 (I do not remember the price in Greenville at that time; the movie price I do remember was in Izmir at the American Theater—movies were at ¢35).

From high school, I attended Clemson University as an architectural student. I graduated in the five-year program in five years and, about six months later, graduated with my master of science in civil engineering and have worked as a civil and structural engineer for over fifty years. While I was at Clemson (my father had decided that he could pay the first two years for each of us five children), I worked mostly during the summer but occasionally during school when my course work made it possible for me to do. My work during the first two years of architectural school was during the summer at the company where my father worked as a vice president of architecture (it was a full discipline engineering-architectural firm). I started as a worker on a surveying team and eventually got to work in the office as a draftsman—utilizing the skills I was learning in school—at the glorified wage of $2 an hour or $80 a week less taxes (what? Oh yeah, we will discuss taxes later). But gas was still about ¢29 a gallon.

After my fourth year at Clemson, when I had taken some structural engineering courses, I was given a raise to $4 an hour because I could now produce something more than a drawing—I could design the structure of buildings (of course everything I did had to be checked by a registered engineer). During my fifth year, I worked for another engineering firm through the time that I graduated with my master's degree. By that time, I was married, and it was important to have a full time position.

I applied at that firm and at a steel fabrication company that had an engineering office as well. I worked for three years with the fabrication firm, making $9,000 a year plus some raises, then another two years with a small consulting firm making $12,000. It was time for me to take my licensing exam, so in addition to my day job, I taught a four-course structural engineering sequence at Greenville Tech to refresh what I would need for the exam, making $10 an hour of class contact time. I passed my licensing exam, received my first license as a registered professional engineer, and moved to a larger multidiscipline engineering firm for another three years. In each location I worked, I earned an increasingly larger salary. The amount you earn at the beginning of your career will increase with your seniority and your experience and the responsibility you take on.

At your age, David, you can expect to make minimum wage unless you have a skill that is needed by your employer. As you learn the skills that you may not yet have, your value will increase as will your earnings. No matter what salary level you enter at, over your life, your value should increase. But in addition to your salary and your skills, something else will increase as well—your cost of living. Depending on what you decide to do with your life (I have an idea what you would like to do, and it is an honorable life), after you leave the comfort of your parents' house and care, you will have new responsibilities to go with your new salary. That is what is next.

With love,

Granddaddy

3

Responsibility

Dear David,

You already have responsibility—you are a student, you are an athlete, you are a family member. It is good that currently you do not also have to earn a living and support yourself or your family. For many people your age, that is not the case, and working in their teens is essential to provide food and utilities and rent for their families. But you are fast approaching the time in your life when you will be more on your own and responsible to provide for some of your needs.

Your family is tightly knit, and because yours is a military family like mine was, you learn to be self-reliant and take care of those responsibilities that you do have. But you probably want a car to drive, and that is a big financial responsibility. If one is available in your family, some of the costs like insurance (we will discuss that later, but it is not cheap for a teen driver) and property taxes (there's that word again) may already be covered. But regular continuing costs such as gas, oil changes, and tire replacement may fall to you to pay. These are serious costs, and as you must have noticed in this current period of high inflation (there's that word again), the price of gas is very high, recently the highest it has ever been in the United States since the car was manufactured. At least this time, there were not many places that ran out of gas.

When I was working at that steel fabrication plant, there was an oil embargo in 1973–74 that caused long lines, and gas stations would run out of all grades of gas. A lot of cars simply ran out of gas and