What To Do With a Boomerang Kid

Many people are using the FaithFi app to help provide the wisdom, community, and money management to stay on track, financially speaking. To date, over 37,000 members are using its digital envelope system, participating in our community forums, and engaging in virtual workshops. And one of the most convenient features is the ability to keep all your accounts in one place for an easy-at-a-glance view. You can choose from one of three options, depending on your management style, and it's available on desktop or mobile. Go to faithfi.com and click app to get started. We'll talk about what you can do about it, then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Okay, I said you're not alone if you have a boomerang kid living in your basement. We know that because the financial group Thrivent actually does an annual boomerang kid survey. The latest one, just conducted in April, found that 46% of parents have had an adult child move back in with them at some point. The survey showed that student loan debt is preventing boomerang kids from achieving financial milestones, like buying a home 39%, saving for retirement 34%, or building emergency savings 36%. And 28% of young adults say student loans have them living paycheck to paycheck, with only 22% saying their first job helps them pay down that debt. Now, an adult child living at home in and of itself may not be a big drag on parents' finances if you're only providing what's called three hots and a cot.

It's when you start picking up the tab for their smartphone, student loans, and car payments that things can get out of hand in a hurry. Many parents are willing to help their kids even to the point of their own detriment, even when it jeopardizes their retirement. In a brand new bank rate survey, around half of parents said they've sacrificed emergency savings and debt payoff efforts to help their adult children.

43% said they'd tapped into retirement savings to help their kids. This inability to cut the financial umbilical cord can have a detrimental impact on both parents and children. The kids may begin to expect regular financial handouts and become dependent on them.

So what to do about it? Well, first is realizing that you should do something about it. You don't want to have an adult child living at home unless there are mitigating circumstances, such as caring for you if you're disabled. Proverbs 10-4 reads, A slack hand causes poverty, but the hand of the diligent makes rich. As parents, we always want to help our children, but at the same time, we don't want to encourage our children to have a slack hand.

Finding the dividing line between helping and hurting can be difficult, and that often leads to tension when spouses disagree on where one ends and the other begins. But it doesn't have to be a question of throwing your kid out on the street or breaking your budget. You can take on this challenge gradually. First of all, you need to set a non-negotiable requirement. Your boomerang child must have a job and be earning income.

The type of job isn't important. Set a deadline. For example, moving out day is two months from now if you're not yet working.

There aren't plenty of jobs available, so this shouldn't be a problem. Once your boomerang kid is earning money, you can sit down with him or her and set up a budget and a financial plan. First and foremost, in that plan will be saving to get their own place. You need to impress upon the child the need to live below one's means so that you can save.

It's key to all future financial success. You can offer to match your child's savings temporarily to accelerate the process. You want your child to save for an apartment, but also to save for emergencies. Their budget must allow for that once they're on their own.

Otherwise, something will come up, like a job loss or a major car repair, and they'll be borrowing from you or moving back in. Of course, all of this is much easier if you are a financial role model. There's no better way to teach your children about wise money management than by showing them how to do it. Proverbs 22 6 tells us, train up a child in the way he should go, and even when he is old, he will not depart from it. It's never too late to start teaching your children financial responsibility. And when you do, your boomerang child can once again leave your hand, this time successfully.

I hope that's been an encouragement to you. Hey, before we take our first break, let me remind you about the FaithFi app. It's a great way for you to develop your spending plan. And by the way, it could be a great resource for that boomerang child in your basement.

Perhaps they could use it to set up their own budget, begin to track their spending, get into our digital envelope system and learn a crucial skill that will pay huge dividends when they're out on their own. You'll find it all on our website at faithfi.com. That's faithfi.com.

All right. Your calls are next. 800-525-7000. That's 800-525-7000. I'm Rob West and this is Faith and Finance.

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Soundmindinvesting.org. Great to have you with us today on Faith and Finance. All right, it's time to take your calls and questions today. Eight hundred, five, two, five, seven thousand.

That's right. We've got lines open and we're ready for your calls. Eight hundred, five, two, five, seven thousand. We're going to begin in beautiful Hershey, Pennsylvania. Hi, Olivia. Go right ahead. Hi, Rob. Thank you for taking my call. I really appreciate it. Absolutely.

I have a question. We've been diligently working to get our debt down and our credit scores improved. And we have four credit cards. Three of them have zero or negative balances because we pay them immediately, even before they post if they're used. One credit card is a retail card and the credit limit is forty six hundred. There was a two thousand dollar balance. I just made a six hundred and ninety five dollar payment on the card prior to the due date and was going to make another payment. And when I went into my credit karma, I checked my credit scores and it dropped 21 points on both TransUnion and Equifax, stating that the reason it dropped is because of a decrease in my balance, which kind of surprised me because I thought getting out of debt would increase my credit score because we're looking at purchasing a new car in the next three to six months.

And just wondering, why did that happen? Yeah. So did you have a charge alongside that large payment? Did that two thousand dollar charge come all in one month?

No, no, not at all. OK. And so that was a balance you were carrying over a number of months and then you just made a large payment against it? Yeah.

What happens is every month I've been paying down on the card and I thought I would just get this taken care of this month, making a large payment on it. And that's what happened. Yeah. OK.

Very good. Well, I mean, typically the biggest driver there is around credit utilization. And clearly, you know, that two thousand dollar balance, did you say the limit was forty six hundred on that? Correct.

OK. So the credit utilization was above that 30 percent threshold, which does start to pull your score down. Now, the fact that you paid it down, I mean, there really isn't anything in the credit scoring algorithm that negatively affects you by simply paying down a card.

It's usually the other things around it. So if there's a late payment, obviously, in this case, there wasn't. You know, the credit utilization ratio changes because not only do you pay it down, but you pay it completely off and close the account. And so that changes your overall credit utilization in the aggregate across the rest of your cards. Doesn't sound like that would apply here because you paid it down, but you didn't pay it off and close it. So I'm not hearing anything that would have negatively affected you other than the fact that you're getting it, your credit utilization down even lower by paying this large amount and you're not showing any kind of charges in the other direction, especially since any charges you have during the month, you're paying it off before the cycle ends. And so therefore, the zero balance is being reported to the bureau.

So you're doing all the right things. You know, they do look at your credit mix and the quality of those lenders does factor in, although this wouldn't have been something new because it sounds like you had that retail account open. But usually those retail cards in some cases are backed by a lender that's not necessarily top tier credit. It might be more, you know, one level down, not necessarily a finance company category, but maybe kind of in the middle and that can negatively affect you. But I think overall, Olivia, the idea that you would be an on time payer, that you would work toward getting your overall credit utilization for individual cards, as well as in the aggregate down below that 30 percent threshold.

That sounds like the only one where that's an issue is this this retail card. And then just continuing to keep them open to show that longevity in your credit history is all the right things. So I don't think that, you know, this is going to affect you for any length of time.

I think you'll probably, in fact, see if you were to go back in a month later that that score jumped right back up. So I think you're going to be in good shape for this upcoming purchase that you have. And I don't see anything negative regarding the the actions you're taking here. Is that helpful?

OK. Yes, it is. So I guess I'm OK then if I want to make another large payment on that card. You absolutely should be. Again, as long as you're not charging it up and then it's being reported prior to that payment, showing that you're increasing your credit utilization significantly, which in this case you're not. You're just bringing the total debt down.

That should actually work for you, not against you. Hey, thanks for calling today. All the best to you, Olivia. Call any time. Let's head to Lancaster, PA. Hi, Ann. Go ahead. Yes.

Thank you, Rob, for taking my call. Yes, my husband and I, we have been debt free for about 20 years and we thank God for that. But recently we purchased our second home for our special needs adult fund so that he can live in there. And this kind of a home is a new concept. But we are back to paying a mortgage again. And so it's putting a bit of a strain on our finances until we get things up and running.

The house needed some more work than we realized. Plus, we have to fully furnish the house as well. So our question is surrounding paying our tithe. We have been faithful tithe givers to our church, but because of this new challenge here in our lives, it's made things kind of difficult. And we were just wondering if we can withhold the tithe for a time till we get our son moved in the house.

We want to do the right thing, so I'm not sure. Well, I appreciate that question and I appreciate that you want to honor the Lord and yet you want to provide for your family. Both are very clearly biblical.

I would say at the end of the day this is a decision that needs to be made between you and your husband and the Lord. What we know about New Testament giving is that it's giving proportionately. So I like the idea, the principle of the Old Testament tithe, which Jesus references, although we're no longer under the law of Moses. I think that as a guideline for our giving should be systematic based on the increase starting with the local church. But New Testament giving, kind of the framework, if you will, is around proportionate giving, freely giving, so not under compulsion or obligation, sacrificial giving. Those would be kind of the hallmarks of our giving as a New Testament believer. And when we look at these two ideas, what I would love for you all to do is, no matter what, to continue to be a percentage giver, giving off of your increase starting with the local church, as to the amount, because we're not being legalistic about it, we're not trying to check a box, we're giving as an act of worship and we're giving freely. Again, what that looks like as you balance all of the competing priorities you have, including providing for your son, I think is between you and the Lord. What I would say is, let's try to find other ways for you to be able to come up with that money. There are other areas you can cut back in. But if you all have done the hard work and you say, listen, we think we've skinnied this budget up the very best we can, and for a season we feel like we're going to continue to be a percentage giver, but it's going to be a lower percentage than it has been, I think that's perfectly appropriate as long as you pray through that and feel good about that, then again, I don't think there's anything where you need to feel like you've missed the mark or you certainly don't need to feel guilty about that. I think the Lord knows your heart, and at the end of the day, I think he's delighted that you're caring for this son of yours, and obviously there's expenses there and he has medical needs that have required you all to step in, and so if that impacts your ability to give at the level you would like to give, I don't see any problem with that.

But I would keep that muscle of giving systematically going, even if you dial it back, but at the end of the day, I think this is a decision you all need to make with the Lord. Does that make sense? Yes, it does. Yes. Okay, well thank you guys.

That really shed some light on the situation. Thank you so much. All right, Ann.

God bless you and all the best to you and your husband as you care for your special needs son. If we can serve you in any way in the future, let us know. Folks, we're going to take a break. When we come back, we've still got plenty of time for your calls and questions on anything financial. Call 800-525-7000. Call right now and we'll take those calls right around the corner. Stick around. Sure, they provide biblically wise financial advice as part of their practice.

You can find a local CKA professional in your area by going to faithbuy.com and clicking find a CKA. I hope you're having a great day. I sure am. And I'm looking forward to your phone calls here. 800-525-7000.

The calls are coming in and they're building, but we've still got a few lines remaining. So if you have a financial question today, give us a call. 800-525-7000. Again, that's 800-525-7000. Let's head right back to the phones.

We'll go to Cleveland, Tennessee, WMBW. Hi, Carol. Go right ahead. Thank you for taking my call. I would like to ask about revocable trust. I formed a trust 23 years ago after my husband died. And at the time I owned a house and I was advised to get a trust. Well, now I don't own the house. The only thing that is in there is my car, which probably wasn't a smart thing to do to put that in there. But anyway, the car and then some investments, which are some stocks and interest-bearing money market accounts for a total of $80,000. So is it worth having the trust? Should I get rid of it?

If I do, how do I do that? But I'm also concerned about tax-wise for my children after I die. What's the best thing for them, to have the trust or not? The trust, and I'm not an attorney, so any legal questions you want to direct to an estate attorney. But let's just talk generally about how this works. So what's the trust going to do for you?

Why did you do that in the first place? Well, the reason you would typically do a trust is generally, unless you have a really massive estate, you don't have to worry about estate taxes. Because there is no inheritance tax, so your kids don't pay any taxes on whatever they receive from you. And estate taxes don't kick in until you have an estate bigger than, at least today, $13 million. So if you're under $13 million for your estate, you have no estate taxes and they don't ever pay any inheritance tax. So there's really going to be no taxes due on this unless after they receive your assets, they hold on to them and they appreciate in value.

But that's after the fact. So what's the purpose of the trust? Well, the trust is just to facilitate the efficient transfer of your property and assets outside of probate. So what is probate? Well, when you die with a will, the probate court gets involved and they adjudicate the process of administering the will alongside the personal representative. And there are court costs involved and it can be time consuming.

It can be months or years if it's complicated or there's a contested will. So the trust avoids all of that. Whatever is in the trust, as you said, you know, some investments in money market and a car because the home is no longer in it. Then those things that are titled in the name of the trust are going to pass directly to your heirs outside of probate, which means they'll get them quicker.

They'll be anonymous, not a part of the public record, and there won't be any court costs. So I would say, given that you've already taken the time and expense to put it together, I don't see any benefit of you dissolving that trust. You certainly can because it's revocable, not irrevocable. But I don't think there's any benefit.

And I think the fact that that's a sunk cost, you get still the added benefit of at least those things that are in the trust passing directly to your kids outside of probate, which is a good thing. So, you know, I think I'd probably just stay the course, Carol. Does that make sense, though? Oh, very much, yes.

And that's exactly the question I was wondering. So, yes, that's perfect. Okay, very good. Hey, if I can help you further along the way, don't hesitate to reach out. May the Lord bless you. Let's go to Franklin, PA. Hi, Greg. Go ahead. Well, thanks for taking my call.

I'm curious. I'm looking at putting an addition on my home, which I own free and outright. I'm 61, and my 401k has grown substantially. That's about a million dollars. I didn't know if it would be better at this point in life to borrow the money and have the opportunity cost that goes along with it to put the addition on, or is it better to go set up a home equity line of credit and just pay it back like a regular mortgage for the next 10 or 15 years? Yeah, that's a good question. Let me ask you, what do you think the total cost of these renovations and addition is? Probably going to be somewhere in the neighborhood between $50,000 and $75,000.

$50,000 and $75,000. Okay. And you own your home free and clear, is that right? Yes. Okay, yeah. And you've got about a million dollars in the 401k, and that's still in the 401k? Yes, yes.

I have never touched it, but I've just learned that opportunity costs usually outweighs anything else. Yeah, yeah. And you are still working for that employer, correct?

Yes. Okay, yeah. You know, here's the thing. I mean, if you can cash flow this thing, I kind of like you leaving it there. Because once you take it out, although you wouldn't have the penalty, because you're over 59 and a half, it would all be taxable. And so you'd have to add 50 to 75,000 to your taxable income. Now, we're at the low end, I think, of the tax rates, if anything, depending on what happens on the outcome of the next election. I mean, the Trump Tax Cuts and Jobs Act is set to expire in 2025. And, you know, the Biden administration is already talking about some pretty significant increases to the tax code.

And so, you know, a lot of that is going to depend upon what happens in November. So taxes, if anything, are staying the same, if not going up. So you could argue that this is a good time to pull it out, although given that you're still working, you're adding this on top of your existing income. So that's probably going to offset the fact that we could have higher tax rates down the road, is that if you waited and pulled it out in retirement, you're not adding it to additional income because you're no longer working.

So you don't have any earned income. And I think the opportunity cost is the right way to look at it in the sense that, you know, as soon as you take it out, that's money that doesn't have the ability to grow tax-free for the next three decades, assuming you live past the age of 90. So I kind of like the idea of you taking a home equity line of credit. Normally we'd say home equity loan, but I like a line of credit here because you could ride those interest rates down as they come down and then just try to get that paid back as quick as you can.

You could always pull it out and pay it off at any time, but I think as long as you have the cash flow and the surplus to accelerate the payoff and pay it off out of current cash flow, I'd rather you do that than take it in the 401K. That's my best advice. Well, that's going to do it for us today. I'm so thankful for your calls. What a privilege it is that you invite us into your stories each day as we guide you back to God's word and encourage you to apply the wisdom we find in scripture to your financial decisions and choices. And let me invite you to become a FaithFi partner.

These are men and women who help us reach more people with this life changing message of God's wisdom related to stewardship. FaithFi partners support us monthly at $35 a month or more or $400 a year. And we have the opportunity to make available some great FaithFi partner benefits, including exclusive quarterly ministry updates and early release copies of each of our FaithFi studies and devotionals mailed right to your door. If you'd like to become a FaithFi partner or give a gift of any amount, just head to our website, faithfi.com and click give. That's faithfi.com and click give. Well, folks, we hope you come back and join us next time. On behalf of my entire team here at FaithFi, including today's broadcast team, Taylor Stanrich, Amy Rios and Chad Clark, I'm Rob West. Looking forward to having you back here next time as we apply God's wisdom to your financial decisions and choices here on Faith and Finance. Until then, may God bless you. Bye bye. Faith and Finance is provided by FaithFi and listeners like you.