When Kids Have Two Homes

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Not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota, and Utah. Today's version of MoneyWise Live is pre-recorded so our phone lines are not open. Teaching children how to manage money wisely can be a challenge, even more so if the kids have two sets of parents.

Sadly, that's often the case these days with shared custody after a divorce. Hi, I'm Rob West. Avoiding conflict and using money as an asset, not a liability, is the key to giving children a consistent message, equipping them to be good stewards. Ron Deal joins us today to talk about that, and we have some great calls lined up, but we will be taking your live calls today because we're pre-recorded. This is MoneyWise Live, where God's truth meets our financial decisions. So our guest today is my good friend Ron Deal.

Ron's co-author of The Smart Step Family Guide to Financial Planning and director of Family Life Blended, a part of Family Life Ministries. Ron, great to have you back on the program. Wow. It is always a pleasure to be with you guys.

Thanks for having me. Absolutely. Such an important topic. And as we said at the start, teaching children to follow God's financial principles poses extra challenges, as you well know, when they're essentially growing up in two households. So I'd like to begin today by asking you just to drill down on that a bit for us.

Why is that so often the case? Well, whenever you have two households, a child's moving between two homes, you have lots of parental influences and lots of messages about values. I frequently like to help people understand step family living a little bit and a single parent child living between two single parent homes by just doing what I call the math.

Let's just do the math. In a biological family, you have two parents and maybe four grandparents. So you've got six people who are kind of primarily involved in the lives of those children. And depending on where the grandparents live, it really could just be the two biological parents. Well, in a blended family home, for example, you often have anywhere from three to seven adults who are influencing the children. Three if there's one step parent, four if there's two step parents, one in each home.

What if a woman has a child by multiple men? You start doing the math on that and you have a number of people. Well, then you add grandparents and you might have eight sets of grandparents.

Okay. So all of a sudden we have somewhere between nine and 21 adults who are influencing the children, giving messages about values and what's right and wrong and how money should be used and spent. And obviously kids are watching how grandma spends money and how dad spends money and how stepdad spends money and all the message that goes along with that.

So all of a sudden the message just gets diluted. Now, in some sense, every parent has to deal with this because as our children grow up, they go and visit their friends and they see how their family spends money and how the role it plays in their life. And so all of us have to help our kids see money from one standpoint that we're trying to teach, knowing that they're going to be influenced by media and friends and all kinds of things. But in a single parent home or a step family home where you have those primary adults that are actively engaged in the child's life that have direct influence into their world, again, do the math. It's just more complicated. There's more influence. And so it's harder for any one parent to push forward the values that they want their child to pick up.

Yes. Well, and as you know, the way money is handled growing up is such a key driver to how we see money from God's perspective and also how we handle it practically as adults. And so these complications of voices, perhaps on different pages in many cases, just really creates a challenge for the child to figure out how to navigate this really important area of life, doesn't it?

Yeah, it does. Just the other day, I did a virtual class where we're talking about good parenting in complex family situations. And I started the class by sharing this story. I have a good friend in Ghana, West Africa, a ministry that my wife and I are personally involved in of helping to rescue trafficked children. And then they raised them. It's just an amazing ministry. And I was talking with the director one day and I said, tell me what you learned about parenting when you were growing up here.

He's a Ghanaian man. And he said, oh, my father told me two voices do not raise a child. One voice raises a child. And so the principle is, look, as mom and dad, you each bring natural giftings and talents to the parenting that you do, but you really need to be singing off the same sheet of music. And when you do that, then children benefit from the one voice.

And it gets complicated in a step parent and stepchild situation. So we'll talk practically about how we move forward. How do we overcome some of these challenges? Today, we're talking with Ron Deal. He's the co-author of the Smart Step Family Guide to Financial Planning and director of Family Life Blended, a part of Family Life Ministries.

Stay with us. More to come on MoneyWise Live. Welcome back to MoneyWise Live. Today, we're joined by Ron Deal, co-author of the Smart Step Family Guide to Financial Planning and director of Family Life Blended.

Ron is an expert on these topics. So challenging, as we talked about just before the break, you know, guiding our kids and understanding how to handle money God's way is challenging enough. But Ron, just before the break you were sharing, when we do the math, we realize how complicated it can get with multiple parents. And then we've got all of the grandparents associated with that. And it can be a real challenge to lead with one voice, right?

That's exactly right. And yet at the same time, that is the opportunity. If all of those adults can try to find one voice.

Now, let me just be realistic. Somebody's listening right now going, there's no way I'm getting my former wife and her new husband to join us because their values are so different than ours. And yes, that's the challenge. And yet there might be some things you can come together around as it relates to teaching stewardship, for example, to the kids. But you try the best you can in order to do that. Why? Because you gain strength in your influence with children in your parenting when you move toward one voice.

Yes. Well, it's so key and worth the effort that goes into it. Ron, we started by talking about values, and that's critical.

It really is the foundation. Let's move to the financial side for a moment. What if the other parent is not meeting their financial obligation, paying their fair share?

Well, let's talk about this because I think there's a number of things for us to consider. First of all, most households really need to provide to the other home what they're required to provide after a divorce, for example, child support or what they're receiving from the other home. Bill and Melinda Gates are probably going to be just fine managing their homes because they're both going to be super wealthy after their divorce. But everybody else in the world needs that child support. If the other home is not paying their fair share, it does create some stress and some strain, and it certainly adds to the animosity between the co-parents. That animosity actually can be, in many ways, more devastating than the amount of dollars that come because it just creates this difficulty. How do we find one voice if I'm really resentful towards you? That presents some challenges to try to work through and figure out how you can come together around that.

There's really no simple answer to resolving that gap between you as co-parents. It takes time. It takes effort. It takes a Christ-like heart and attitude. But the end game, the goal of being patient and trying to have business-like conversations and talking about, hey, we really do need you to do your part, and trying to make that happen. The end game is, children benefit, and there's less animosity between homes, which creates a climate where children are more likely to catch your values, what you're trying to teach them as it relates to money and everything else.

So, going that extra mile, trying to have that heart and that attitude is really important. Hill, no doubt. Let's say the other parent is paying child support, but the other parent is using it for things you disagree with. We hear this so often.

What then? Gardner, this is where you take a deep breath and hear me say, it is out of your hands. You really have to let it go, unless we're talking about an extreme circumstance where it's putting the child at harm, and then you say something to somebody. But outside of that, this is more about your preference versus their preference.

And you know what, guys? Sometimes this really comes down to control. It's that you weren't fair to me when we were married.

I'm really not going to let you get away with this now. Control is what people try to take when they feel that they're entitled to something, but rarely does it work. It just means you're trying to tell them what to do and how to parent.

And if you already have a difficult relationship, that's just going to make it worse. And I have to say, guys, I think a lot of well-intentioned Christian people do this. It's sort of like sometimes there's that Christian pride of, well, my values are better than yours. And so you need to do what I'm telling you to do. I think that just makes it worse. That is not the humble attitude that's really going to be negotiable and cooperative and invite the other household to consider your point of view when your need is rooted in pain, you're probably going to be more controlling and more angry and less cordial and less democratic about it. And so you got to let it go.

Yeah, that posture of holding everything with an open hand really helps. Ron, talk to that person who's in our listening audience today that finds themselves envying what the other household is able to provide for your children, things you can't offer. You just don't have the financial means to do so. Yeah. So again, let me just say, sometimes this is rooted in the past, pain over how things went down, the fracturing of our relationship or family or whatever, the residue from that lingers and sometimes that just adds envy or animosity towards how the other person is living. You look at the things they have and you wish that you could have that or you wish you could provide that to the children. And Proverbs 14, 30 says envy rots the bones.

I'm just stunned by that passage. Why does it rot your bones? Physically, it can rot your bones as well as your heart. Why? Because you're discontent. You're comparing and you're finding yourself lacking and you wish that they had less, you feel defeated, you feel insignificant, and then you end up taking your anger out on the other people. And sometimes you do that by just bad mouthing them to your children.

And that just creates this lifestyle war. And guess who else learns to be discontent and envious? Your kids. I mean, that's not the thing you want to teach them, right? You want to teach them contentment. You want to teach them that Hebrews 13, 5 really is something to lean into. For God has said, never will I leave you.

Never will I forsake you. So don't make money worth more than it really is. That's the thing. Search for your contentment in God and strive. Strive within your heart to release what you feel like is unfair, what they have, what you don't have, and just stop comparing.

That doesn't help. Yeah, that's so key. Let's reverse the situation, though, for those in our listening audience that can provide what the other parent can't. How sensitive should they be to that and what practical guidance can you give them?

Yeah, I think they should be really sensitive and sacrificial, to be honest. Before I say a little bit more about that, let me just point out that coming out of the pandemic and who knows where we are going to be into the future. There has been some lopsidedness happening with co-parent situations. One parent's keeping the kids for extra time.

Why? For physical safety of the children, moving between homes kind of adds some vulnerability to the risk of COVID. So some parents have just had to make some adjustments through this whole ordeal. Let me just point out that legally, the other home has a right to say, okay, you kept the kids for a month and we haven't seen them. Then we get to make up some of our time.

Legally, there's going to be some of those sorts of things happening in the near future. I think this could also fall into the question you've asked about finances. It could be that the other home has paid some extra stuff and now it's your turn. You kind of need to make up for what's been happening because of the situation we've been in. If you have more resource and the other home has less, I think being sacrificial, paying a little extra for something goes a long way towards building a working partnership between the households. Again, that is worth gold because then when problems arise, you have that relationship. You can fall back on and you can talk about it.

Just try not to put yourself in a situation where the other home expects you to pay for those extra things. You can be grace-filled and sacrificial, but don't overcommit either. Very good.

So practical. We've just scratched the surface. We'll have to have you back. But thanks for giving us a biblical perspective on this issue today, Ron. We appreciate it. Yeah, thanks for having me. Ron Deal has been our guest today.

You can find the Smart Step Family Guide to Financial Planning wherever you buy books or rondeal.org. More to come just around the corner. Thanks for joining us on MoneyWise Live, where God's word intersects with your financial questions. And we're so glad you're along with us today.

Our team is actually taking some time off today, so don't call in. But I will tell you, we have some great questions lined up in advance and we're looking forward to hearing from those folks. I know you'll hear something that will be of value to you. And perhaps in just a moment, we'll take a few of your emails as well.

Let's head to Holland, Michigan. Steve, you've been incredibly patient. How can we help you, sir? Hi, thanks for taking my call.

My wife and I are frequent listeners. Always appreciate your sound advice. My mom passed away last year and we will receive an inheritance of about $100,000. Along with some investing and saving and tithing on that, we also want to share that with our three kids. We have three sons.

They're all married, have children and are in pretty stable situations. But we'd like to give them roughly $10,000, $12,000 apiece. Our discussion has been, do we just kind of write them a check and say, here you go? Or do we kind of just let them know, hey, we have something here for you in case of an emergency? We're just kind of wrestling with how to present this to them. In a sense, I think we'd like to be able to just hand the money over to them, trusting that they will be wise stewards with it or not.

I don't know. We've been in the receiving end of situations like that before, and frankly, the funds came out of the blue. We were very surprised and grateful for the blessing that happened, so we're not sure which direction to go with this. Well, it's obviously going to be a blessing to them no matter how you do it. I would make it a matter of prayer, Steve, just to ask the Lord to give you some wisdom.

There's obviously any number of directions you can go. There's going to be not any tax consequences to this because it was an inheritance to you, so there's no taxes. The annual gift exclusion is $15,000 per donor per recipient, so you could actually give $30,000 between you and your wife, so you're fine there. I think the question is now or later, and are there any stipulations as to the gift?

So let's talk about now or later. I think the key is, do you want them to be able to use the funds right now? And a good bit of that has to do with just your own observations as to their financial and spiritual maturity. Clearly, if there was anything going on in any of their lives where they were living a lifestyle that was problematic and you could actually end up funding sinful behavior that would lead to something other than a desired outcome. And so if there's any hint of that, you obviously want to withhold that as to not put money into a problematic situation. So I think that would be the first issue.

Obviously, you didn't mention that, so I'm going to assume that that's not the case. But if there was something there that Mike saying that prompted in your thinking, you know, let me know. But then secondly, financial maturity as to the decisions they're making and just your observations as to their ability to handle that. Give me your thoughts. Well, I believe each of each of his sons, they're all three boys. Each of them are intelligent, smart and living.

We feel a good life. I know that two of them are definitely believers. The third, I don't think so. But he is a stable, a good father, and we feel leading a good life. But, you know, obviously there's that other aspect to his life as well. But I think, you know, they're each in different stages as far as their needs might be. None of them are destitute by any means.

They all are in stable situations income wise. So it would be really something we would like to see them do something with maybe long term or something like that. But then are we dictating what they should do with this? And that's, I guess, where we're kind of wrestling.

Yeah. And I think, I mean, clearly you're the one making the gift so you can do it however you want. But there is that element to it where, you know, I think you'd need to ask yourself, are you okay with whatever decision they would make? And you need to be able to answer yes to that before you make that gift. If they were to decide to use it on a really nice vacation or an improvement on the house in the short term versus investing it for the future, would you be okay with that decision?

I think you and your wife need to talk through that before you would be in a position to make that gift. If you are okay with whatever they choose, and you just cited their maturity and stability and just kind of where they're at in their lives, then I think there's something to be said about you all just making that kind of, you know, lavish gift, perhaps with it, you'd say, you know, our desire is that this would be something that you'd have into the future. I think, you know, they, it would be good for them to hear that from you, to know that that's, you know, going into it, that's your desire. Now they become the steward and have to decide what they do with that information. But I think making that known to them that that would be your hope, but that at the end of the day, you're going to leave it up to them as to how they use it.

No questions asked. You know, I think that would be certainly one approach, there would be nothing wrong with that. I think the second option is just, you know, is there something creative you want to do with this, you know, ie promoting generosity. So, you know, if that's, if it's 10 or $12,000, maybe it's $10,000 as a gift and $2,000 in a donor advised fund, where it's already been given and needs to just be given away. So you can set up a donor advised fund where they would then be charged with, you know, distributing that $2,000 to nonprofit ministries and charities that would be near and dear to your heart. That would be a way to kind of foster, you know, some really exciting and fun giving that's on the heart of God clearly when we look at Scripture. So I would probably go one of those two approaches, but I do think you and your wife need to kind of wrestle through this and just say, are we going to be okay no matter what they do with it? And if the answer is yes, then I like the idea of just making the gift, making your desires known on the front end, so they have that and then can weigh that as they make decisions. But at that point, you need to be willing to let it go and trust that they're going to make the right decision.

And then if you decide you want to add a giving component to it, talk to our friends at the National Christian Foundation about a donor advised fund, ncfgiving.com. Steve, hang on the line. We'll talk a bit more off the air.

This is MoneyWise Live. So glad you've joined us today. Again, we're taking some time off, so don't call in, but we'll be back with much more just after this. Stay with us.

Thanks for joining us on MoneyWise Live, where we apply God's wisdom to your financial life. Hey, we're taking some time off today. Our team is not here, so don't call in, but we have some wonderful calls that we've lined up in advance that I know you'll enjoy. We're going to begin today in Florida in this segment. Pam, welcome to the broadcast.

How can we help you? Hi, thank you for taking my call. I've been listening to you for a while.

I miss your side buddy. I do as well. I just saw him the other day, and he gives his best to all of the MoneyWise listeners, but I appreciate your kind remarks.

Yes. Well, I was listening the other day, and there was a young lady that called in about having a credit card that she wanted to X out. I've had a couple of credit cards that I've just had hidden. I basically used two credit cards, maybe just one.

So the particular stores that have their own, I'm not using them. So how do you get rid of them, and how often do you delete one, or how do you do this whole thing? Well, I think the key is whether or not you're concerned about a temporary drop in your credit score. I mean, that's what most folks are asking about when they ask about closing a credit card, because at face value, the idea that you would have these cards sitting around that you have no intention of using is not a good idea, because you've got to keep up with the accounts. You've got to monitor them to make sure that nobody's compromised the account and is charging them for unauthorized fraudulent purchases, because if you don't report that on a timely basis, you may end up being liable for it.

So you've got to keep up with them. And I think just for simplicity's sake, we all have enough on our plates, let alone tracking accounts we're not using that we probably want to get those closed. Now, the reason we may want to spread that out over time or start with the accounts that have been open most recently is just as a result of, you know, where is your credit score? Do you already have a high score? And, you know, therefore, if it dropped 30 or 50 points temporarily, and then it came back up, you know, a few months later, that's not a big deal, especially if you're not out seeking credit, then I would say just go ahead and close them.

And let's be done with it. But if you're kind of right on the borderline, you know, you need a 640 and above to qualify for a loan that you're looking to get and you're at 655. You know, it's probably not the time to go closing a bunch of accounts because you could see a drop and then, you know, that could hurt your ability to qualify for the best credit when you're out there looking for a loan.

So I think that's the driving factor here. How many cards are you looking to close, Pam? I'm looking to close at least four. Okay. Everything I have is paid for. I have rental property that I'm getting rent in that they're all paid for, my house is paid for, everything is paid for. So there's no loans that I'm out looking to get and I'm just trying to delete and get rid of things. Okay. Then I just go ahead and close them all down right now. And, you know, again, if you monitor your credit score or you have a, you know, free service from a credit card that does that for you, you may get alert that your score has dropped 30 or 40 or even 50 points. That's not a big deal.

It'll come back. The key is that you're an on-time payer every month and that you have just, you know, a good financial foundation under you. So I wouldn't be too concerned about it and I think it'll give you a little bit more peace of mind to know those are out of the equation, they're done, and you can forget about them and cut up those cards. So hopefully that helps you. We appreciate your call today and we'll look forward to hearing from you again real soon. Connie's in Fort Myers.

Connie, how can I help you? Hi, thank you for taking my call. Yes, I am weighing two home mortgage refinance options and I'm just trying to see which one would benefit me more. So the first one is at 2.625% with a finance fee of $1,300 plus closing costs. And then the other one is 2.25% with a financing fee because you're buying down a few points, $2,805 plus closing costs. Can you give me some or recommend which one might be the better deal?

Yeah. Well, I mean, you could run the numbers just to see whether or not, you know, how long it would take for you to be, quote, in the money for you to buy down that rate. I mean, I typically would say let's just find the lowest rate possible, you know, that you can with the lowest closing costs, you know, without a lot of upfront fees. I mean, right now you're going to be looking at something, you know, just under 3%, you know, without a lot of cost. And where you're not buying down the rate but, you know, you're only spending 1 to 2% in terms of the overall loan value toward closing expenses.

So on a $300,000 loan, we're talking about, you know, $3,000 to $6,000. And as long as you're going to stay in that home for at least, you know, 5 to 8 years and you don't extend the term and you're saving at least a point to a point and a half on the interest rate, then that makes a lot of sense because you'll end up paying back those costs, you know, over 5 or 6 or 7 years. And, you know, then from that point forward, you enjoy the savings on the interest, you know, until the end of the loan and you'll save thousands and thousands of dollars in interest if you stay in the home until it's paid off. The reason, you know, that I don't love the idea of buying it down is, you know, life calls, right? And so you may plan to be in this home a long time but if you end up moving, you know, and you've bought the interest rate down, that's just more upfront expense that we have to wait until you recoup, until you start realizing some benefits of that refinance. Now, if you plan to stay there for 30 years or let's say you're doing a new 20-year mortgage and you actually stay for 20 years and you run the amortization schedule based on you buying down the rate on the front end and you do in fact take it all the way to the end, you may find or you probably will find that you're actually going to save some money in interest and you can have them give you that comparison to show you. It's just that, you know, for most folks, they're spending a lot of money upfront and we just don't stay in homes these days, you know, for that long.

Does that all make sense to you? I think we lost you, Connie, but I appreciate you calling today. Hopefully that's helpful as you think about this. I might encourage you to get a third bid just because I like the idea of getting three. Get one from your current provider, your current lender. I'd get at least two from online banks. Go to bankrate.com to get the very best loan programs that are out there with the very best rates. And I think if you do that and then compare the three, again, with the idea being you want to understand are you getting today's best rate based on a credit score of 740 or above, which is going to be just under 3% with no more than 1 to 2% in closing costs.

That's a good mortgage and I would certainly consider that. So we appreciate your call very, very much. Well, folks, we've got just a moment before our next break. Let's take an email.

We haven't done that for a bit. If you have an emailed question, you can always send it to us. Questions at moneywise.org and we'll try to get it on the air. This question comes from Michael and Jan and Michael just asked simply, should I pay off my student loans before I begin long term savings? And here's what I would say to that. I would be well on your way to paying down your student loans before you start contributing to your retirement account.

What do I mean by that? Well, if you're in a position where you've got the monthly payment fit into your budget and you can have a target to pay those student loans off within 10 years, then I would say yes. Go ahead and start by putting at least the matching portion in your retirement account to take full advantage of that dollar for dollar match. If you have that, that's free money.

You don't want to pass that up. And then I think you have a choice at that point. Do you want to add more to the retirement account or do you want to accelerate that payoff? I think you could go either way.

It's really just something you need to pray about and develop a conviction about. There would be nothing wrong with saying we want to get out from under that debt as soon as possible or no, we're OK with a 10 year payback and we want to increase our retirement. Ultimately, your target for retirement is 10 to 15 percent of your take home pay. Jan and Michael, thanks for sending your e-mail to questions at MoneyWise.org. We're going to pause back with more of your calls and questions just after this. Stay with us. Welcome back to MoneyWise Live.

I'm Rob West. So glad to have you along with us today. Hey, our team is taking some time off today, so don't call in. But we have some great questions all lined up for you. You're going to get a lot out of this. We're going to talk about whether universal life makes sense for kids.

We're going to talk about how you use a health savings account to supplement retirement. But first, down to Chattanooga, Tennessee. Tim, what's on your mind today? How can we help you, sir? Yes, I thank you, first of all, for taking my call.

Sure. And I'm sixty seven. I'm retired and I'm taking four percent, as they say. Well, my question is, if I'm if I got stocks, I get bonds and whatever.

What yield do I want to get per year on the whole thing in order to make sure that everything flows right? Yeah, that's a great question, because obviously you're going to have some taxes that you need to pay on that money. And so you want to make sure that that is covered as you pull that out so you can net the amount that you need. So typically we'd be looking to make about five percent annualized on that portfolio so that you can easily take out that four percent and cover any fees or expenses. Keep in mind, you know, if you have an investment adviser in there, there's going to be a cost related to that.

And then you had any taxes that are due as well. So if you target, you know, a five percent return, if in some years, you know, it's six or seven and other years it's down. I mean, the idea is that over time that that's going to balance out to a four percent rate of return, typically with like a 70 30 portfolio where 30 percent is in stocks. And about 70 percent of that is in fixed income or bonds. And the idea would be, you know, if you were 100 percent invested in stocks, you know, we would say that you would want to be thinking about, you know, being able to weather a 30 percent downturn in the market and, you know, or 35 percent. You know, so when you look at getting that exposure down to only 30 percent in stocks, you know, at that point, we're talking about much less that you would be weathering on the downside.

You know, probably about 10 percent. So even if your portfolio during a period of time where the market was declining, if that portion was down about 10 percent, you know, for the overall portfolio, that's OK, because you would wait that out and let that money come back without selling anything or doing anything to cover that. And then you'd live on the fixed income portion. Obviously, during periods where it's doing quite well, you know, then we're we're looking at realizing some of those gains and using that to supplement the portfolio.

So those ups and downs over time should even out to where you can cover that four percent of the income that you're taking out and make sure that, you know, all the expenses and taxes are paid. Does that make sense? Well, it's exactly the question or answer the question I was trying to ask. Yeah, thank you very much. OK, very good, Tim. Thanks for your call today, sir. We appreciate it. Let's head to Cleveland, Ohio. April, how can we help you with HSAs today? Hi, thanks for taking my call.

Sure. I am interested in finding out I don't understand how to use an HSA account to maximize retirement savings. The reason I'm asking is because I'm in my early 50s. I haven't saved a dime and I need a way to turbo charge this also to give you a good idea of where I am. I even though I'm in my early 50s, I feel like the Lord is leading me to attend medical school. So I'm in the middle of massive flux and I want to make sure I do this right.

Yeah, very good. Well, I think the key right now, April, if you feel like you're a bit behind on long term savings is just to keep your lifestyle at a minimum the best you can. So you have as much surplus as possible and make sure you keep giving. Don't take on any debt to the best of your ability and take that margin and save, save, save. Now, you want to get that in tax advantaged vehicles, which is going to be either a 401K at work or at least an IRA, a traditional or a Roth. If you're self-employed, you could use a SEP IRA.

But an HSA is, in fact, another way to do it. The key is you really need to be fairly healthy because you don't want to be using that money a lot and you want to be able to max out your contributions. But if you can do that, then the amount that's left over at the end of the year and even before that, if you've built up a surplus, can be invested in mutual funds and other vehicles.

So that money is growing. Now, you want to make sure you keep enough money liquid in the account for your annual health care expenses. And you can liquidate positions as you need to, but you generally want about as much as you think you'd need in a 12-month period. The rest you invest.

Now, here's the key. Once you reach age 65, the HSA behaves similarly to a traditional IRA. You take withdrawals out of the HSA for non-medical expenses, penalty-free. Now, taxes may still be applicable to your withdrawal amounts, similar to traditional IRA withdrawals, but you avoid that 20% penalty from the IRS. Now, the withdrawals for qualified medical expenses, which arguably in that season of life may be your biggest expense, will still be eligible for tax-free withdrawals as you look to pull that money out.

Now, with contribution limits, you've got to have a high deductible health plan in place in order to qualify for the HSA. But as long as you do, you can put in $3,600 in 2021 for an individual, $7,200 max for a family. So that's the idea behind it, where it's this additional savings vehicle that can be invested with tax advantages, assuming you're not using up what you put into it each year for your medical needs in a given year.

Does that make sense to you? Yes, but I also wonder how do I access it at the end of the year to be able to invest it? Because from what I understand, you can only access the funds for medical purposes, so I'm a little bit lost. Can you help me with that?

Yeah, sure. You can only withdraw them for medical purposes, but that doesn't mean that you can't invest it. So when you make contributions into the HSA, generally through salary deferral, either an employer portion or an employee portion that you elect, that goes into the HSA. And then you would just typically log into your account online with whoever your plan administrator is, the custodian of those funds. And you're not taking any money out like you would if you needed to pay a medical bill, you're just taking the balance and that portion that you don't think you need at a given year that you want to invest, you would just direct it right into those investments inside the HSA. So the money is never leaving the account, it's just that you're redeploying it in investments inside the plan, similar to what you would do in a 401k or an IRA.

You're not taking the money out, you're just investing the money that goes in. Does that make sense? Yes, it does. Thank you. You're welcome. We appreciate you checking with us. And we'll look forward to talking to you again real soon. Thanks, April. Let's head to Green Acres, Florida. Jennifer's up next.

Jennifer, how can we assist you? Yes. Hi, thanks for taking my call. I wanted to know the difference.

My baby was like six years old. I wanted to open an account and I opened it and the lady said it was life insurance. But then when I called back a couple of years later, they said, oh, it's a universal insurance. So what does universal insurance mean? Yeah, well, universal life insurance is also called adjustable life insurance because it offers some flexibility. You have the ability to reduce or increase your death benefit and pay your premiums at any time in any amount with some limitations. But the idea is it's a combination of a life insurance policy with a savings vehicle. The question I guess I would have is, you know, why do you need insurance on a child? You know, you can usually get as a rider to another policy, a small burial policy if you wanted protection, you know, for that, you know, that type of event that could occur. But other than that, you know, typically I don't recommend it. I'd rather you get a very inexpensive burial policy and then take the difference and invest it not through an insurance product but through another type of account.

If you want to save for your daughter's future, you know, I'd look at a 529 plan for college or another type of investment account where you can see that money grow. But again, not inside an insurance product where there's a lot of fees and commissions. But with the insurance portion itself, I guess I would just ask, you know, why do you feel like you need that?

Right. I didn't know at the time, but then I opened with Prime America a 529 for her. And when I wanted one for myself, well, banker's life had turned me down because I'm diabetic and they didn't want to give me an insurance. So I turned it on her, but then I opened Prime America and they said they would put up a savings for me. So I have a 529 for her and a savings for me with Prime America. And then with this now, I wanted to know, should I, I don't know how much I have in there to pull it out.

Yeah. So you would want to just call and ask if there's any cash value that's accumulated. And when you cancel the policy, if that's what you decide to do, you would get that back and then that policy would lapse. And then moving forward, I think the question is just where's the very best place for you to invest for yourself? It's probably going to be starting with an emergency fund and a high yield savings account up to three to six months expenses.

And then beyond that, for the longer term for you, I'd look at a retirement account like an IRA or a 401K or 403B. And then for your daughter, it's probably going to be a 529 specifically for college. There are probably better plans out there, better 529 plans than the one that you're in. And the way to evaluate that is just to go to savingforcollege.com. You can look at the current plan you're in and compare it to other plans in other states to see if you can do better. And I suspect you can.

In many cases, you'd be able to roll that over to the new 529. So I hope that helps. I appreciate your desire to save for the future and be thoughtful about how you manage God's money. We appreciate your call today.

Well, that's going to do it for us, folks. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Let me say thank you to my amazing team, Deb Solomon, Dan Anderson, Jim Henry, Amy Rios. And we're so thankful for what they do each day to make this program happen. This is where God's word intersects with your financial life. Come back and join us next time, will you? God bless you.