Money Management

Have a child with a brand-new college degree in need of a job? Read on to see why you should — and shouldn’t — bring them on board. 

Small business owners are often surprised to learn that it’s possible to hire their kids to work for them at a pretty young age. In fact, there can be tax benefits to hiring young children — namely, you get to deduct their earnings as a business expense. And also, if you’re hiring a child under age 18, you won’t have to withhold or pay any FICA tax on their income.

But while you can get away with hiring a younger child to work for your business, you need to be careful. If you claim that a young child does certain work that the IRS does not deem age-appropriate, it might choose to dig into your situation further.

Things get a lot easier when you have a child who’s a recent college graduate. At this point, your child not only has a degree, but may have developed certain skills that can make them a useful member of your team.

But is it a good idea to hire your own child to work for you? Here are some pros and cons.

Pro No. 1: There’s a level of trust

If you have a good relationship with your child, then one benefit of hiring them is getting an employee you know has your best interests at heart. Say you’re hesitant to turn bookkeeping over to a random hire because the information there is quite sensitive. You might have an easier time sharing your checking account details with your own son or daughter.

Pro No. 2: Employee retention may not be an issue

Some people take any old job out of college just to earn a paycheck and have something to put on their resume. But it can take time to hire and train an employee, so you’d probably rather not have to repeat the process too often. Your own child is more likely to be upfront about their expectations. And if they say they intend to work for you for a number of years, that’s probably true.

Con No. 1: If your business fails, you’re both out of a job

If your child loses their job, they may end up coming to you for financial support. But if your child works for you and your company goes under, you’ll both be in the same unfortunate boat. Consider the financial impact on your family overall if you hire your child.

Con No. 2: Work issues could impact your personal relationship

It’s not always easy being your own child’s boss. Say your child’s performance isn’t up to par. You may do your best to offer suggestions for improvement gently. But if your child gets offended, now, they’re not just angry at their boss — they’re angry at their parent. And if you decide that things just aren’t working out on a whole, there could be long-term animosity between you and your child.

If you have a child who just graduated from college and is looking for work, hiring them could be a good idea. That way, you get the help you need, and they get the benefit of a steady paycheck. But before you hire your recent college graduate, consider the pros and cons of doing so. And also, have an honest conversation that addresses those benefits and drawbacks so you both go into the situation on the same page.

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Many people are already retired by the time they reach their 70s. Read on to see what 70-somethings have saved. 

Since Americans are living longer these days, more people may be opting to work into their 70s. But for the most part, it’s fair to assume the typical person in their 70s is retired, at least partially. And at that point, you may be tapping your IRA or 401(k) plan consistently rather than leaving that money alone to let it grow.

Data from Northwestern Mutual’s latest Planning & Progress Study, however, reveals that the average 70-something does not have a very large nest egg to work with. The average savings balance for people in their 70s is just $113,900.

If you withdraw from that sum at a rate of 4% a year, which is what financial experts have long recommended, that amounts to just $4,556 of annual income. And that 4% withdrawal rate may actually be too generous given today’s economic environment.

Now to be fair, it may be that part of the reason 70-somethings have an average of $113,900 in savings is that they’ve already started to dip into their nest eggs. If you’re in your late 70s, for example, it may be that you’re 10 years into retirement, so that would make sense.

But all told, $113,900 is not a lot of money for retirement purposes. So if you’re finding that money is tight, you may need to get creative in generating more.

How to boost your income once you’re in retirement

Some people who find that money is uncomfortably tight in retirement opt to un-retire. They go back to work on a full-time basis and try to boost their savings.

But that may not be something you want to do, and understandably so. In that case, you can explore alternative ways to generate income without making yourself miserable.

One option is to join the gig economy. Monetize a hobby, or find flexible work that’s enjoyable, whether it’s selling crafts or becoming a tutor.

Another thing you may be able to do is monetize your home if you own one. Let’s say you have an area in your home you don’t use much, like a finished basement. You could rent it out and use the money you collect from a tenant to help cover your bills.

And if you don’t want a full-time tenant, consider renting out parts of your home. If you live in a place where parking is hard to come by and you have an extra spot in your driveway, rent it out to a desperate commuter. You can even try renting out storage space in your home for cash if you have plenty of it.

You’re not doomed

You might assume that if you only have somewhere in the vicinity of $113,900 in savings during your 70s, that your retirement is apt to be a disaster. But that’s not automatically the case. If you’re creative about generating income, you may find that you’re able to get by on a smaller nest egg.

And also, don’t underestimate the power of cutting some expenses. Getting rid of a car and taking the bus when you need to go places could save you a bundle of money on maintenance and auto insurance. Think about the bills you can shed without making yourself unhappy, because a few key changes could go a long way.

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Rate hikes have made borrowing generally expensive. Read on to see if a personal loan can help. 

The Federal Reserve has been on a mission to cool inflation. To accomplish that goal, the central bank has raised interest rates 10 times since March of 2022.

To be clear, the Fed is not tasked with setting consumer interest rates directly. Rather, it oversees the federal funds rate, which is what banks charge each other for short-term borrowing.

However, when the Fed raises its benchmark interest rate, the federal funds rate, it tends to make it more expensive for consumers to borrow. So if you’re carrying a balance on your credit cards, for example, you may find that the interest rate on your debt is higher than it was in the past. The same might hold true if you’re in the process of paying off a HELOC.

In fact, a reason credit card and HELOC balances are a big problem right now is that they tend to come with variable interest rates. So it may be a good time to consolidate your variable-interest rate debt with a personal loan.

Personal loans offer the benefit of fixed interest rates and fixed monthly payments, which can make them a lot easier to manage. But while consolidating your debt with a personal loan could be a good option, you’ll need to make sure that makes sense for you.

Make certain you’ll come out ahead financially

If you’re juggling multiple debt payments each month, the simple act of consolidating them by getting a personal loan could make your life a lot easier. And chances are, the interest rate you’ll be eligible for on a personal loan will be lower than what you’re paying on your credit cards.

But the rate you get on a personal loan may or may not be higher than what you’re paying on a HELOC. You’ll need to look at the numbers as they apply to you.

Also, see what your credit score looks like. Personal loans are unsecured, so lenders put a lot of emphasis on credit scores when determining rates. If your score isn’t in the best shape, you may not end up with a very competitive interest rate on a personal loan.

Explore other options, too

If the only kind of debt you’re juggling right now is a few different credit card balances, it may be worth it to see if a balance transfer offer makes more sense than a personal loan. Many of these offers come with a 0% introductory rate that can buy you a reprieve from paying interest for 12 months or longer.

If you qualify for an extended 0% introductory rate and plan to work a second job or do something in the near term to come up with more money for debt payoff purposes, then this route could make more sense than a personal loan. But again, it’s a good idea to explore all of your options for consolidating debt at a time when interest rates are high. A little research could help you land on the most manageable and cost-effective decision.

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A fraud alert gives you an extra line of defense against identity theft. Learn how it works and what to expect if you put a fraud alert on your credit. 

New account fraud has become a popular way for scammers to steal money. Instead of using your card information, criminals use your personal information to open a whole new account, such as a credit card or loan. Then, they can get money from the new account, skip out on paying the bill, and leave you to sort out the mess.

There were 363,092 reports of new account fraud using credit cards in 2021. If you’re worried about your identity being stolen this way, a fraud alert could give you extra protection and peace of mind.

You can put a fraud alert on your credit free of charge by contacting any of the three credit bureaus: Equifax, Experian, or TransUnion. Each one lets you do this online, and you don’t need to set up a fraud alert with all three. The one you contact is required to notify the other two so they do the same. Here’s how a credit fraud alert works and what to expect afterwards.

Lenders and creditors will contact you about new credit applications

A fraud alert notifies lenders and creditors to contact you directly about credit applications in your name. When you set up a fraud alert, you provide the phone number where you want to be contacted.

Credit checks are a standard part of credit applications, including applications for credit cards and loans. When a lender checks your credit, it will see the fraud alert on your credit file and the number where it can contact you.

This means you’ll know about every credit application made using your information. If you filled out the application, you can let the lender know it’s legit, and the lender can proceed as usual. If you didn’t, you can inform the lender so there isn’t a fraudulent account opened in your name.

An initial fraud alert lasts one year

There are multiple types of fraud alerts:

An initial fraud alert is available to anyone. It lasts for one year, and you can renew it for additional one-year periods.An extended fraud alert is available to victims of identity theft. To put an extended fraud report on your credit, you must have a police report or an FTC identity theft report. It lasts for seven years.An active duty alert is available to active duty service members. It lasts one year and is renewable for the length of your deployment.

You can keep renewing a fraud alert free of charge for as long as you want. Just make note of when the fraud alert will end so you can decide if you want to renew it.

It protects you from new account fraud, but there are other types of fraud out there

A fraud alert works well against new account fraud. When you put a fraud alert on your credit, scammers won’t be able to take out credit cards or loans using your information.

Keep in mind that there are many types of fraud, and a fraud alert doesn’t provide complete protection from every possible threat. Criminals could still steal your existing credit or debit card information to make fraudulent purchases. They could also potentially open a fraudulent bank account in your name, since many bank accounts can be opened without a credit check.

Should you put a fraud alert on your credit?

Consider putting a fraud alert on your credit if you’ve been a victim of identity theft or if you’re worried about it. For example, if you learn your information was stolen in a data breach, you may want to set up a fraud alert to protect against fraudulent accounts.

If you’re not sure a fraud alert is the right choice, there are other options available. For something more convenient, you could sign up for a credit monitoring service. There are free ones available, as well as free identity theft protection offered by some credit card companies. Credit monitoring helps you stay on top of your credit and accounts opened in your name, without needing to manually approve every new account yourself.

For something more robust, there’s a credit freeze. When you freeze your credit, lenders and other third parties can’t even access your credit report, effectively preventing new credit applications in your name. It’s not the most convenient choice, but it’s another effective way of preventing new account fraud.

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Buying a house in a golf course neighborhood may seem fun, until problems arise with paying for the course’s upkeep. Read on to learn more. 

Golf course neighborhoods can seem like a really attractive place to live — especially if you love to golf. In fact, many people are willing to get a larger mortgage and pay a premium to live on the golf course where they can enjoy the attractive views and play a few holes whenever they want.

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But before you buy a house in a neighborhood attached to a golf course, it’s important to consider the potential downsides and risk of making this choice.

Here’s the big problem with golf course neighborhoods

When you buy a house in a neighborhood with a golf course, there’s a big risk involved that you may not think about. The big issue is, what happens if the golf course closes?

More courses have been closing in the United States than opening since 2005, and participation in the sport is waning. If a golf course fails in a neighborhood, property values could decline substantially, with data suggesting that the value of surrounding houses typically experience around a 10% to 50% decline depending on the market where they are located.

A dispute could also arise over exactly what should happen to the land that the golf course is on. This has resulted in lawsuits when buyers of the failed courses have wanted to reboot the property into other things. And some owners of “golf course” properties have found themselves instead living next to more single-family houses or even next to large apartment complexes.

For those who wanted to be on a golf course, suddenly living next to a huge multi-family dwelling would be a major change of lifestyle — not to mention one where their property would likely be worth a lot less going forward.

Should you buy a house in a golf course neighborhood anyway?

Not every golf course is going to fail, obviously. And there will always be demand for homes in golf communities because the lifestyle can be very pleasant when things go right.

The key is, it’s important to do your research. If you can, find out how long the golf course has been operational, who owns it, whether it is profitable, and whether there are any potential threats of a course closure in the future. It can sometimes be difficult and time consuming to research these issues, so you may need to ask for help from your real estate agent.

You can also check into zoning laws to see what kinds of development might be permitted in the area should the course close. Of course, people can get variances and develop properties even if the zoning may say that the specific type of development is forbidden — but zoning rules can provide at least some protection.

If you choose a very established neighborhood with a thriving course, then you may be in the clear. But if there are any signs that there’s trouble or that the course’s future is at risk, you may want to steer clear so you don’t find yourself dealing with a bad situation if the course near you becomes the next one to close its doors.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Being a college graduate isn’t enough to make you ready to become a homeowner. Read on for other considerations to help you decide it’s time. 

Graduating from college can be the start of your adult life. And you may be excited to do adult things — like buying a home of your own. But, before you rush into home ownership, you need to make sure you are really ready to take on the financial responsibility that this entails.

To help you determine if you’re ready to get a mortgage and buy your first house, be sure you’ve checked these tasks off your to-do list.

You have a stable career

Mortgage lenders typically want to see that you have a consistent two-year work history. This means you have worked for the same employer, or at least within the same industry, for two years and your income has been pretty stable during that period of time.

While it is possible to get a mortgage from some lenders without that stable career on your record, you’ll have many fewer loan providers to choose from and you may get stuck with a higher rate due to the increased risk you present. If your income has gone up recently, the lender may also only count some of your earnings when calculating your debt-to-income ratio.

For example, if you made $30,000 two years ago and $50,000 last year, you may get credit only for around $30,000 of your income when the lender decides how much you can afford to borrow.

Of course, you’ll also want to have a stable career for other reasons as well. The last thing you need is to buy a house, lose your job, and become unable to make the mortgage payments.

You don’t plan to move within the next few years

You’ll also want to make sure you’re ready to set down roots before you buy a home. During your post college years, you may find you need to relocate a few times for career or relationship opportunities. Unfortunately, if you’ve bought a house, you could be stuck in one place until you’re able to find a buyer and sell it for enough to pay off your home loan as well as all closing costs.

Unless you intend to remain in one place for at least two years — and ideally closer to five — you should probably wait to purchase. Otherwise, property values may not have gone up quickly enough to cover the closing costs and fees you’ll incur, including around 6.00% commission to a buyer and seller’s real estate agent.

You have a down payment saved

Having a down payment in a savings account is very important before you move forward with a home purchase as well. The National Association of Realtors indicates the typical first-time buyer has made around a 6% to 7% down payment since 2018. With the median sales price of homes sold during the first quarter of 2023 coming in at $436,800, you could be looking at a down payment of over $30,000 for a median-priced home. That’s a lot of money.

Even if you buy a cheaper house, you’ll still have to come up with tens of thousands of dollars. And, if you do not have a down payment of at least 20%, your mortgage loan costs will be higher due to the fact you’ll be required to pay for private mortgage insurance.

So, unless you have a good amount of money to put down, keep working and saving for a while before rushing into buying a home of your own.

You have an emergency fund with three to six months of living expenses

Finally, you should make sure you have an emergency fund large enough to cover three to six months of living expenses including your new mortgage payment. That way, surprise home repair expenses or a job loss won’t derail your financial life and leave you unable to afford the home you purchased.

By making sure you check these items off your to-do list, you can confirm you are really ready to buy. It may take you a little while to get to that point after graduating from college, but waiting is worth it.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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