Author Topic: Best way to help your kids by passing them wealth  (Read 4329 times)

ericrugiero

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Best way to help your kids by passing them wealth
« on: May 24, 2019, 09:53:45 AM »
I've thought about this before but the thread https://forum.mrmoneymustache.com/welcome-to-the-forum/fire-by-getting-an-inheritance/ got me thinking about this again.  What is the best way to help your kids financially if you end up with more money than you need?  There are different schools of thought on this and I'm just looking for thoughts.  This community is much more likely than the general population to end up with more money than they need to live on.  For me, if I save money to become FI and then end up getting an inheritance it could easily be that I end up with more money than I need.  My inheritance (if it happens) is likely to occur around normal retirement age by which time I should not "need" it.  Per current US tax law, I could at that point take some of the inheritance money my kids would get in the future and give it to them early.  But the big question is, would that be good for them?

Standard thinking (in the general population) seems to be that it's helpful to contribute to your kids finances and get them started on the right foot.  This could be anything from paying for college, free place to live, down payment on a home, money to start a business, annual gifts of $10,000-$15,000, etc.  However, I'm listening the book "The millionaire next door" right now and they did a big study of people's finances.  They found many instances of what they call "Economic Outpatient Care" (EOC) and their conclusions are that it's harmful to the kids who receive it.  They say the kids who receive it tend to count on that in future.  This makes them less motivated to earn and more likely to spend.  They end up statistically making less, spending more, and are less confident in their ability to take care of themselves financially because they have never truly taken care of themselves. 

Mr Money Mustache stated on his blog that he doesn't want to deprive his son of the opportunity of achieving FI on his own so he doesn't plan to give him a bunch of money.

This all makes sense, but I have to admit if I was offered a pre-inheritance right now, I would take it and be happy to accelerate my path to FI.  Does that make me a hypocrite, or would it make sense to let my kids get the point where they are supporting themselves without help, saving for the future, and making good financial decisions and then give them a pre-inheritance?  I don't want to provide Economic Outpatient Care but I also would like to be able to help them if I'm in a position to do so. 

Right now this is all academic because I'm raising my kids to be independent and I haven't achieved FI myself yet.  The only thing I'm planning to help with for sure is to pay for part of college.  Thoughts?


StarBright

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Re: Best way to help your kids by passing them wealth
« Reply #1 on: May 24, 2019, 10:37:01 AM »
I've posted this link on the forums before, but I really like this guy's take and it is what we are currently planning to do with our kids once they start working:

https://actionecon.com/building-generational-wealth/

tl:dr : Match your kids contributions to IRAs up to 5k a year to get to 25k total - bumping them up a nice base as early as possible. Giving your grandkids an "inheritance" upon birth if you can swing it, giving them a leg up to be used for college, life, etc.

thatsdifferent

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Re: Best way to help your kids by passing them wealth
« Reply #2 on: May 24, 2019, 10:49:06 AM »
I would agree with all of StarBright's post, and I also plan on helping my kids with matching their savings, etc.

I would say I'm a recipient of "EOC". I received substantial help with a house down-payment, paying for (cheap in-state) college, funds that kick-started my retirement savings, and an on-going annual gift. I tend to count on the gift in the future, and it makes me less motivated to earn.

But then, enter the MMM mindset-

I'm not more motivated to spend. My annual gift goes straight into an IRA. I view the gift as another layer of financial protection, which has comforted me enough for my wife to be a stay-at-home parent, and for me to be a part-time stay-at-home parent. My salary pays the bills, the gift goes into savings. If things were to go dire (probably only medical would do that), then I could use the gift on that.

These financial gifts have made all the difference in my family's life, and I would do the same to my kids. However, I have a sibling who has also received a yearly gift, and I would say it gets spent, and more relied upon as a crutch. If I don't trust my kids' abilities to manage money, then I will have to tread carefully before giving them too much, too soon.

ice1717

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Re: Best way to help your kids by passing them wealth
« Reply #3 on: May 24, 2019, 12:17:38 PM »
I've always wondered if the kids getting EOC were raised like classic "rich kids", i.e. never had to work hard for things and always got everything they wanted.  If raised this way and then continued to receive support such as yearly gifts or bailouts, I can see it being a problem.  I hope not to make these mistakes, but it takes daily commitment and can be really hard to say not to cute little faces.

My plan is similar to Star's.  Each of my kids will be getting $3k for a UTMA investment account (actually it is an inheritance from my grandfather).  They will get a monthly allowance (currently too young) and will be encouraged to invest it.  I will give some sort of match for every dollar (not sure if 50% or 100%).  I also plan to match earning when they have high school jobs and/or stuff like b-day money.  My thought is this is like an employer match and they can't get access to the money until age of majority, which is 21 in my state.  I hope to encourage 1) comfort with investment accounts and "addiction" to growth  2) habit of saving money they receive  3) delayed gratification capacity of seeing money, but not being able to spend it until 21 4) last but not least, a self created leg up for when they graduate college/start in the real world.

My spouse and I have also agreed that if we are going to FIRE, we are committed to paying for their college education. 

robartsd

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Re: Best way to help your kids by passing them wealth
« Reply #4 on: May 24, 2019, 05:34:32 PM »
My parents provided free room and board at home while pursuing full-time education. I'd do the same and likely add a retirement savings match. I could see offering the retirement savings match to further generations (while living and/or through a trust).

Awesomeness

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Re: Best way to help your kids by passing them wealth
« Reply #5 on: May 24, 2019, 06:26:57 PM »
This is on my mind a lot and I've come up with a few good ideas how I can help my adult kids. They're 21 and 26 and right now anything significant would probably hurt more than help but since I'm not quite set myself that isn't an issue. I'm still helping one launch, not quite done w school.

Because I've gone through a nasty abusive divorce and he's not around, it's just me and will be for the rest of their lives.  My thoughts go to protecting them and making sure they keep what I give them in case of divorce and or a bankruptcy.  So I think of how I'd like to help then go to worse case scenario on what would take that all away. Bad things happen.

I'd like to contribute to housing, retirement savings and help with medical costs if needed.  I'd probably buy them each a house or duplex but keep it in my name, letting them live there for costs only and making sure my affairs are in order for it to pass to them.  Retirement savings are protected against bankruptcy. It would make me feel good if they used their lower housing costs as an opportunity to max out Roth IRA's or I've thought of giving them annual gifts to max these. Not sure how to keep this part away from a spouse in case of divorce so I'd need to seek counsel on this and before I bought another house etc. I've read that if you are housing your children it doesn't count as a gift for tax purposes. Also you could pay medical bills directly to the source to avoid the tax also. I haven't verified this yet, just read online. 

It's hard because I want to help and not hurt them so I need to be careful. I think about this a lot.  I have no spouse to bounce ideas off of or balance me out, in the past he had the mentality that when our kids were 18 he was done helping them. He forgot, or didn't care,  how much his grandfather helped him as a young adult and it hurt me because I wanted to help. Now I can and realize that I will have enough for me soon and if I do it right I will be able to help them with some pretty big things in life.  Mine are still a bit immature with money but I'm hoping in time that changes. I got better with time so they probably will also. 



One

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Re: Best way to help your kids by passing them wealth
« Reply #6 on: May 24, 2019, 06:32:18 PM »
We only have one kid, he's a good one, we won't need all the money. Our plan is to push him towards a career that he likes vs one that pays the most. One idea is to buy him a house in our name, close to us, and let him live there for free as long as pursuing a career of some kind. Other option is supplement him as long as he's a productive member of society. I don't think they have as good of opportunities going forward.
« Last Edit: May 24, 2019, 06:38:40 PM by One »

Chippewa

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Re: Best way to help your kids by passing them wealth
« Reply #7 on: May 24, 2019, 07:18:28 PM »
Find OzLady’s journal here. I like her approach to building generational wealth for her kids. And shares the journey.

StarBright

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Re: Best way to help your kids by passing them wealth
« Reply #8 on: May 24, 2019, 07:27:35 PM »
I'm also one that has had what I consider "EOC" help - particularly from my parents. I don't think it harmed me. I've been saving for retirement since my first "real" part time job at 17. I'm still saving 20 years later. I've also never asked for help and made the big purchases myself: wedding, first car, first and second houses etc so when they've offered a bit to DH and I when money was tight (job loss, two babies, medical emergency etc) we accepted it gratefully and gracefully. It probably never amounted to more than a couple thousand over 15 years, but it was always offered when we could really use it - honestly like manna from Heaven.

More recently we've tried to turn down offers of help but accepted it again when my parents pointed out that they've done a ton for my brother and have felt guilty about not doing the same for me. They tried to give us cars or buy us a new car (they hated that we were driving a 16 year old vehicle with their grandkids in it) and we eventually accepted a medium sum towards the purchase of a new car. We would have been fine without the money - but it certainly made the decision to purchase a new vehicle easier. I am super grateful to my folks for helping to ease our path when it gets a little too exhausting. I really hope to do the same for my own kids.

I don't think I'm worse off for having received money - we still sock away about 40% of our income any given month. I guess that is why, at this point in my life, I have no qualms about thinking of helping my children. DH and I are very responsible- we expect our kids to be as well. 
« Last Edit: May 24, 2019, 08:43:24 PM by StarBright »

Bloop Bloop

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Re: Best way to help your kids by passing them wealth
« Reply #9 on: May 24, 2019, 08:28:30 PM »
I don't think you should ever gift children significant sums of money - or build the expectation of that in future. It will erode their desire to become financially self-sufficient and successful. It breeds complacency.

I think if you have money, the best thing you can do is convert it into time spent with your children, teaching them from a young age about interesting things, giving them a hand with their education - not though rote tutoring, but by passing on important values: curiosity, critical thinking, an ability to express different views articulately. Your time and effort is the most important thing.

If you must provide financial assistance, I would do so mainly by providing free room and board till a reasonable age (say, 25), and then by providing gentle encouragement and preparation for things like interviews and extra-curricular activities. But it's important that you let your children succeed and fail (repeatedly) on their own merits. Give them a soft landing but still allow them to fall.

Finally, depending on tax laws in your country, you can loan adult children money in a way that is tax-beneficial for both parties, but I would only do this for tax advantages and only when I am certain the children are self-sufficient and responsible.

former player

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Re: Best way to help your kids by passing them wealth
« Reply #10 on: May 25, 2019, 04:16:08 AM »
Things have changed for the current generation of kids, compared to how it was before.  The two big changes are ones that involve significant sums of money - higher education costs and higher house purchase costs.  Both are a function of living in a richer society than before - there is more accumulated wealth in society generally to put into these assets and so the cost has gone up.

That does I think mean that the equations on helping out the next generation have changed a bit.  MMM's "completely on your own at 18" means a higher mountain to climb towards the sort of comfortable, asset owning class that until the last few years a sizeable segment of the population was able to take pretty much for granted for the previous two or three decades.

I agree that economic outpatient care is a bad idea all round.  And two of the biggest inequalities in society are access to good education and inherited wealth, and the current level of those inequalities doesn't just hurt the people at the wrong end of them but society in general, as well as being morally unconscionable.

I guess I'm in the "enough to do anything, not enough to do nothing" camp, giving it when it's needed and not when I'm dead, and putting the surplus to addressing some of those inequalities.

FIREstache

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Re: Best way to help your kids by passing them wealth
« Reply #11 on: May 25, 2019, 06:21:07 AM »
Don't be a dream hoarder.  Don't give your kids any money or advantages that other kids might not have.

https://forum.mrmoneymustache.com/welcome-to-the-forum/are-you-a-dream-hoarder/
« Last Edit: May 25, 2019, 06:33:37 AM by FIREstache »

FLOW

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Re: Best way to help your kids by passing them wealth
« Reply #12 on: May 25, 2019, 07:24:07 AM »
We only have one kid, he's a good one, we won't need all the money. Our plan is to push him towards a career that he likes vs one that pays the most. One idea is to buy him a house in our name, close to us, and let him live there for free as long as pursuing a career of some kind. Other option is supplement him as long as he's a productive member of society. I don't think they have as good of opportunities going forward.

Not saying this is a bad idea, but it strikes me as a spectacularly bad idea. Sure, you don't need all the money... but maybe the kid wants to buy his own house and make his own way.  You are robbing him of that.  I would be pretty careful about what this setup might mean to your kid.  It could be emasculating.  It could seem like you are essentially purchasing a vote in how he runs his life. So like, when he wants to cut down a tree, does he have to check with you?  Get your okay? 

What this idea means to you, may not be what this idea means to him.  You seem like a kind thoughtful person.  So you probably considered this already.

Adam Zapple

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Re: Best way to help your kids by passing them wealth
« Reply #13 on: May 25, 2019, 07:32:53 AM »
I think it's hard to look at statistics and draw any conclusions.  I will help substantially with college and encourage savings by matching retirement fund deposits.  This decision needs to be made in the context of your overall financial education plan for your kids.

RePatriot

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Re: Best way to help your kids by passing them wealth
« Reply #14 on: May 25, 2019, 09:41:34 AM »
Pre-Boomers, it seems that the general norm was that you were to assist your children as much as possible, including down payments on a house, etc.  Of course, the expectations placed on children were much different as well.

Just as investing early yields compounded results over time, so does early financial help.  My grandparents and parents both saved for 20+ years to prepare to send myself and my two brothers to college.  Graduating debt free has made a massive difference in my life, freeing up possibilities that wouldn't be available otherwise.  If my economic reality included student loan payments, my life would look a lot different now.  I'd rather start my adult life debt free than get a fatter check when I'm 50.

All of this is predicated on raising semi-responsible children.  As far as dream-hoarding goes, I believe that a persons primary responsibilities are to their family.  I consider myself a steward of my family's wealth, and once I've secured my family's future needs, I can look to increasingly further other's needs financially.

Catbert

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Re: Best way to help your kids by passing them wealth
« Reply #15 on: May 25, 2019, 10:40:27 AM »
We only have one kid, he's a good one, we won't need all the money. Our plan is to push him towards a career that he likes vs one that pays the most. One idea is to buy him a house in our name, close to us, and let him live there for free as long as pursuing a career of some kind. Other option is supplement him as long as he's a productive member of society. I don't think they have as good of opportunities going forward.

Not saying this is a bad idea, but it strikes me as a spectacularly bad idea. Sure, you don't need all the money... but maybe the kid wants to buy his own house and make his own way.  You are robbing him of that.  I would be pretty careful about what this setup might mean to your kid.  It could be emasculating.  It could seem like you are essentially purchasing a vote in how he runs his life. So like, when he wants to cut down a tree, does he have to check with you?  Get your okay? 

What this idea means to you, may not be what this idea means to him.  You seem like a kind thoughtful person.  So you probably considered this already.
 
FLOW said it before I could: Worst idea ever.  At least you were up from about what you want from a deal - the ability to control your son's life (i.e., to get the pseudo-gift had has to live close to mommy and daddy and have a career they approve of).  Maybe that's not want you mean to do, but really re-think this idea.

Tass

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Re: Best way to help your kids by passing them wealth
« Reply #16 on: May 25, 2019, 11:20:30 AM »
Lots of people here saying that they had help and it didn't hurt them, which is a great example of survivorship bias. Of everyone who gets parental help, some are going to build that into something bigger and some are going to squander it. People who use it responsibly are far more likely to end up on this forum. We are not a representative sample.

Here's a young-adult mustachian perspective. My parents matched every dollar I put toward college, and when I graduated about $5000 short of that agreement they didn't charge me interest as I got on my feet and paid it back over about two years. I'm very grateful. My mom also helped me put together my first adult budget when I moved across the country, and when I grew alarmed at how little my income would cover, she helped me adjust so that everything would fit. Instead of contributing money, she went with me to the grocery store to help me buy a frying pan, a spatula, a can opener, and foods she knew would go the furthest. THAT gave me confidence, and my budget turned out to be roomier than I expected once I settled in. I am grateful that she didn't budge when I got nervous.

I am the oldest child and I think my parents are a little uncertain how much help they are supposed to be giving me - but at this point, I take pride in my financial independence from them. They are smart with money, but not mustachians, and I think they were startled by how quickly I accumulated savings (relatively speaking for a grad school income!)

Also, I have seven younger siblings, four who are still kids. There are better ways for them to use their money than boosting me.
« Last Edit: May 25, 2019, 11:26:29 AM by Tass »

Cassie

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Re: Best way to help your kids by passing them wealth
« Reply #17 on: May 25, 2019, 03:22:41 PM »
Rep, I am a boomer and previous generations had all they could do to save for their own retirements and weren’t supporting or financially helping their kids. Some did with college but many couldn’t afford to. I think you are taking about affluent families versus the middle class.

Maenad

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Re: Best way to help your kids by passing them wealth
« Reply #18 on: May 25, 2019, 03:55:49 PM »
Pick up a copy of "The Old Money Book" at the library and give it a read. There are some common behaviors that successful old money families practice that tend to reduce the "shirtsleeves to shirtsleeves in 3 generations" thing. In the blog (https://theoldmoneybook.com/) the author also mentioned that there are financial "counselors" that help old money families with this as well, and you may want to pay for some of their advice on how to develop your "new money" into "old money".

I've known a couple of old money kids when I was growing up, and a lot of what he says holds water.

TomTX

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Re: Best way to help your kids by passing them wealth
« Reply #19 on: May 25, 2019, 08:11:27 PM »
Heinlein tackled this one in The Number of the Beast, though it was more of a trust payout than from living relatives.

For the recipient to be handed their fortune from the trustees, they had to first earn their own fortune.

Money Badger

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Re: Best way to help your kids by passing them wealth
« Reply #20 on: May 25, 2019, 08:15:54 PM »
I came from grandparents that indulged the kids and frankly ruined them...With certainty...Nothing good comes of trying to control children with gifts of capital or predicting how a child will launch from the nest when easy money comes their way...

Instead... We set expectations of “21 and we’re done” with ours before the teen years and meant it.   And we consistently reminded the kids to “adult-up” in the situations where our peers or theirs didn’t.   My oldest, almost 22, now gets it and thanks us.   And the youngest is smart and already more independent than her sister and doing even better in school.   We love our kids more than life itself...   But parenting isn’t a popularity comtest.  Consistency, self-reliance and non-financial
reminders of love work best by far.   

Hula Hoop

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Re: Best way to help your kids by passing them wealth
« Reply #21 on: May 26, 2019, 03:13:33 AM »
Money badger - I agree with this.  I live in a culture where "kids" live at home with parents and, traditionally, parents support their kids financially forever.  Obviously, there are a lot of young, hard working Italians whose parents aren't in a position to support them but for middle class families and above the ideal is to buy your kids an apartment, a car, pay their rent or have them live at home and continue to feed them and do their laundry often well into their 30s.  I've seen what a ruinous effect this can have on the younger person.  I know several families in which the 20 something "child" (often with a degree!) sits at home and plays video games while the parents cook, clean, pay all utilities and generally enable the "child". 

I'm obviously from a very different culture (the US) but I really believe that it's way better for a young person if s/he is financially on their own after university.  My parents could have paid for stuff for me but they didn't as it wouldn't have occurred to them as they aren't from this culture.  I got student loans and lived in really crappy student housing and always worked part time and during the summer.  I'm not perfect but at least I know how to hustle at work and earn a living. I'm kind of lazy by nature (which is my motivation to FIRE), so I think that if my parents had indulged me I would never have worked as hard as I have to build a career.
« Last Edit: May 26, 2019, 03:15:04 AM by Hula Hoop »

mathlete

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Re: Best way to help your kids by passing them wealth
« Reply #22 on: May 26, 2019, 06:09:26 AM »
I have no specific plans because I'm 20ish years away from this situation at the minimum, but I do have a few thoughts.

All else equal, people with financial assistance do better than people without it. The "pressure makes diamonds" adage is true only for certain people/circumstances. The pressure of Bird's Celtics may have made Magic a better basketball player. I don't think something like crushing student debt has the same effect. Most people make worse decisions when they're under pressure.

I'm sure we all know someone who is still on financial life support into their 30s in 40s, but there's something wrong with these people at a more fundamental level.

debittogether

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Re: Best way to help your kids by passing them wealth
« Reply #23 on: May 26, 2019, 09:38:34 AM »
We only have one kid, he's a good one, we won't need all the money. Our plan is to push him towards a career that he likes vs one that pays the most. One idea is to buy him a house in our name, close to us, and let him live there for free as long as pursuing a career of some kind. Other option is supplement him as long as he's a productive member of society. I don't think they have as good of opportunities going forward.

Not saying this is a bad idea, but it strikes me as a spectacularly bad idea. Sure, you don't need all the money... but maybe the kid wants to buy his own house and make his own way.  You are robbing him of that.  I would be pretty careful about what this setup might mean to your kid.  It could be emasculating.  It could seem like you are essentially purchasing a vote in how he runs his life. So like, when he wants to cut down a tree, does he have to check with you?  Get your okay? 

What this idea means to you, may not be what this idea means to him.  You seem like a kind thoughtful person.  So you probably considered this already.

I know someone who did exactly this with her one child and it blew up in her face.   Because what are you going to do when the kid does nothing with their life,  kick them out of the house?

She's in her late 60s now and should be retired,  but still works,  because her son is in his late 30s, never ended up working a day in his life and lives in her second house rent free since the early 2000s.

Acorns

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Re: Best way to help your kids by passing them wealth
« Reply #24 on: May 26, 2019, 02:49:43 PM »
I am raising my kids with the expressed expectation that they will by self-sufficient by their early 20s. However, assuming they are on glidepath to accomplish this, I will help them as much as I can with education, a safe car, housing (such as a down payment for a modest house, not a mansion), and hopefully providing an educational trust for any grandkids I may have. I also really like the idea of matching whatever money they put into savings, whether an IRA, 401k, or other retirement plan.

tralfamadorian

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Re: Best way to help your kids by passing them wealth
« Reply #25 on: May 26, 2019, 02:55:29 PM »
Pick up a copy of "The Old Money Book" at the library and give it a read. There are some common behaviors that successful old money families practice that tend to reduce the "shirtsleeves to shirtsleeves in 3 generations" thing. In the blog (https://theoldmoneybook.com/) the author also mentioned that there are financial "counselors" that help old money families with this as well, and you may want to pay for some of their advice on how to develop your "new money" into "old money".

I've known a couple of old money kids when I was growing up, and a lot of what he says holds water.

+1 I'm too lazy to dig through the archives atm but I believe he has some interviews or summaries of how actual old money families introduce fiscal responsibility to their children and how to become good stewards of the family wealth.

Bloop Bloop

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Re: Best way to help your kids by passing them wealth
« Reply #26 on: May 27, 2019, 01:33:16 AM »
Don't be a dream hoarder.  Don't give your kids any money or advantages that other kids might not have.

https://forum.mrmoneymustache.com/welcome-to-the-forum/are-you-a-dream-hoarder/

I don't agree with that. By giving your children good genes you are starting them off with an advantage. By giving them a good, intelligent, well-rounded upbringing you are giving them a head-start that other children might not have. Reading to them, taking them to libraries, feeding them nutritious food - all that gives them an advantage other children don't have. Yet I would do all of that, specifically so they can benefit.

I agree you shouldn't hand them any financial advantages - they need to work for it.

Linea_Norway

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Re: Best way to help your kids by passing them wealth
« Reply #27 on: May 27, 2019, 05:58:32 AM »
I think it could be okay to give children a financial gift, after they have proven to not squander it. For example, when we bought a home (from our own money), we got a financial injection from my parents in law. That was almost 10% of the house's value. It came in very handy at that time, because we underestimated all the costs involved with buying a house.

If you are rich up to your death, the children will get the money when that day comes. Then they are probably very adult and have learned to be either sensible or not sensible. I don't think you need to make them FI at the age of 20-25. It wouldn't hurt to let them work for some years/decades for their own money.

Malkynn

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Re: Best way to help your kids by passing them wealth
« Reply #28 on: May 27, 2019, 06:31:52 AM »
As someone who grew up with a lot of kids from wealthy families, I can tell you from my experience that it's impossible to predict in advance the best way to handle this issue.

There really is no best strategy, you have to customize it to your particular family.

Some people need financial support to reach their full potential, some people really thrive fending for themselves, some people crumble by having financial incentives attached to only certain life choices (university, marriage, home ownership) and it erodes their sense of autonomy, some people will carelessly burn through inheritance while others will be inspired to live their best life, some people's motivation completely falls apart when they expect a large inheritance, other people thrive to accomplish on their own...

I've seen it all, and the ones who fared best were the ones with the best mental health and the least fucked up parents.
In all my years with rich kids, the ones with the fucked up parents tended to end up the most fucked up.

Just know that you can't really control outcomes and do what makes sense for your family. Don't try to figure out the "right" way to handle it because there is no right way.

Don't worry about how to pass on wealth, worry about being happy. That's what really matters in terms of not screwing up your kid.

StarBright

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Re: Best way to help your kids by passing them wealth
« Reply #29 on: May 27, 2019, 07:05:07 AM »
Don't be a dream hoarder.  Don't give your kids any money or advantages that other kids might not have.

https://forum.mrmoneymustache.com/welcome-to-the-forum/are-you-a-dream-hoarder/

I remember this thread! I thought it was a good point about NIMBY-ism and all that - but obviously if you have kids you probably want to give them the best advantages. It is built into our very bones to do just that.

That doesn't mean though, that you can't do the best for your child and try to do your best for other kids too. Like, volunteer to campaign for the measure that extends public transportation to your 'burb or similar. There are tons of things you can do to help even the playing field:  a group of us in our PTA are trying to convince others to adopt a "sister school" with whom we'd share our fundraising efforts or instead of donating to our township's scholarship fund, we donate to nearest city's scholarship fund instead.

We definitely do not embrace the either/or concept when it comes to base line advantages.
« Last Edit: May 29, 2019, 07:38:01 AM by StarBright »

SM2

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Re: Best way to help your kids by passing them wealth
« Reply #30 on: May 27, 2019, 10:11:44 AM »
I am now a single parent and struggling to rework my life after seeing everything fall to bits. I have always attempted to be good with money. My parents were responsible and taught me to save and not be wasteful.

I hope to be able to help my children if I can. But I will also be VERY mindful of trying to secure money that a spouse can't get. After all that happened to me and I see where I am now, it is so disheartening.

I don't know what I am going to do in their future. I will watch and try and teach them about money and investing (the ex is a spendy pants) and hope they take after me or they will be in a world of hurt later in life.

I am so blessed that when life crumbled, my parents could financially help me to keep myself and my girls in the house. They know that I don't waste any money. Heck, they have tried to get me to treat myself recently even because they see how I am attempting to hustle and make ends meet every month and that I am trying to still save for the future. They knew that this could make such a difference for myself and my kids that they were not worried about helping. And if my situation changes, they would be repaid in no uncertain terms instantly. I won't be going out and buying a new car (mine is older but I can't buy a new one). Or having any big spending sprees.

My big test right now is to show the children how to budget and work with what they have. To save and to hopefully not waste money and go into piles of debt. Their lifestyle is very different from when we were a family. And now radically so based on the family situations on each side (there are no trips or treats with me as those are not in the budget).

marion10

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Re: Best way to help your kids by passing them wealth
« Reply #31 on: May 28, 2019, 02:36:46 PM »
My kids each have a bachelors and no student loans. They are grateful and now (late 20s)realize what an advantage they have. We have helped fund their IRAs since they were teens. They are Roths - so they have the money for a down payment on a house if they desire. If they get in real trouble- then we would help- but they have been out of our pockets (so to speak) for quite a while.

Fishindude

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Re: Best way to help your kids by passing them wealth
« Reply #32 on: May 28, 2019, 02:44:54 PM »
We paid for their education, have helped them out with cars, contributed a little towards their home down payments, etc., but they are now both in their 30's, have alwyas worked, doing just fine, married with families, etc. and aren't expecting anything.   We've got more than we're ever going to need and hopefully 30 more years to live so an inheritance won't do them much good that late in life.    At some point in the near future we might gift them some cash or real estate?   I don't think it would turn them into deadbeats at this point.

SwordGuy

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Re: Best way to help your kids by passing them wealth
« Reply #33 on: May 28, 2019, 04:12:49 PM »
"Few people have the strength of character to overcome such a lack of adversity."

   Prime Minister William Pitt the younger, speaking of HRH the Prince Regent.

So, be careful how much you give away and to whom you give it.  It may not really be a gift.

FIREstache

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Re: Best way to help your kids by passing them wealth
« Reply #34 on: May 28, 2019, 04:55:09 PM »
Don't be a dream hoarder.  Don't give your kids any money or advantages that other kids might not have.

https://forum.mrmoneymustache.com/welcome-to-the-forum/are-you-a-dream-hoarder/

I don't agree with that.

Neither do I.  Ha!  I don't have kids, though.

js82

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Re: Best way to help your kids by passing them wealth
« Reply #35 on: May 28, 2019, 05:09:08 PM »
(Disclaimer: I don't have kids)

I would argue that it's valuable to to help your kids with *some* things, but not gift-wrap them everything for free.  Make your kids own their decisions enough that they understand the value of money and what it means to work for things, but give them a leg up, if it's within your ability.

I came out of college with almost no debt(my parents were well into upper middle class, but I wouldn't consider them "rich").  This is a *huge* advantage.  That said, my parents didn't pay for everything.  The purpose of my summer job was to cover food/books/entertainment expenses.  Even before college, while I had a comfortable life, I didn't get everything for free - that Nintendo, that fancy mountain bike - I had to save up money by mowing lawns in the summer, shoveling driveways in the winter, etc.

It's important to teach kids how to work towards goals.  You can offer some amount of financial support and still do that, but letting them coast without consequences probably won't end well.

SwordGuy

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Re: Best way to help your kids by passing them wealth
« Reply #36 on: May 28, 2019, 08:09:01 PM »
(Disclaimer: I don't have kids)

I would argue that it's valuable to to help your kids with *some* things, but not gift-wrap them everything for free.  Make your kids own their decisions enough that they understand the value of money and what it means to work for things, but give them a leg up, if it's within your ability.

I came out of college with almost no debt(my parents were well into upper middle class, but I wouldn't consider them "rich").  This is a *huge* advantage.  That said, my parents didn't pay for everything.  The purpose of my summer job was to cover food/books/entertainment expenses.  Even before college, while I had a comfortable life, I didn't get everything for free - that Nintendo, that fancy mountain bike - I had to save up money by mowing lawns in the summer, shoveling driveways in the winter, etc.

It's important to teach kids how to work towards goals.  You can offer some amount of financial support and still do that, but letting them coast without consequences probably won't end well.


Well, if you ever have kids, you already know the right thing to do on this topic!

Wrenchturner

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Re: Best way to help your kids by passing them wealth
« Reply #37 on: May 28, 2019, 09:19:15 PM »
Help them learn long-term planning and delayed gratification.  Teach them how to invest and understand their psychological landmines.  Looking back, I would have gained more from those lessons than cash when I was, say 16-22. 

You can help them with strategy, like paying rent in a HCOL area while studying or trying to build a career, if they get into something atypical.  Maybe you could buy a condo for them to rent from you at a lower than market rate.  I have friends that benefited from that and they don't seem worse off for it.
Perhaps you could lend them part of a down payment to get a better rate or something like that.  Basically offering added value rather than free stuff.
Teach them how to cook, fix their cars, etc.  Honestly the cash situation got much better for me when I became more responsible as a person, at which time an inheritance is really just icing on the cake.  The small inheritance I got at 23 I have nothing to show for, and the larger inheritances I get in the future will not be a liability for me.

Teaching your kids that their hard work will be rewarded and maintaining their faith in that is what's really important.  My mother was a very cynical person and it has taken a lot of work to undo in myself.

Pigeon

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Re: Best way to help your kids by passing them wealth
« Reply #38 on: May 29, 2019, 09:50:36 AM »
I'll probably do the same thing my parents did.

We pay for 4 years of room, board and tuition at state schools.  The kids are expected to have summer jobs or internships. 

My parents were not big gift givers, other than paying for college.  They also paid for weddings, but that had a lot to do with what was personally important to them, not to the new couple.  For every birthday and Christmas once we were adults, we got a check for $25, period, with one exception.  One year my dad sent each kid at check for $2,000 out of the blue, along with a copy of a magazine with data ranking no-load mutual funds.  This was pre-Internet.  The catch with the gift was that you had to pick a fund and invest it, and promise not to touch it for 5 years.  That, IMO, was brilliant.

When the last parent died at 94, we received what was left of his estate.  By then, we were all well-established professionals, within spitting distance of retirement.


CowboyAndIndian

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Re: Best way to help your kids by passing them wealth
« Reply #39 on: May 29, 2019, 10:17:01 AM »
I've posted this link on the forums before, but I really like this guy's take and it is what we are currently planning to do with our kids once they start working:

https://actionecon.com/building-generational-wealth/

tl:dr : Match your kids contributions to IRAs up to 5k a year to get to 25k total - bumping them up a nice base as early as possible. Giving your grandkids an "inheritance" upon birth if you can swing it, giving them a leg up to be used for college, life, etc.

I do something like this, but a little different.

I promise to match what they earn during High School but putting in that amount into an Roth-IRA. Gets them interested in earning and saving. Most of their earnings were around 3k/year. They were so excited when their savings grew!

On top of that I pay for 4 years of college for a degree which will get them a job. I do not pay for the 5th year of college. When they know they are responsible for the 5th year, they become so focused on finishing in 4 years. If they go for post graduation, I will pay room and board, but till now they have not.

Like others have mentioned, I have taught them to save and spend wisely. My older son at 27  has a NW which was what I had at 40, so I think my lessons have helped ;-)
« Last Edit: May 29, 2019, 10:23:09 AM by CowboyAndIndian »

OtherJen

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Re: Best way to help your kids by passing them wealth
« Reply #40 on: May 29, 2019, 10:37:30 AM »
I'm beyond grateful that my parents paid for all of my undergrad education costs not covered by scholarships. My in-laws did the same for Husband. Starting out our adult lives debt-free was such a gift.

I'm also glad that neither set of parents is inclined to give major financial help. We've learned to depend on ourselves, whereas friends with more financially pushy families are dependent on parental supplementation.

Sugaree

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Re: Best way to help your kids by passing them wealth
« Reply #41 on: May 29, 2019, 01:04:17 PM »
I've always wondered if the kids getting EOC were raised like classic "rich kids", i.e. never had to work hard for things and always got everything they wanted.  If raised this way and then continued to receive support such as yearly gifts or bailouts, I can see it being a problem.  I hope not to make these mistakes, but it takes daily commitment and can be really hard to say not to cute little faces.



Not always.  I've mentioned BIL a time or two, but he's a classic example of EOC gone wrong.  He was always the golden child.  Younger than my husband by 8 years, he was the quiet academic brother while my husband was being brought home by the cops.  More than once.  BIL ended up inheriting a house and some cash from his grandfather.  That lasted about two and a half years.  My in-laws paid for at least a bachelor's, 2 masters', and PhD.  When his wife got a two-year fellowship to teach in Europe, they paid to move him, his wife, and their two kids over there.  When that job didn't pan out, they paid to move him, his wife, and their four kids back home.  FIL offered to give them the family house and pull strings to get BIL a job at the university near said house.  BIL turned it down due to "not applying at any southern schools."  BIL has been given at least 2 cars, maybe three.  MIL/FIL has been paying his rent for at least the last 6 years. 

I won't lie and say that my husband is an angel.  He absolutely sucks with money.  We have very, very separate finances for reasons that are more numerous than they should be.  I suspect that he probably hits his mommy up for money way more often than he tells me.  But with him, that always comes with a price.  He gets to cut the grass or blow the leaves or paint the bathroom or replace the flooring in the kitchen. 

I've made it very clear to DH that I will not continue the EOC to his brother.  I feel bad for his kids, but two people who have PhDs ought to be able to figure out how to be an adult.

cangelosibrown

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Re: Best way to help your kids by passing them wealth
« Reply #42 on: May 29, 2019, 04:16:34 PM »
I have been thinking about this a lot lately, since having my first child. My current theory is (when he's of age) to give him  an annual stipend. Not enough to live on, but enough to make stuff a bit easier and open up options that otherwise wouldn't be available. Say 10k USD per year. I hate the idea of giving him housing, a car, etc, because that takes away the experience of learning what those things truly cost and what choices you need to make to optimize your life.

StarBright

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Re: Best way to help your kids by passing them wealth
« Reply #43 on: May 29, 2019, 04:26:36 PM »
I've posted this link on the forums before, but I really like this guy's take and it is what we are currently planning to do with our kids once they start working:

https://actionecon.com/building-generational-wealth/

tl:dr : Match your kids contributions to IRAs up to 5k a year to get to 25k total - bumping them up a nice base as early as possible. Giving your grandkids an "inheritance" upon birth if you can swing it, giving them a leg up to be used for college, life, etc.

I do something like this, but a little different.

I promise to match what they earn during High School but putting in that amount into an Roth-IRA. Gets them interested in earning and saving. Most of their earnings were around 3k/year. They were so excited when their savings grew!

On top of that I pay for 4 years of college for a degree which will get them a job. I do not pay for the 5th year of college. When they know they are responsible for the 5th year, they become so focused on finishing in 4 years. If they go for post graduation, I will pay room and board, but till now they have not.

Like others have mentioned, I have taught them to save and spend wisely. My older son at 27  has a NW which was what I had at 40, so I think my lessons have helped ;-)

I love this! Great way to encourage work in HS too! If you don't mind I might steal it and augment my plan with it - will also spread out the pain a little bit for StarHus and me. Instead of 25 k in 5 or so years, it stretches the giving window out.

biggrey

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Re: Best way to help your kids by passing them wealth
« Reply #44 on: May 29, 2019, 06:50:36 PM »
As someone who grew up with a lot of kids from wealthy families, I can tell you from my experience that it's impossible to predict in advance the best way to handle this issue.

There really is no best strategy, you have to customize it to your particular family.

Some people need financial support to reach their full potential, some people really thrive fending for themselves, some people crumble by having financial incentives attached to only certain life choices (university, marriage, home ownership) and it erodes their sense of autonomy, some people will carelessly burn through inheritance while others will be inspired to live their best life, some people's motivation completely falls apart when they expect a large inheritance, other people thrive to accomplish on their own...

I've seen it all, and the ones who fared best were the ones with the best mental health and the least fucked up parents.
In all my years with rich kids, the ones with the fucked up parents tended to end up the most fucked up.

Just know that you can't really control outcomes and do what makes sense for your family. Don't try to figure out the "right" way to handle it because there is no right way.

Don't worry about how to pass on wealth, worry about being happy. That's what really matters in terms of not screwing up your kid.

Fantastic and accurate post.  We're living this and making our own choices around guidance and transparency.  We have observed many and the results are well summarized here.  Large sample set!

K_in_SoCal

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Re: Best way to help your kids by passing them wealth
« Reply #45 on: May 29, 2019, 08:09:57 PM »
We're thinking about this as well.  Since we have young adults now, we've offered free room and board while they attend state school (and community college for GEs before the four year school). They have household responsibilities, and since they live here they have to be considerate of everyone else in the house (in terms of picking up after themselves and not staying out late without letting people know ahead of time).  One has a job now, and the other is interviewing, and both are expected to take on more and more of their expenses as they make their ways through school.  Currently everyone in the family has a commuter bike, and we share one small fuel efficient car (3 drivers, soon to be 4).  The car is for necessity (such as driving to school on the one day class gets out after the last bus home departs), and occasionally for other travel, although the car has a nightly curfew.

Living in a high cost of housing area, we're likely to allow a college graduate to live at home for a few years while saving money, paying a modest amount of room and board and pulling his own weight in terms of household duties.  But at that point they need to have a separate cell phone plan, their own vehicle and insurance, etc.

Well down the road there is the issue of inherited monies.  We'll work with a tax accountant to determine how best to pass the monies to them.  I do like the idea of matching IRA contributions, and we'll likely start modest college accounts for grandchildren if and when they enter the picture.

Redstone5

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Re: Best way to help your kids by passing them wealth
« Reply #46 on: June 11, 2019, 01:46:37 PM »
I was just looking through your thread and I really feel for you as a parent not being able to give your kids treats that others may have. I often feel the same way.

However, in my spendthrift days I also had a value lesson about kids and spending, and it is totally true that kids seem to delight in being opposite. The more you spend, the less fun they seem determined to have lol.

For example, two years ago I spend $3000 of my precious post-divorce money on taking my three boys to Disneyland.  (I know, I know. Just punch me in the face) And on that trip my oldest spent the whole week in the hotel room on the phone to his girlfriend, and there were TWO! ruined afternoons out of the seven where my other kids spent the whole time crying and fussing about nothing.

Meanwhile, last week, I took the boys on a local hike through the woods across the road from our new apartment and then bought them popsicles and they told me they had as much fun as getting to level 33 on their video game! High praise indeed for an afternoon out that cost me $3 LOL

Anyways, the moral is, even though our kids might complain about "missing out" on expensive stuff, and we as parents wish we could buy it for them, at the end of the day, it's the parent who has time to spend with their kids that is enjoying a luxurious life, not the parent who spends the most money. I hope that helps with the mom guilt :)