Author Topic: Economic Outpatient Care - Help or Hindrance?  (Read 5273 times)

MonkeyJenga

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Economic Outpatient Care - Help or Hindrance?
« on: September 27, 2015, 05:37:49 PM »
At today's NYC meetup, we got into a discussion about The Millionaire Next Door's take on economic outpatient care, prompted by my experiences in this thread. There was disagreement about both the validity of TMND's research methodology and whether EOC constituted legitimate, needed assistance.

Some people thought it made sense that parents would help a struggling adult child (AC), because if the AC isn't getting by, it's only fair for the wealthy parents to help out. Also, money from the parents didn't cause the AC to struggle in the first place. Others thought that the parental financial safety net/extra boost could cause the AC not to try as hard to succeed on their own. It also "helps" AC's who aren't actually struggling to put food on the table, simply unwilling to give up a certain standard of living. Some thought the book was pointless anyway because they read ERE first. :)

My take, which is based on personal observation and jives with the book: when children grow up with parents who spend lavishly, they tend to get accustomed to that level of spending. They may go on to make a perfectly decent, or even high, wage themselves, but if the parents are additionally financing a luxury lifestyle, that's going to hurt more than help. The AC will tend to spend their own money, spend whatever extra money they receive from their parents, and expect to be taken care of indefinitely, whether through gifts or eventual inheritance. Attempts at budgeting or scaling back are seen as deprivation, if considered at all. If they knew they would have to live and save on their own incomes, it would likely result in a more fiscally responsible and independent lifestyle.

What do you think? Does the book rely too heavily on unscientific anecdotes? Do you have unscientific anecdotes of your own that agree or disagree with the book's conclusions? Is there a better way to measure the effect of this sort of financial assistance?

use2betrix

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #1 on: September 27, 2015, 06:12:27 PM »
There are VERY different types of EOC. I think the biggest difference is parents who provide EOC along with requiring their children to succeed in school, take jobs, etc., as compared to the parents who are constantly buying things for their kids, while not being concerned with their grades or making them work.

I have seen extremes of both and averages of both. Parents who don't require their children to be involved in their future, through work or school, are set up to fail. I think most kids need part time jobs starting young. There are exceptions to this, but very few.


Melody

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #2 on: September 27, 2015, 06:46:02 PM »
From what I can see - too little help hinders - we don't have student loans for living expenses here, although under certain circumstances (low income family) there is government assistance for students. The implication is that higher income families should support their children until they are 21, but in reality many lower middle income families don't. Having to work an excessive amount of hours to pay living expenses can significantly reduce grades at university and given graduate job offers are primarily based on grades (most large companies/firms screen out anything below a 70% average with a computer) so no matter how good you are at everything else, if you can't get past the computer, forget it! So a moderate amount of assistance with living costs (in my family this was "living at home while paying a modest amount of board") greatly increases likelihood of success.
But at the same time nearly everyone who I have seen who's obtained more than a modest amount of assistance directly linked with obtaining good grades at university is has done significantly less well that I think they would have without the assistance. They are also set up to expect a certain standard of living which is higher than the one I live as a MMMer on 6 figures so are likely to feel less satisfied in life as they have no personal feelings of satisfaction. When I look at my apartment or my car, I feel warm fuzzies of what I have achieved. Not materialsm, but "wow, I did this all myself" - I doubt my 28 year old friends whose parents pay their rent have the same feeling of satisfaction opening the door to their homes at the end of the day.

Astatine

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #3 on: September 27, 2015, 08:35:46 PM »
I think there are a few scenarios where EOC makes sense. For example, if the adult child has a moderate to severe disability (particularly if there is intellectual disability or severe mental health issues such as schizophrenia).

But for non disabled adult children, I think EOC does more harm than good to the psychological health of the adult child, particularly if the family is somewhat (or severely) dysfunctional. EOC enables the parents to be controlling, and the adult child never fully grows up to be an independent adult. I've seen this pattern a few times play out. Not pretty. Unfortunately it's too emotionally triggering for me to write about so I can't illustrate with examples at the moment.


letired

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #4 on: September 27, 2015, 08:53:40 PM »
I think there are a lot of factors that go into this besides immediate economic support or not. I think how the family works and how the children were raised go into this a LOT.

My anecdote:

My parents supported me and my siblings extensively (paid for college, each of us got a (inexpensive) car when we graduated college, assorted Costco gift cards, etc), with the explicit understanding that school was our job. Even after school, my parents would still pay for travel expense to come home for the holidays, etc. After school, I felt pretty strongly that I should be financially independent on a day to day basis and was able to do so via a good job after graduating, though I also had no problem accepting the money for the Thanksgiving plane ticket. That said, my standard of living growing up was never particularly lavish (at least relatively), so I didn't have any insane expectations for what my standard of living should be. And my parents didn't raise me to be entitled to their money.


Pooperman

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #5 on: September 28, 2015, 06:04:34 AM »
There's definitely a happy medium between 'bootstraps' and 'lottery'. Don't screw people over by not helping at all, and don't screw people up by paying for their life. The culture I come from makes education very important. My mother paid for my education as schooling was my job. She helped a lot, probably a bit too much, but the help stopped after I got my first job. My father was all bootstraps and wanted me to do it all myself, yet wouldn't let me get a part time job during high school. There's a reason they split. And ways, there is also a happy medium between both. I can fully understand why EOC can have the outcomest does. Why try if you have everything covered? It saps your drive if you have one. On the other hand, getting nothing makes one bitter and more likely to give EOC to kids.

Make the EOC amount clear from the outset and with stipulations. Like, pay for college, but also must do well and must pay rent at home after 6 months once graduated, etc. just enough to push but not enough to hinder.

kite

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #6 on: September 28, 2015, 06:32:21 AM »
As others stated, not all EOC is the same. 
In addition to the natural urge to continue to do for one's own, there is also satisfaction for the giver in passing it along now, while alive, instead of after one is dead.  They can see the fruits of their labor getting used for shiny cars, shoes, diplomas, rehab, etc...

The flaws* in TMND methodology are well known and documented.  It shouldn't be debatable any longer.  Selection bias keeps their really nice story from having predictive value. 
Readers want a narrative with a winner and they want a recipe for a winning formula that they can replicate. (It explains the appeal of a certain candidate and his wickedly fraudulent self-titled university). But that recipe is illusory. 

These technically aren't flaws if your aim is to create an analysis of who has already made it as a 'marketing study' which is what Stanley & Danko set out to do.  The flaw is in interpreting past performance as predictor of future results.  It's not a how-to guide, there is no cause & effect. 

mm1970

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #7 on: September 28, 2015, 12:43:55 PM »
This is all pretty fascinating.

I have a bunch of older sisters (much older) and four nieces and nephews that are closer to my age than my sisters ages.  I'm 45, my oldest nephew is almost 40 and my 4th oldest of nieces/nephews is about 33 years old I think.

Certainly there's a difference in the two families.  Eldest family is a "bootstrap/ tough love/ suck it up" mentality (to an extreme sometimes - the number of times I heard "quit whining" on FB ... until I pointed out that I was 41, pregnant, only sleeping about 5 hours a night, and my mother had just died so FUCK OFF, then they backed off).  Next family is definitely more easy going and crunchy.  That family had more drug issues and also ADHD (dad was ADHD passed on to one of the kids).  Those kids are underemployed and not very interested in changing that.  Their father was like that and their mother too for awhile (she went to college in her 30s and got a BS and MBA and has been a company VP for a decade - so she's the big success story in the family).

Elder family kids are way self sufficient.
Younger family kids are very much not, to the point that my sister still pays for their plane tickets home (and in one case, the spouse's) for "kids" who are 35 and 33.  Whaaaa??  Either that or she just goes to visit them.

I mean, there's a point when "gifts" get ridiculous.  My step-dad paid for our  hotel room before taking a train this summer when we were visiting (he got a room for himself and one for us).  As a birthday gift.  That made my husband uncomfortable, but I told him it would make stepdad feel bad if we said "no".  (We bought dinner, and on the flipside, when he comes to visit us, we pay for his hotel room.  Our house is too small and he likes his privacy.)  Neither one of us (my family and my stepdad) is hurting for money in any way, so there's something to be said for accepting gifts like that.

What seems uncomfortable is when it's one-sided.

sheepstache

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #8 on: September 28, 2015, 01:50:33 PM »
My personal experience made me think the important factor was clear expectations.

I was in a bit of a pickle just after graduating college for reasons of rather muddy family dynamics. My mom and I had shared a checking account. I deposited all of my part time earnings in it and just took out what I needed. It made sense. Anyway. I plan to get an apartment with friends. I'm told that this isn't okay, that my mom has a better plan, and I feel like I can't take money out of the joint account against her wishes. And I don't want to wait while earning because these friends who I trust as roommates are ready to sign a lease in the city now.

So my dad steps in and asks how much I need. He says he'll give me security deposit and first three months of rent. Everything works out fine, I take the first job I can get and carefully budget. I'm independent from then on.

Then there's my friend. The one who got the apartment with me. She's had a separate account for some time. I think the deal was her parents paid for her college but she earned money for her living expenses. She's good with money and ends up with quite a surplus at the end. She's keen on a certain position and she interviews for it at businesses all over town. She can't land anything and after some months her savings are running low. She has a trust fund. She's of age. She assumes she can access that money to tide her over. When she talks to her parents about the specifics of accessing it, there's some hemming and hawing. I think they don't want to "break the seal" and have her use the trust fund for living expenses, would rather it goes towards something like a house purchase. They end up offering her some money as a gift instead. This goes on for a year! The poor girl doesn't know how much she can spend because she never knows to what extent they'll "support" her, whether it will go on for another month and how much. It's hard to budget for complete uncertainty. She doesn't eat right because she's scrimping so much on food. She feels terrible because she can't answer my questions about whether we're going to renew the lease. Yet at the same time, she has nothing to worry about because she has plenty of money and her family has plenty of money. It never feels like it's at the point where she ought to cut bait and just take any job she can get.

My verbosity is an attempt to communicate the kind of fog surrounding the whole discussion, hopefully the reader can think of a similar family situation where things are said and yet not said.

To my mind, the economic assistance from my dad worked because it was a fixed amount agreed upon ahead of time.  (Even though it turned out to be more money than I needed.) I was able to plan and map out options based on various scenarios. It was when money issues were vague that they could easily become tools of control.


I feel like this is all somewhat related to student loan debt. Many of the people I know with massive student loan debt didn't take on college costs by themselves. They had help from their parents. And it went with control of what they would be doing with their lives. I think a lot of people would reject the pressure to go to college if they could straight up say, 'no, I'm not taking on 6-figure debt I don't understand.' But when your family is making huge sacrifices to contribute to it, for some reason, it becomes messier. Think about how many people you know who didn't really think about the cost difference between colleges. I think if parents said something along the lines of, 'we've got a hundred thou to contribute and after that you're on your own,' many more people would have taken cost into account in their choice. But no families I knew had a nuts-and-bolts discussion like that.
Granted, part of the issue may be that most high school students wouldn't feel comfortable taking on low five-figure debt either, even if it was a great deal, because they have a hard time thinking about that much money. So some pressure along the don't-worry-about-it lines makes sense, but I think it's an important factor in the whole vague aspirational nature of college discussions.

La Bibliotecaria Feroz

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #9 on: September 28, 2015, 01:58:29 PM »
My parents raised me right in the first place. Mr. FP and I went quite broke in our late 20s through circumstances that were largely not our fault, but we continued trying to make good decisions--not cashing out our retirement, swallowing pride and taking the short sale, etc. Now they know that if they send me the occasional $500, say, I will do something responsible with it. I don't NEED it. I would manage without it. But those gifts have taken the pressure off now and then, and I accept with gratitude.

They do pay for the family plane tickets when we come to visit. My grandparents always paid for my family to visit them, so now it's tradition :-).

My grandfather is a multi-millionaire. So he is paying for my sister to get a doctoral degree in nursing. She works hard, always has. But she's the sole breadwinner for a family of five people and there's just not a lot of extra money flowing around her house; she will get some support from her employer, but she would simply not be able to attend if she had to pay the whole cost. It would be awfully churlish for him to sit there on those millions of dollars instead of helping out. I'm not saying that every financial decision she makes has been great, but she's generally responsible and she deserves it.

So basically, I think that when you have adult children who were raised right and have a track record of being responsible, there's no harm in helping out with the occasional jam if you happen to have plenty of money. The issue, I think, is when you have adult kids that have never been truly self-sufficient, and money just keeps flowing their way.

milliemchi

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #10 on: September 29, 2015, 12:46:38 PM »
And then there are counter-examples.  My brother has been led through life by my ambitious mother. She has selected a high school for him because he wouldn't be bothered going otherwise. She has told him what to do about secondary education because he couldn't be bothered with selecting a field.  She paid his living expenses for a couple of years while he was in community college part-time and not working any jobs.  I tried to point out the errors of her ways, but was called selfish etc. Fast-forward five to ten years, and he holds a good job, is very responsible, supports a family of four, does not run a deficit budget, does not need financial help of any kind, has his head screwed on straight, and is doing very well.  It just took some time for things to click in his brain. I think he was in his late twenties when it finally clicked.  Just recently, he completed a bachelor's degree in his field while working full time (which brought a big raise). He's doing great.  But while he was in high school, he almost spent more time skipping classes than actually sitting in them.  My mom persistently led him to the water, he happened to drink it eventually. This makes decisions regarding my children more complicated.  I try to teach "you are responsible for your own future" early on, so they don't have to learn that as adults.
« Last Edit: September 29, 2015, 12:49:41 PM by milliemchi »

KCM5

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #11 on: September 29, 2015, 12:56:12 PM »
I feel like this is all somewhat related to student loan debt. Many of the people I know with massive student loan debt didn't take on college costs by themselves. They had help from their parents. And it went with control of what they would be doing with their lives. I think a lot of people would reject the pressure to go to college if they could straight up say, 'no, I'm not taking on 6-figure debt I don't understand.' But when your family is making huge sacrifices to contribute to it, for some reason, it becomes messier. Think about how many people you know who didn't really think about the cost difference between colleges. I think if parents said something along the lines of, 'we've got a hundred thou to contribute and after that you're on your own,' many more people would have taken cost into account in their choice. But no families I knew had a nuts-and-bolts discussion like that.
Granted, part of the issue may be that most high school students wouldn't feel comfortable taking on low five-figure debt either, even if it was a great deal, because they have a hard time thinking about that much money. So some pressure along the don't-worry-about-it lines makes sense, but I think it's an important factor in the whole vague aspirational nature of college discussions.

This is a really great point. I know I had no issues keeping my loans low because I knew before I even applied for schools what support I would get from my parents (a working car, gas money to get home, and insurance) and what I would need to supply on my own (tuition, rent, food, etc). One of my in laws was promised tuition, room, board covered by parents who later reneged due to other familial obligations. That person now has an enormous student loan debt even though they went to state schools. They just didn't have any boundaries or parameters to work within. 

HazelStone

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #12 on: September 30, 2015, 11:25:56 AM »
It depends a lot on the "kid" involved. And the aim of the money. Is it addressing the long term, or current consumption? Almost everybody I know who moved to a major city while they were in the internship/grad school/first job stages...had help from their parents.  To the tune of paying major chunks of their rent. Their parents were taking the long view that it took time to get established in a large city, but the future payoff was worth it. And these "kids" weren't blowing their money at the bar; they were honestly trying to get ahead. Fine. Good for them.

If parents want to give a kid a basic car upon graduation, I can see their point there... or, later on, help with down payment on a house provided the beneficiary isn't over-extending themselves on the purchase.

Why do these parents do this? They want to see their kids settled down and having kids of their own. We've got a bit of a baby bust over the last few years. Getting established has gotten a lot more expensive since my parents were in their 20's.

Now, what drives me NUTS is when Mom mentions the doings of other schoolmates and she doesn't stop to consider that THOSE THINGS ARE FUNDED BY THEIR PARENTS!! My parents were of the bootstrap philosophy. Fine. But then, for the love of God don't compare me to a classmate who had a McMansion funded by Daddy when she could barely afford a 2-bedroom.




partgypsy

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #13 on: September 30, 2015, 11:46:42 AM »
My own personal experiences, is that parental financial support is great to help a child to get through college, helping finance college. But only if the child him or herself is motivated to attend, graduate, and get something out of it. A used/hand me down car? Fine. Have the child live with parents for up to a year after college to help them save money, etc. also OK. But any more assistance than that I've seen is harmful. A child has to differentiate and live independently from the parents in order to learn how to live and support themselves independently. Continuing the financial apron strings short-circuits, messes up that process, usually to the detriment of the child's long term success and ability to take care of themselves. It also makes it very easy for them to get used to living beyond the means they would be able to earn themselves, which also causes problems.

This is an extreme example:
http://nypost.com/2015/01/06/son-accused-of-murdering-hedge-funder-dad-has-a-dark-past/

okits

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Re: Economic Outpatient Care - Help or Hindrance?
« Reply #14 on: September 30, 2015, 12:44:01 PM »
I think the rule for EOC is that it needs to be limited, temporary, and the recipients need to be working pretty damn hard for themselves, already, in trying to make it on their own. 

As a parent, my long-term goal is to raise offspring who are increasingly self-sufficient (and totally so, by adulthood.) That includes learning the value of a dollar and how to live (and appreciate) a frugal life.  EOC to fund a lifestyle, fix financial mistakes, prevent worry or discomfort or exertion, or to clutch the recipient tighter to the giver all run contrary to this.