Most of the bloggers in the personal finance space are younger than me and either have no children or have kids that are still at home. For them the question of whether they should share their financial wealth with their kids once they are grown is purely hypothetical. For me and my wife it isn’t, because our three grown children are in their thirties.
That’s the time people are getting married, paying off school loans, buying houses, having babies (or at least pets) and those things tend to all be somewhat costly. I’ve seen many young bloggers write about how they plan to help their kids some day make a down payment or even to pay for their future grandkids’ college.
Personally, the plans my wife and I made together regarding our kids, years ago, were to pay for their four year degrees. After that other than normal birthday and Christmas gifts we did not plan to give our adult children any money until both of us died, hopefully at the age of 120, or older. And that is what we’ve done. Except for the college part, that ended up being free. Each of our kids managed to get merit based free four year degrees with everything, books, tuition, fees and room and board provided. So we gave them a few thousand bucks when they graduated but nothing like paying for their college would have cost.
Two of them have gotten married and we again gave them a few thousand dollars because they basically both eloped and there were no wedding costs to foot. And the only other time we gave them significant financial gifts was once, when we gave them each $10,000 as a surprise gift with no strings attached. We have no idea how they spent that or if they invested it.
But as time has gone on our assets have started to pile up. We’ve got about three times as much in stocks, bonds and cash as we need to provide us our lifestyle of choice. So practically, we could give half of what we have to them now and still have a 100% safety margin of extra money. All that is to say it isn’t a hypothetical question when it comes to what kind of financial gifting is appropriate for grown children, at our stage of life.
I hear the arguments all the time, why make your kids millionaires when they turn 60? They could use the money much more now. And that does make sense, I mean I’ve lived this. My parents were the prototypical millionaires next door who amassed a million dollar inheritance for both me and my brother. I was 58 and he was 60 when we received the inheritance. We both retired two years later. In my case the extra money was only a minor factor. The fact is, I was already a multimillionaire, and adding another digit in the seventh column didn’t really move the needle that much. It was a little more of a factor for him but he’s in great financial shape too.
I never expected to get money from my parents before they died, and I can’t imagine it would have made a positive difference in our lives if we had. I do think it might have changed the relationship if a significant part of our net worth was flowing in from them, at their discretion. Also I think we were good with money, and never felt a need for more than we had in our early married years. I was kind of proud of us for being frugal, having great kids and my having a stellar career. We felt the camaraderie of a winning sports team. We were all in on building a great life together, on our own. We got along great with our parents and had no expectations of either them or us ever needing any monetary assistance.
If they had given us a down payment for a bigger house then we would have never paid off this one and only house we’ve ever owned, so early. We likely might have bought nicer, more expensive cars and maybe taken more exotic vacations. But would any of those things made life better? I doubt it, life has been very good. I don’t regret not having a fancier house or fancier cars. I love what we have, and part of that is we earned it. And we didn’t need the Bank of Mom and Dad chipping in.
There are a lot of what if’s when it comes to a topic like this. What if one of your children just can’t support themselves due to an illness or disability? Then I’d say you have to step in and support their needs. But often life isn’t so clear. What if they just are not very successful and can’t seem to get past minimum wage jobs, does that change your responsibility as a parent? And if it does how do you know if they are simply lazy or really trying at life and have had a lot of bad luck? When is stepping in with money helping and when is it enabling grown kids to stay on the couch all day playing video games? Or maybe worse what if substance abuse is involved, then it is really hard to know where that line is between helping and throwing gasoline on the fire.
That’s hypothetical for me so far, my kids are doctors, engineers and college educators. They are all solvent and are middle to upper class earners. While none of them has our kind of wealth yet, none of them have trouble making ends meet. And the doctor married to another doctor will likely blow past my net worth in the future. Because there is no serious need for money I’m not inclined to hand it out to my kids. We might do another surprise gift at some point but not in any kind of repeated pattern that would create an expectation of a future income stream.
There is also the whole matter of how different cultures view the obligation of parents and grown kids. In much of the world a parent’s retirement plan is their kids. They raised them and there is a return obligation to provide for your parents in their old age. Also in many cultures there is an expectation that any family members with excess money have an obligation to all other family members who have financial short falls. One of my running partners is from the Philippines. She complains frequently how many of her relatives ask her to send money to them because they can’t find work. The United States is kind of unusual in terms of the degree of self reliance that is built into our culture. It is almost considered shameful to request help from parents or from your kids or to take financial assistance from the government. That’s also very different from other cultures. Yet this is my culture and it leads me to feel that providing monetary assistance to my kids when they are doing OK financially is simply the wrong thing to do. Being the safety net of last resort is one thing, helping them buy an 80 inch 4K television is something else.
While we have our plan and have stuck to it I am not 100% sure that it is the optimum way to handle the transfer of wealth to our kids that will inevitably happen someday. I lean on the fact that I never felt like my parents cheated us by hoarding money until they died. I feel like our kids feel the same way, but that still doesn’t mean we are doing things right.
I am curious, some of you are on the adult child end of this issue and some of you may be facing this from the parent’s perspective. What do you think is the right way to handle passing money down to grown kids?
Have any of you gotten a significant piece of your future inheritance while your parents were still living?
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