What forms have you seen other than paying for education?
This would be part of my reasoning in not giving kids a larger gift toward a home. With a decent but not gigantic retirement fund(s), I definitely want to ensure that there is the financial support in later years so children are not so burdened with the costs (financial and emotional) of care.
For instance, private home health aides in our area cost a min of $25 an hour, 3 hour min a day. We hired those for my parents - and they were not completely debilitated at that point - just needing some assistance with showering, exercises, etc. while I worked a demanding full-time job. Later one parent required 24/7 aides.
I want to make sure - if needed - there are funds for that so my kids aren’t crushed with the burden/guilt of care. I want that for them more than (frankly) I want them to have a nicer house at a point earlier than they can afford on their own.
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Many of them give their grandkids the best education possible. They also introduce them to older people who can help the grandkids with jobs/networking.
When we bought our second house, we bought in an area where there was tons of old money as well as new wealth. The old money operated very differently. I learned a lot from watching them.
First, they are more frugal. They drive older cars, but have a Summer/Ski place. They don’t buy flashy things but they spend a ton on education. They pass on their family business and if they don’t own one they connect their kids in early to their network. Their kids and grandkids get jobs in the network and they never say no to people in the network. (BTW< they pretend that the kid was qualified to do this job even though they weren’t by a long shot). They get involved in philanthropy and the families use philanthropy as a place to meet other people and sell whatever services they do within philanthropic circles. There are many other things they do. But I’d mainly say networking and philanthropy.
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Set up a donor advised fund for charitable giving, funded with appreciated stock. (You can start one with as little as a thousand bucks). You avoid paying capital gains on the stock; you’ve set up a vehicle so that your kids have a way to support the causes they care about even if they don’t have the money to be as generous as they’d like to be. That’s how you see pretty modest earners continue their family’s legacy of giving- the money was stashed away years ago specifically for this purpose.
Various ways to set up a trust for grandchildren which have tax benefits(you’d need a lawyer and it’s only worth it if you are talking big bucks).
At the moment, funds paid directly to a medical provider (or directly to an educational institution) can be on top of the annual gift allotment. So if you have a child or grandchild with heavy medical expenses, the grandparents can pay for those AND do the annual gifting under or at the limit with no need to file a gift form. This “loophole” may change btw…
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I think this is no different than people claiming that a kid can go to a college and “do the work”. That is such an elastic standard.
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I’ve been looking at the areas my daughter is interested in buying in the Bay Area. Today she can afford a town home or older home in the $1 million range. She will be paying more than her rent, maybe that’s why she’s not in a hurry. She’s saving for 20% down payment.
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@DrGoogle123 Even in DC, my son and his wife just had to pay over a million for a fairly small townhome. Prices in the most desirable neighborhoods can be pretty steep. Good luck to your daughter.
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This was essentially our situation when we bought our first (and only) house. My parents bought their first after 15 years of marriage and when I was 8. H and I bought our house after being married 7 years and after he finished school and residency. D came along 3 years later. Today we couldn’t afford to buy our house.
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We are straying from the original subject of this thread, but TLAT and I made saving a priority and paid for it by driving 15 year old used cars, never going out, and generally living frugally. Like you, we had some stressful early years - an entrepreneur can spend a decade on a business with no compensation and never see a payout - but things did ultimately work out.
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So much unfounded judgement here.
It is of course perfectly possible for a child to be “smart” and prioritize living in a “hot” area in their youth. There’s more to being smart than having your own particular set of priorities. I spent my youth in an area very popular with young professionals, scraping by in remarkably bad conditions, having a blast- and saving money at the same time. I don’t regret it a bit, and I wouldn’t necessarily withhold homebuying help if my child does the same.
To make such a sweeping generalization, brushing aside someone’s qualifications simply because they come from old money, is pretty outrageous. And off topic- of what value is this observation to this discussion?
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My friend’s parents paid for the bat/bar Mitzvahs, summer camp ($8000+), two years of a specialized school (education, yes, but the parents wouldn’t have been able to choose this school for even 2 years without the parents paying), several big family vacations in Mexico. The grandparents had a beach house in the Hamptons so the family could always take a vacation there.
My friends just didn’t have to stretch their income to cover these thinks (like I did, and my kids didn’t go to $8000 summer camps). This family made about what I did, but I had to pay for the current and save for the future. They didn’t.
My nephew is dating a girl from a very wealthy family. They just bought a house together and a huge hunk of the down payment came from her father (with an agreement that it is hers). Father has also paid for the two older sisters’ weddings. The girl friend makes very good money but just doesn’t have to worry about the things many others in her age group do - student loan payments, saving for a wedding, vacations (many involved her sisters’ weddings, so parents paid). She doesn’t have to pay her parents back for the down payment on her house, which of course lowered the monthly mortgage payment too. Often her parents pay for things like the bachelorette parties for her sisters, wedding clothing, Christmas in Vail at their family ski home.
Nephew and girlfriend live very frugally (although in a house that cost almost a million dollars). Her sister lives with them and pays rent. They drive her grandmother’s old car (so like a Buick) and nephew doesn’t even have a car; they live in the 'burbs, but he works from home and has a bike. They looked at the sister’s Royal Wedding and said ‘not for us.’
It’s easy to live simply if you have everything. They do have a designer dog who takes a lot of their disposable income.
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If someone has large student loans they aren’t going to be buying a house in SF.
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Same here! I don’t mean to judge, but it just seems too iffy! That said, we didn’t have the money to do that, so it was a moot point for us.
We know some people (co worker of mine) that happened to, and it’s been a big hassle. They lost quite a bit of money and I think it hurt them financially. They are pretty well off, but it did affect their finances and financial decisions for a while. I do have another family friend who bought a condo for his daughter in college, and they lost money when they sold it, but they’re very wealthy. Very wealthy, as in they can buy stuff without looking at the cost. That’s definitely not the norm for most families paying for college. H and I never had any interest being landlords and we most likely wouldn’t have been able to afford it anyway!
When I was in grad school my dad considered buying a house that I would live in and find roommates. But I didn’t want the hassle of finding/screening roommies, maintenance, etc. It would have fallen on me and I had other things to worry about. Didn’t want that responsibility.
It’s the same with us! We “could” help our kids with a home down payment, but then H and I would have to work well into our 70’s and 80’s and our kids would maybe have to help us in retirement, which we don’t want. We were able to pay for college for both our kids and our D graduated debt free and our S will graduate debt free in a few years. We paid for private school for them and helped buy them used cars and we took plenty of fun family vacations. That’s more than many kids get and they’ve had a wonderful life. Yeah, helping with a house down-pyament would be nice, but it’s not in the cards. We’re lucky that we’ve been able to afford to do a lot of other things for our kids.
It’s sad! And the kids who have decent, but not super high paying jobs or don’t have parental assistance get left behind…
True! Our kids know that we will NOT be helping them with buying a house. Yes, they may have to rent for a while, but that’s life.
All said, if I had the money, I’d be more likely to help my kid with the down payment or some new appliances for the house, I wouldn’t buy the house for them. I want my kids to have some skin in the game. I’ve seen it not end well when the parents actually bought the house for their kid…in one case, the kids lost the house because they couldn’t afford the mortgage.
Good idea! I think that in some cases, when parents offer too much assistance or in this case buy their kids a home outright, it could set the kids up to fail, if they actually can’t afford the upkeep on the house. It can also make kids not be realistic about how much things cost or what kind of lifestyle they can maintain on their salary.
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Bought and rented a 2 bdrm condo to my brother when he was in med school at a large flagship. Walkable to the univ medical center. Rental pretty much covered mortgage, fees and taxes. Back then rules on passive losses also more favorable. Made a decent gain after 4 years and the location of the condo made it an easy sell.
Looked at doing the same for D in a high COL area. Housing prices just too high relative to rent that I would be upside down unless I fronted a huge down payment. Any return would have to assume major appreciation. Have been gifting both kids each year and have pushed them to max out their Roth IRA/401k while their marginal rates are relatively low.
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In NYC, aside from down payment, many coop boards require 2 years of mortgage and maintenance in liquid asset. A lot of young people can’t do it without help.
D1 didn’t need my help, but D2 may need some assistance because of her law school student loans. D1 said she would help out if needed.
I think it is important that if one is going to give it as a gift, it is a gift. It is not one’s money any more. You have no say in what house they buy, what happens when they sell, how they fix it up, etc. If the gift is to a couple, it is to the couple.
If one can’t give with no strings attached, don’t give.
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To me in some ways it’s like a second marriage. Spouses often, especially when they come in with assets, ensure they protect their assets for their kids.
My sister and husband have this.
I get your point and on the surface it is how it is when you gift, but I think if one chooses precautions could be used.
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^ A post-nup agreement can address this issue. Since inheritance is not community property unless comingled, the in-law can sign an agreement to repay $X to your child if there’s a divorce.
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