If my son and DIL stay in Silicon Valley, I can’t imagine how many years it will take for them to afford a house. I’d rather lend them $ in a few years then let them wait u til they can afford. They will have to compete with cash buyers.
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Interesting diversity of approaches.
I agree with the person who said that, if one wants to help, the time to help is when they are younger (not just out of college, but when they are getting married or probably even more important when they are having kids).
Trusts are very important in this, because as someone above noted, one can have kids with no financial judgment or in the case of my brother, consistently bad financial judgement. I persuaded my mother to leave whatever she was leaving for him in trust, because he was likely to misspend. I also persuaded my siblings to suggest giving more to him because he has been remarkably helpful to our mother in ways that would have cost her/us quite a bit of money had he not been so helpful. Oddly, there was a period where both of them concluded that I didn’t like him because I was proposing putting money left to him in trust. Trusts also enable the trustee to provide the help at the right time (per above) rather than waiting for our deaths to give to the kids.
My mother gifted us part of our down payment on our first house 40 years ago, and she gave similar gifts to my siblings. We did not gift our son anything, but we did lend him 100% of the purchase price of his condo. Interest only, 3.75%. Mortgage drawn up by a real estate attorney and recorded. The income has been very useful for us. His condo has appreciated. Obviously he could not have gotten financing like that from a bank, but it was mutually beneficial and I can say I didn’t give him anything.
So interesting with different approaches. I worked 2 minimum wage jobs including a third shift to put me through college, and I still came out with $30K student loan. My husband’s parents were poor but his dad loved him enough to cash out their 401K to put him through college. His parents were divorced. And it was like his dad knew…he died as soon as hubby finished his undergrad degree. Now I want to do everything I can to make sure my kids don’t have to go through what I did. And my husband would never let his kids borrow money for college. I would like to think they have had a great childhood. Hubby and I got great jobs right out of college, so we were able to afford taking the kids with us all over the world (for work and pleasure) since they were infants. We are never shy from spending money on entertainment. We are not exactly the fugal kind. But both kids have been working since they were 12 with incredible work ethics.
We are very open with our kids about our finances, no specific numbers but they know we are doing well. We casually told them that we would not leave them all the inheritance, half will go to charities, they didn’t even flinch. My daughter said sure that makes sense, and that we should do whatever we want with our money and they should have no say and no expectation. Said she is so grateful that we are paying her tuition. That she is so lucky compared to other kids to have tuition paid for (ha, she doesn’t read this thread). So she wants to use her own money for rent and food. I tried to give her money, give her my credit card, give her my door dash account, Starbucks account, etc. so she can order food/drink, whatever/whenever she wants, she barely touched them. I know some parents give their kids $300-400/month for allowance. Mine wouldn’t accept despite me trying. I Venmo her $300 once and she texted me “what are you doing mom? I don’t need it!”. It’s hard for me.
My 15 years old son said he is going to be so rich he will buy us a beach house by the time he is 25, so no worries about his future lol.
So, bottom line is, we have no detailed plans about inheritance. Life has blessed us with great jobs and great lucks. We are just going to live fully and generously, and whatever left over will go to charities and the kids. It was never an option not to leave something to our own charity organization.
Our son’s decision to serve has made a lot of these decisions moot for us. The Army owns him for the next eight years and will be taking good care of him. He bought a beautiful new house in May, no help from us, on a VA loan that his Basic Allowance for Housing (BAH) mostly covers. So, the government gave him the money to buy the house and is basically paying it off for him. Best racket going, IMO. The Army also gave him (and the rest of his class) a $35K almost-no-interest launch loan just prior to the end of his junior year that he invested as he didn’t need it for a car or any other start-up expenses. The Army is also paying for his master’s degree. He has no debt.
He and his best friend co-own a software development company that generates income and will probably out-earn his military salary eventually. By the time he leaves the service, he will have been making a solid income and will have a resume that will be very attractive to the government contract and private sectors.
Our son doesn’t need us financially and probably never will. We had a lot of issues with his decision to enter the military, but finances and future prospects weren’t among them. He’s far ahead of where we were at his age. I can’t say we find the military any shinier than we did before he went this route but, in some ways, the security of his decision has been a gift to both him and us.
^See, just like that it works out. That’s parenting well done imo. Underlying assumption seems to me many parents assume their kids life has to meet a. certain criteria. Many seem to have a preset notion what it has to be for your kids. Falling below it has to be prevented by you with your money. I think it is more important to live a life they build on their own than meeting that standard. Otherwise, they are still living their parents life enslaving themselves in material indulgence and remain a kid at ages they shouldn’t be. I am sure some are quite happy with it. It certainly is an easier life. 1984 in micro scale.
Nevertheless, parental circumstances and choices make a huge difference in what opportunities the kids have to build their own lives.
From a personal point of view, parents may want to focus on maximizing their kids’ opportunities and information so that they can make well informed choices on their own.
From a societal point of view, it does mean that much of the economic inequality in the current generation is “inherited” by the next generation, due to different levels of opportunity and information that can be provided by parents to their kids (long before actual inheritance when someone dies and leaves an estate).
@Nhatrang, great story about your beach house. When my son was younger than 15 (maybe 10 or so), ShawWife and I were talking about buying a house in the mountains (I think in Western Canada where I did at one point look at a bunch of houses but ShawWife told me she didn’t want to own a house there). Anyway, he said, “Don’t worry Dad. When I get older, I’m going to buy you your mountain house.” He’s now on a path where that wouldn’t be implausible.
There was a pop business book that I read years ago, that unlike many pop business books, had some real wisdom. Of course, the wisdom could have been summarized in a page or two rather than 90 breathless pages. It was called The Millionaire Next Door and was written when a million meant much more than it does today.
The first piece of wisdom was that the people who “become millionaires” by which he meant the people who accumulate assets are not necessarily the people who make the most money. So, doctors and lawyers often don’t accumulate assets. The people who accumulate assets are those whose expenses are less than their income. Obvious, but not to most people.
The second related point is that where you choose to live affects your spending level. So, if you live in a neighborhood where people buy new cars every three years, it will start to feel normal to do so. If they all hire gardeners, you probably will also. So, better to live in a neighborhood where spending is below your income. Indeed the overall point is that you need to develop a plan for spending such that you are consistently spending less than you make. My own observation is that a few choices affect your spending levels. The first is your neighborhood. The second is education (private or public). The third is how you vacation (I have friends who spent many, many thousands more than we spent vacationing).
The third point involved kids. This relates to @Igloos’s point. Parents who regularly make gifts to their kids to support their kids’ lifestyles teach their kids that they don’t have to adjust expenses to be less than their incomes (or to raise their incomes). I think @Iglooo was saying the same thing.
Interestingly, What @BKSquared and I would do is different. We are not proposing an annual parental gift. My MIL did with one of her kids and so the kid and her H didn’t save and it was a big shock when MIL stopped the subsidies. The daughter had to change her career path to increase income. What @BKSquared and I are proposing is a one-time gift to help with a downpayment so that they could pay all the subsequent expenses of owning a house sooner – rather than taking longer to accumulate the downpayment (my kids are in SF, where the downpayment is likely to be a chunk, and one may move back to Boston where the chunk will be a little smaller, but still pretty impressive). We wouldn’t help with annual expenses – they would need to cover them. No reason anyone needs to follow our approach, but it is qualitatively different than an annual lifestyle subsidy.
My reason for gifting sooner rather than later comes in part from my own experience (we got modest help a couple of times when buying our first and second house). We will likely also inherit something from my MIL, but we will inherit it in 3, 5 or 10 years (hopefully she lives that long). This will likely be larger than what we received years ago. But, by that point, we will have made all plans for our own lives without any benefit of an inheritance. It won’t have affected our lives – whereas a gift earlier on could well have done so (as did the help with the downpayment). I don’t have any complaints. ShawWife and I have fulfilling careers, have had a wonderful life so far and have been fortunate enough financially. But, as an observation, an earlier gift could have reduced stress in the years when I was building my business. I often spent more than half the month traveling when my kids were young and was often nervous, unnecessarily it turns out, about whether I could make the business work…
I have clearly had the talk with both kids about point 1 (spending less than you are earning and point 2 (placing yourself in a group of people whose spending levels matches what you want to spend and not what you earn) and also encouraged both to set up automatic savings of X% of their paychecks. And maybe ShawSon will buy me that mountain house at some point.
I am hoping DDs do as well as DH and I have done financially and in all other aspects of life - being able to ride out life’s challenges and have a happy and fulfilling life.
My parents had five children by the time they were 30 (dad) and 28 (mom). Since they built up a business, the fruits of their labor with good cash flow was in their 50’s. They did a lot, and later did gift all 5 of us a bit of money one time (under what is allowed gifting tax free for a single person). Dad also made sure my sister had a good second car and they gifted her money at her birthday and Christmas so she could better afford to finish her UG and graduate degrees. My sister married into a challenging situation but she has ridden it out and raised two great kids and now they have 4 grandchildren. Her Library Science degree and work had her living more middle class and also being able to get her son’s UG education w/o any debt.
After dad died (young at age 64) and some real estate was sold, it was part of a A/B trust and passed to the 5 of us tax free. That was also the time I was battling stage III cancer (and pretty debilitated), so the infusion of money was a big help to us with DDs in 8th/9th and 10th/11th grades - continuing their education and life w/o any financial disruption.
DH and I had our children when we were turning 38 and 40. So DDs are 24 and 26 now. We will soon be retired.
Both sets of our parents were just focusing on getting to retirement, staying healthy, and enjoying life a bit. They wanted their kids to figure things out just like they did.
DD1/SIL are really working hard at paying off his student debt and the smallish car loan they took out when they had their daughter and needed a family vehicle. They are really making good progress. DD2 is finding how to live her life to the fullest and budget for what she wants to do.
I think it is great to be able to help out with buying a property in expensive real estate areas - as some on this thread benefited in some way from one of their parents. It is all situational and dependent to a certain extent on the personality and character of offspring and their spouses.
I do like the lowish loan set up helping a young adult getting into owned property.
Many ways to be creative.
I have been reading this discussion with interest and my conclusion is that everyone should do what makes them comfortable and happy, dependent on individual family and financial circumstances, no judgment. I respect @Iglooo’s position but it is not a philosophy that works for us.
H’s parents generously paid for all their grandchildren’s higher education when they were alive, and we have paid for graduate school since then. Our kids have, on many occasions, expressed gratitude for being able to complete their desired educations debt-free and each has exhibited a work ethic of which we, as parents, are very proud. Not having to pay off debt has, in any way, encouraged them to spend rather than save. As a matter of fact, our kids have substantial savings due to lifelong gifts from grandparents, bar/bat mitzvah gifts etc. that have been invested by my H, but each lives within the means of their current employment, choosing to hold those saved funds for down payments, etc.
Their earning capacities are not equal and H and I do not feel the need to equalize in our estate planning - each will, ultimately, get 1/3 of what’s there at the time. We will, however, contribute to grandchildren’s 529 plans to the extent we can, or if we are lucky enough to be around and circumstances allow, will pay it forward and cover their college tuition, as my in-laws did for our kids. We have more than we need for retirement and intend to enjoy our lives with our kids and grandkids while we can. YMMV.
Regarding the “Millionaire Next Door” book’s advice, being frugal (both you and your spouse) is optimal but I found it interesting that one area the book recommends spending $$$ on is hiring very good lawyers and accountants who can help their clients “shelter” their income and assets thereby maintaining as much of their wealth as possible…
Our philosophy is similar to @runnersmom. All of my kids have proven themselves to be hard workers and savers. Any money that has been gifted to them by family members goes into savings. They know without being told that that money is intended to be used for things like a down payment on a house, graduate school, future grandchildren education and travel. Or to enable one parent to stay home with their children. (If any of them ever have any) it’s not intended to be used for fancy cars and frivolous purchases.
We have plenty of money for retirement and we will also inherit some money down the line. I’d rather help my kids get a start in life versus having them inherit when they are in their 60’s. We have been very lucky and our children also know how lucky they are to graduate debt free. All are aware that we don’t choose the family or life circumstances we are born into and that they are privileged and with that privilege comes responsibility.
I have elderly neighbors. They have 3 children, 2 have done very well, one of which has done very, very well with multiple homes and a very nice life. Their 3rd has not. A couple of divorces, no college, underemployed and lots of hard luck. The parents did so much for this 3rd child, paid for her divorces, bought her a condo, helped buy her a car. Right now she is in her 60’s and works as nanny.
The idea was that when the parents couldn’t take care of themselves, the 3rd child would move in with her parents and take care of them as they have taken care of her over the years.
In the opinion of many in the neighborhood that time is now. Dealing with advanced age, dementia and strokes, the couple’s health is going down fast. Neighbors can help but they can’t make decisions.
Guess who went back to her nannying job (but she was really broken up about it) and guess who is driving the parents to their multiple doctors appointments and having them stay with them.
I think you’ve guessed right!
@socaldad2002, I don’t remember the advice about lawyers and accountants but I wholly endorse that as well. When I first set up my business, I looked long and hard to find an accountant who would proactively figure out how to save me money on taxes and solve problems. In addition, I have also found that this is an area where it pays to spend time as I have found aspects of tax law that saved a fair bit and weren’t uncovered first by the professionals but passed their approval. However some of my clever ideas were also rejected by the professionals, so I highly value their expertise.
I read that book ages ago. Mostly I remember the emphasis on the time value of money - how a plumber could start working (and saving) 10-12 years before an MD could. Additionally, the MD would likely come out of medical school with debt, too. And, finally, that there were lifestyle “expectations” (appearances) put upon an MD (or attorney or certain other professions) that interfered with wealth accumulation. Maybe not spending more than you made, but spending most or all that you made because a doctor should drive a certain car, have a certain brand of watch, a certain size of home, etc. So, the plumber came out ahead by earning an income earlier, not having educational debt, and not having societal expectations of owning certain material trappings.
Lifestyle creep is a huge challenge for many.
I understand the time value of money (having calculated present and future values using formulas and tables rather than spreadsheets in accounting classes). And agree that people making and saving money earlier can accumulate more wealth than people making more money later in life. But looking at the several doctors I know well and couple of plumbers, it just isn’t how it worked out in those cases. And its not because the doctors graduated without debt (they didn’t) or because the doctors don’t drive fancy cars, own huge houses (multiple for some of them), take expensive vacations, etc (they do). Its just that the income difference allowed them to catch up. And then some (actually a lot).
But the concept is valid.
Is “professional status symbol expectations” a real thing, or is it just that earning a high pay level enables people to spend a lot of money, and some people spend all of their pay buying status symbols?
For example, do people choose their physicians based on what car they drive or what watch they wear?
In my experience physicians choose their car based on what car other physicians drive ?
It’s that neighborhood thing mentioned previously. Your subconscious expectations of yourself and others are affected by the people you hang with. That’s one reason why the White Coat Investor site and others like it, are so very helpful in resetting expectations for a generation.