Lesser of two evils: House or cash for kids ???

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Lesser of two evils: House or cash for kids ???

Postby convert949 » Sun Apr 22, 2012 10:08 am

Good Morning,

Having finally finished the completion of our transition to the Boglehead way, we find ourselves confronted with one last challenge to our happy retirement. Having retired somewhat early at 60 a couple of years ago, we have continued to subsidize two of our five children who are chronically underemployed. One is single and the other is married with two children. Given the current state of the real estate market, we are considering the purchase of a "Mother/Daughter" home that they can share in lieu of the monthly subsidy we are currently providing in the amount of nearly $1500 per month combined. There is no definite end in site.

Our thoughts are to purchase an appropriate property (many available in our area) for cash and have them pay all expenses on the home (taxes, utilities, maint etc.) This is a number that they can afford with no further subsidy from us. At some point in the future, assuming their job situation improves, our hope is that one of them will purchase the home from us so that we can recover our initial investment while offering the opportunity to purchase at a price that is not likely to be available in the future.

To provide some background, we have been very fortunate with a total portfolio that would still be nearly $3M after the 200K cash purchase. Are we crazy? or, does this make sense? What is making us crazy right now is writing those monthly checks!

Regards to all,
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Re: lesser of two evils???

Postby xerty24 » Sun Apr 22, 2012 10:19 am

It's your money - you can do what you want. That can mean writing the kids checks, buying a house for them, or cutting them off altogether. It sounds like you're not entirely happy with providing the present level of support and are looking for this house as a way to cut them off with one final subsidy. Is that about right?
No excuses, no regrets.
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Re: lesser of two evils???

Postby stan1 » Sun Apr 22, 2012 10:34 am

I think the cash payments give everyone the most flexibility. Year to year their circumstances could change, and there's a fair chance if you buy the house in 5 or 10 years you'd be stuck with a rental property that neither of them want to live in if they have successfully moved on to another phase in life through a new job or a new relationship. In the meantime, if the house needs a new roof or a new heater -- who will pay? I'm not sure the one time purchase of a house will eliminate the need for future expenditures.

I hope they are appreciative of their loving, generous parents.
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Re: lesser of two evils???

Postby 555 » Sun Apr 22, 2012 10:43 am

It seems you have plenty of assets for your own retirement, but not necessarily enough to support a few freeloaders indefinitely.

At least with a house purchase, you'll cut out a rent payment that goes outside the (extended) family.

But ultimately these adults need to stand on their own two feet.
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Re: lesser of two evils???

Postby chaz » Sun Apr 22, 2012 11:48 am

You are a good parent.
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Re: lesser of two evils???

Postby convert949 » Sun Apr 22, 2012 11:59 am

xerty24 wrote:It's your money - you can do what you want. That can mean writing the kids checks, buying a house for them, or cutting them off altogether. It sounds like you're not entirely happy with providing the present level of support and are looking for this house as a way to cut them off with one final subsidy. Is that about right?


Hi xerty24... Well, almost right... We are also hoping that they one will buy it eventually. We have struggled with how to help our kids in a positive way. When we sold our company several years ago, we set aside money for each kid. One started a business, one used it for a down payment on a house and one still has her's as she is soon to graduate from college. The two in question have gone through the money set aside for living expenses or for failed business opportunities.

stan1 wrote: I'm not sure the one time purchase of a house will eliminate the need for future expenditures. I hope they are appreciative of their loving, generous parents.


Stan1, I am not sure either and I also hope that they do!

555 wrote:It seems you have plenty of assets for your own retirement, but not necessarily enough to support a few freeloaders indefinitely.

At least with a house purchase, you'll cut out a rent payment that goes outside the (extended) family.

But ultimately these adults need to stand on their own two feet.


Actually, you have hit it on the head 555! Perhaps misguided, we think of this as a way to give these two a reasonable target to meet initially to first, get them to be self sufficient and therefore (hopefully) motivated to stay off the subsidy and yes, it does bother us that we are making the current payments to others who are making money on us in the form of rent payments.

Thanks all for the insight. Lots to think about. Gets down to sanity vs. loss of flexibility :confused

Regards to all,

Bob (convert949)
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Re: lesser of two evils???

Postby bearwolf » Sun Apr 22, 2012 12:13 pm

convert949 wrote:
The two in question have gone through the money set aside for living expenses or for failed business opportunities.

Bob (convert949)


I don't see this ending well. It looks like they have already proved they can't or won't handle money well. It looks like you will buy a house and then expect them to maintain it. But remember these are people that have come to expect maintenance from you. so they don't have an incentive to produce.

My parents did the same for my brother thinking they were helping, but wound up enabling him to not have to stand on his own feet. At age 53 he still has a problem and hasn't yet learned how to make it in the world.

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Re: lesser of two evils???

Postby jlj » Sun Apr 22, 2012 12:19 pm

I agree you are a good parent, trying to do the right thing. But I have made the mistake of buying a home to help a needy son and his family. Suggest you keep your help for family on a cash-contribution-basis only. Suggest you avoid pitfalls of their improper care of the property, hard feelings about their lack of agreed-upon contributions to very minimal rent, and downright anger when still trying to clean up the physical and financial messes left by helping family through purchase of real estate. In the long run, you will likely still feel the need to help buy groceries, clothes, etc.

Cash keeps your contributions flexible. Best wishes in your tough decisions to help needy family.
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Re: lesser of two evils???

Postby dbr » Sun Apr 22, 2012 12:21 pm

jlj wrote:I agree you are a good parent, trying to do the right thing. But I have made the mistake of buying a home to help a needy son and his family. Suggest you keep your help for family on a cash-contribution-basis only. Suggest you avoid pitfalls of their improper care of the property, hard feelings about their lack of agreed-upon contributions to very minimal rent, and downright anger when still trying to clean up the physical and financial messes left by helping family through purchase of real estate. In the long run, you will likely still feel the need to help buy groceries, clothes, etc.

Cash keeps your contributions flexible. Best wishes in your tough decisions to help needy family.


This is sensible. I think there are so many bad things that can happen with what you propose that, yes, it would be crazy.
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Re: lesser of two evils???

Postby Muchtolearn » Sun Apr 22, 2012 12:24 pm

I don't like it at all. I have nothing against helping kids a lot or even an awful lot. The married one with the 2 kids bugs me the most. I hope there aren't any more until they are able to take care of raising their own children. There are 2 adult parents (I think - no mention of divorce) so they should be responsible. If you want to buy them a house, that's fine. I can't see why you should buy a house to play landlord for them. Let them get their own landlord. This will not end well otherwise. What will you do when they can't pay the bills?
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Re: Lesser of two evils: House or cash for kids ???

Postby convert949 » Sun Apr 22, 2012 1:49 pm

Wow :shock: Based on the first few posts I though it would at least come out 50/50. Actually, I thought I would get a lot of requests by members who wanted us to adopt them!

As to the dependency issues, we have thought long and hard about which is worse, i.e. endless subsidies vs. an attainable goal through the real estate idea. We do realize that either way, we run the risk of perpetuating the "status quo". Initially, we thought that by giving them an attainable goal, we would increase the chances that they could take care of themselves. Based on the experience of the members, it seems like the outcome may not have been as positive as we had hoped.

Now I'm really depressed... :(

Thanks again,

Bob
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Re: Lesser of two evils: House or cash for kids ???

Postby jlj » Sun Apr 22, 2012 2:02 pm

Be happy, not depressed. You just eliminated a boatload of future problems...
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Re: Lesser of two evils: House or cash for kids ???

Postby livesoft » Sun Apr 22, 2012 2:12 pm

What do the independent kids think about all this?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Lesser of two evils: House or cash for kids ???

Postby VictoriaF » Sun Apr 22, 2012 2:25 pm

convert949 wrote:Now I'm really depressed... :(

Bob


You would feel even more depressed if you had spent money on a house and it backfired in some of the ways mentioned above. Another reason not to buy a house is restricted job opportunities for your children and their spouses. People unencumbered by houses can move to where jobs are.

Victoria
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Re: Lesser of two evils: House or cash for kids ???

Postby pkcrafter » Sun Apr 22, 2012 2:29 pm

Our thoughts are to purchase an appropriate property (many available in our area) for cash and have them pay all expenses on the home (taxes, utilities, maint etc.)

The only way you won't be disappointed is to resolve yourself to the fact that it won't be long before you own a second home and you are paying all the expenses. Oh, you forgot insurance.
As to the dependency issues, we have thought long and hard about which is worse, i.e. endless subsidies vs. an attainable goal through the real estate idea.

You see this as a goal, but I very much doubt your children will see this as a goal.

You did not say what your own needs are, but it sounds like your needed withdrawal rate is much lower than 4% or even 3%. While that is excellent, I caution you to closely keep track of your give-aways and total portfolio withdrawal.

Paul
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Re: Lesser of two evils: House or cash for kids ???

Postby FrugalInvestor » Sun Apr 22, 2012 2:36 pm

convert949 wrote:Wow :shock: Based on the first few posts I though it would at least come out 50/50. Actually, I thought I would get a lot of requests by members who wanted us to adopt them!

As to the dependency issues, we have thought long and hard about which is worse, i.e. endless subsidies vs. an attainable goal through the real estate idea. We do realize that either way, we run the risk of perpetuating the "status quo". Initially, we thought that by giving them an attainable goal, we would increase the chances that they could take care of themselves. Based on the experience of the members, it seems like the outcome may not have been as positive as we had hoped.

Now I'm really depressed... :(

Thanks again,

Bob


Can one person give another an "attainable goal?" Google's online dictionary defines a goal as "the object of a person's ambition or effort." A goal is a very personal thing and if it isn't, I suspect, unlikely to be attained.
"Some men worship rank, some worship heroes, some worship power, some worship God, and over these ideals they dispute and cannot unite, but they all worship money. - Mark Twain
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Re: Lesser of two evils: House or cash for kids ???

Postby exoilman » Sun Apr 22, 2012 2:41 pm

You are good thoughtful parents. Continuing the needed monthly payments would be my opinion also. Many things can change, divorce, illness etc. You will be able to adjust accordingly when the unexpected happens.

Best regards and good luck
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Re: Lesser of two evils: House or cash for kids ???

Postby 555 » Sun Apr 22, 2012 2:48 pm

I wanted to know this too!
livesoft wrote:What do the independent kids think about all this?
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Re: Lesser of two evils: House or cash for kids ???

Postby convert949 » Sun Apr 22, 2012 3:27 pm

555 wrote:I wanted to know this too!
livesoft wrote:What do the independent kids think about all this?


Actually, we did discuss it with a couple of them and they feel that as we would own the house that they are OK with it. We have avoided discussing our continuing cash support as that has been received negatively in the past. (edit) Again, the origination of the "lesser of two evils" decision...

Regards,

Bob
Last edited by convert949 on Sun Apr 22, 2012 4:02 pm, edited 1 time in total.
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Re: Lesser of two evils: House or cash for kids ???

Postby Rodc » Sun Apr 22, 2012 3:45 pm

My parents did this with my sibling. It worked out pretty well.

My sister fell on hard times, messy divorce etc., and my parents wanted to help primarily because they did not want their grand-kids hurt.

They bought a house and my sister lived in it until the last left for college last year. At that point she married her long time boy friend (she did not want to saddle him with her kids, so her plan for sometime was to wait until the last was out of the house). As each child left, rent increased. And as planned, when all kids were out of the house, my mother sold the house and is out of the take care of sister business.

My sister went to school for an associate degree in accounting, got a decent enough job, always paid rent, her and her boyfriend did the maintenance, added a bathroom and such. House was in much better shape when she left than when this started.

Zero hard feeling from myself and my other sister that our sister was getting help. We did not need help, sister did. You know, hard luck sometimes happens.

I can't advise how this might work out with your kids, but it is not an automatic disaster.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Lesser of two evils: House or cash for kids ???

Postby 555 » Sun Apr 22, 2012 6:52 pm

Rodc gave a positive anecdote.
Here's a CNN article
The new American household: 3 generations, 1 roof
http://money.cnn.com/2012/04/03/real_es ... /index.htm
One key point is that in cases where these things work, people are pulling their weight.
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Re: Lesser of two evils: House or cash for kids ???

Postby Tuxx » Sun Apr 22, 2012 6:59 pm

If you buy a house now only will you be out the $200K your monthly stipend will be higher too.

Thee double whammy.
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Re: Lesser of two evils: House or cash for kids ???

Postby Anon1234 » Sun Apr 22, 2012 7:05 pm

A house will tie them to a small geographic region. Do you think that is wise? You could take the house money and buy an SPIA annuity for them. That would provide income for life with no geographic restrictions. Just an idea... of course they could attempt to sell it.
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Re: Lesser of two evils: House or cash for kids ???

Postby Tuxx » Sun Apr 22, 2012 7:07 pm

convert949 wrote:Actually, I thought I would get a lot of requests by members who wanted us to adopt them!



Can I have them running errands, cleaning the dog, cutting the grass, doing maintenance around the house, washing the dishes, etc?
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Re: Lesser of two evils: House or cash for kids ???

Postby Rodc » Sun Apr 22, 2012 7:28 pm

555 wrote:Rodc gave a positive anecdote.
Here's a CNN article
The new American household: 3 generations, 1 roof
http://money.cnn.com/2012/04/03/real_es ... /index.htm
One key point is that in cases where these things work, people are pulling their weight.


3 generations under one roof is a very different model from the OP.

Our town has a large number of highly educated first generation Asian families with grandma (sometime grandpa or an aunt) and kids under one roof. Seems to work very well for them. Certainly they all seem to be pulling their own weight with grandparents providing childcare while both parents work well paying white collar jobs (mostly software or bio-tech).
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Lesser of two evils: House or cash for kids ???

Postby hq38sq43 » Sun Apr 22, 2012 8:09 pm

There may be a useful lesson in government- subsidized housing. Sometimes it works well, often it backfires. Helping people occupy homes they cannot afford often results more or less promptly in slums, due to inability or unwillingness of occupants to pay carrying costs: utilities, repairs, insurance, taxes, etc. A money subsidy at least fixes the subsidizer's liability.

The calculus is especially hard with adult relatives, especially children. Our experience providing limited cash subsidy to our son and daughter has worked well so far. Knock on wood.

Good luck.
Harry at Bradenton
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Re: Lesser of two evils: House or cash for kids ???

Postby rai » Sun Apr 22, 2012 8:13 pm

Tuxx wrote:If you buy a house now only will you be out the $200K your monthly stipend will be higher too.

Thee double whammy.

this is correct.

If you buy a house and now all of the sudden they can't pay the property taxes or utilities what are you going to do?

the more you give them the more they will need. I would slowly start ramping down the dole let them work some more or cut out luxuries (cell phones, cable TV, cigarettes, etc..) it won't kill them.
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Re: lesser of two evils???

Postby campy2010 » Sun Apr 22, 2012 9:01 pm

chaz wrote:You are a good parent.


IMO, good parents let their kids fail and allow them to learn how to pick themselves up again. Coddled children turn into adults who can't stand on their own two feet.

To the OP, do what you feel is right, but consider how your children will survive when you are no longer around. I'm not sure a house will help their situation. They're going to learn how to live without your money at some point.
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Re: Lesser of two evils: House or cash for kids ???

Postby ks289 » Mon Apr 23, 2012 8:11 am

Allowing kids to fail may not always be best solution or recipe for long term success.
Agree however with any plan which promotes tools for long term self-sufficiency/success.

Agree that creating incentives for the recipient (more "strings" attached or creating a less "comfortable" situation such as living in your basement/multigenerational household) would be paramount.
While the symbiosis of a multigenerational household is efficient, there are certainly headaches/sacrifices that many are not willing to bear. Speaking from experience. :?
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Re: Lesser of two evils: House or cash for kids ???

Postby Grt2bOutdoors » Mon Apr 23, 2012 8:47 am

I'll second Chaz - you are a good parent.
Buy the house, keep it in your name, have them pay the taxes, maintenance, etc.
Hopefully, the economy in South NJ will turn around and they can get back on their feet.
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Re: lesser of two evils???

Postby HomerJ » Mon Apr 23, 2012 9:08 am

chaz wrote:You are a good parent.


Not necessarily. Read the chapter in "The Millionaire Next Door" about the dangers of subsidizing a child. You can do more long-term harm than good.
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Re: lesser of two evils???

Postby HomerJ » Mon Apr 23, 2012 9:17 am

campy2010 wrote:
chaz wrote:You are a good parent.


IMO, good parents let their kids fail and allow them to learn how to pick themselves up again. Coddled children turn into adults who can't stand on their own two feet.


This. It's not good for them. In the back of your kids' minds, there's probably a tiny feeling of being a failure. They can ignore it most of the time, but they don't have the pride of standing on their own two feet. You don't want to be 80 and realize that your 50 year-old "child" is incapable of taking care of himself.
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Re: lesser of two evils???

Postby cheese_breath » Mon Apr 23, 2012 9:26 am

rrosenkoetter wrote:This. It's not good for them. In the back of your kids' minds, there's probably a tiny feeling of being a failure. They can ignore it most of the time, but they don't have the pride of standing on their own two feet. You don't want to be 80 and realize that your 50 year-old "child" is incapable of taking care of himself.

My 87 year old mother-in-law is in this situation right now with her 54 year old son, my brother-in-law. We're afraid when she passes he'll be knocking on our door, and we're not gonna answer.
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Re: lesser of two evils???

Postby Grt2bOutdoors » Mon Apr 23, 2012 9:57 am

rrosenkoetter wrote:
campy2010 wrote:
chaz wrote:You are a good parent.


IMO, good parents let their kids fail and allow them to learn how to pick themselves up again. Coddled children turn into adults who can't stand on their own two feet.


This. It's not good for them. In the back of your kids' minds, there's probably a tiny feeling of being a failure. They can ignore it most of the time, but they don't have the pride of standing on their own two feet. You don't want to be 80 and realize that your 50 year-old "child" is incapable of taking care of himself.


I don't think this is a case of "coddling". Given one of two obvious choices which would you prefer if it were your child? 1) Buy the home and let them stay in a warm,safe place that they can afford at a cost of $600 - $700 a month not including food, clothing, medical? or 2) Let them sink because "coddling is worse" (where is the rolling eye emoticon when you need one?) and have them wind up in a shelter? Again, because in today's fantastic economic enviornment in South Jersey where the jobs just aren't there or the employed are "underemployed", to offer financial assistance from your over the top portfolio would just be too much and send the wrong message to two young minors plus their adult parents.

I often thank my lucky stars that my parents think about the family unit rather than the individualistic "myself" kind of thinking that seems to permeate the Silas Marnas atmosphere I find to occur much too often here. I wonder what Dr. Stanley really practices in real-life rather than the books he wrote and people blindly accept as gospel.
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Re: Lesser of two evils: House or cash for kids ???

Postby Grt2bOutdoors » Mon Apr 23, 2012 10:03 am

GRT2BOUTDOORS wrote:I'll second Chaz - you are a good parent.
Buy the house, keep it in your name, have them pay the taxes, maintenance, etc.
Hopefully, the economy in South NJ will turn around and they can get back on their feet.


Go one better to satisfy the ones who think you are "coddling them".
Buy the home, in your name. Prepare a lease document, charge them the exact cost of taxes, insurance and maintenance. Let's say they fail to pay because of no employment, what have you. Do this, keep a running tally and deduct it from the value of any inheritance they may receive "down the road". This will ensure that they are not receiving a disproportionate amount of assistance from you relative to your other children who do not need assistance. At the minimum this will solve two things, it will provide warm and steady, secure shelter and two, it will keep the assets under your control with little room for mismanagement.
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Re: lesser of two evils???

Postby Jim Profit » Mon Apr 23, 2012 10:13 am

rrosenkoetter wrote:
chaz wrote:You are a good parent.


Not necessarily. Read the chapter in "The Millionaire Next Door" about the dangers of subsidizing a child. You can do more long-term harm than good.


My thoughts exactly. This is a classic case of "Economic Outpatient Care" from that very good book and the OP really should read it. The chapter has an excellent analysis of the dynamics of this situation; the basic gist of the chapter is that monetary support provided by parents continues to weaken the children that receive it while the children that receive no or very little help become stronger and more financially independent. Another unintended consequence is the children receiving aid generally live above their means and in a neighborhood that encourages even more consumption (i.e. "keeping up with the Jones'") so they just keep digging themselves in deeper no matter how much aid is provided.
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Re: Lesser of two evils: House or cash for kids ???

Postby Toons » Mon Apr 23, 2012 10:21 am

You are a generous parent,but personally I would not subsidize them
They need to "find their own way" in this life.
I am more an advocate of tough love.
Hardship,life's challenges ,meeting them and solving them
make us all stronger when all is said and done. :happy
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Re: lesser of two evils???

Postby Grt2bOutdoors » Mon Apr 23, 2012 10:27 am

Jim Profit wrote:
rrosenkoetter wrote:
chaz wrote:You are a good parent.


Not necessarily. Read the chapter in "The Millionaire Next Door" about the dangers of subsidizing a child. You can do more long-term harm than good.


My thoughts exactly. This is a classic case of "Economic Outpatient Care" from that very good book and the OP really should read it. The chapter has an excellent analysis of the dynamics of this situation; the basic gist of the chapter is that monetary support provided by parents continues to weaken the children that receive it while the children that receive no or very little help become stronger and more financially independent. Another unintended consequence is the children receiving aid generally live above their means and in a neighborhood that encourages even more consumption (i.e. "keeping up with the Jones'") so they just keep digging themselves in deeper no matter how much aid is provided.


Owing a home in their names (parents) and providing a market based rent apartment is hardly "keeping up with the Jones". OP should do what they feel is best and not rely on a bunch of strangers to tell them. Apparently the OP has done something right in their lives since more than 50% of their offspring are economically self-sufficient and they have accumulated over $3 million in assets. Only on this forum is everyone living in Lake Woebegone - the island of perfectionists or are they really?
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Re: Lesser of two evils: House or cash for kids ???

Postby beachplum » Mon Apr 23, 2012 12:17 pm

ever thought of Paying for them to get financial/job counseling and a plan on how to manage money and increase job skills. They need to be accountable to someone on how they manage money.
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Re: Lesser of two evils: House or cash for kids ???

Postby bungalow10 » Mon Apr 23, 2012 12:32 pm

Help them by supporting them emotionally as their figure out how to support themselves.

Giving them money or housing just reinforced the negative behavior that caused them to need the money/housing.
An elephant for a dime is only a good deal if you need an elephant and have a dime.
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Re: Lesser of two evils: House or cash for kids ???

Postby teacher » Mon Apr 23, 2012 12:48 pm

I agree with chaz. "You are a good parent."
You already know whether your children are just "takers", or whether they have pulled out all stops to get on their feet. If it is the latter, I would contemplate doing what you propose. These are tough times. But, if they are comfortably dependent, I would dole out money for necessities, but with conditions. I would want to know what efforts are being made to get employment, and I would want to have ongoing knowledge of whether they deviate from a reasonable budget. Since they have plowed through a lump sum, I would not require anything less than full disclosure as to how your contributions are spent. They may not want to comply with your conditions. In that case, you have done all you can without enabling.
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Re: Lesser of two evils: House or cash for kids ???

Postby imgritz » Mon Apr 23, 2012 12:49 pm

I believe in teach a man to fish philosophy. How are you teaching your children to become productive adults?

My parents would give me advice and a very small amount of cash from time-to-time. They told me at a very young age that if I wanted money then I would have to earn it. I've had my jobs where I had to move across the USA. I also taught myself budgeting and investing.

I suggest you help your children by teaching them.
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Re: Lesser of two evils: House or cash for kids ???

Postby tractorguy » Mon Apr 23, 2012 12:52 pm

The OP is not telling us what the two underemployed children are doing to try to change the situation. Good jobs are out there but it might require that these children take some more training courses and/or relocate to find them.

I was more than willing to provide one of my daughters room and board for a year while she was looking for an architects job. (This profession was very hard hit by the downturn). It took her a year and she had to move 1200 miles but she finally found one and is now making it on her own. While she was looking, I know she was spending a minimum of 8 hours/day on the search. She was also obtaining certifications and attending local conferences to improve her skills and network. I was very comfortable that her personality would not allow her to stay on the parents dole any longer than she had to.

If I was the OP, I would be very reluctant to formalize the dependency by providing a house. This changes their current state of unemployment into a "normal" situation. It also eliminates a lot of job possibilities (relocation and/or the military for example). I would be more likely to sit down with the children, review what they are doing to find work, and help them develop an action plan to change things. It may require education, a relocation, or widening the filter on the kinds of jobs to look at. The children also need to learn that they are not going to find a first job that will allow them to live in the same style as a child of someone who has $3M in their portfolio. This is a hard lesson to teach but is necessary.
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Re: Lesser of two evils: House or cash for kids ???

Postby Watty » Mon Apr 23, 2012 1:23 pm

A few things to consider about the mechanics of the situations;

1) ....

2) .....

3) ...

4) It might be tempting to buy them a significantly nicer house than they could afford to rent even with the subsidy you are giving them. Finding a nice safe neighborhood is one thing but be cautious about this because if the rest of the neighborhood is significantly more affluent than them then they might not fit in well. This is especially important for the kids who might not fit in well with the other more kids in the neighborhood if they are way more affluent.


EDIT: I misread the origional post that said that the kids would get the use of the house, not be given the house as a gift. the first three do not apply so I deleted them.
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Re: lesser of two evils???

Postby HomerJ » Mon Apr 23, 2012 2:27 pm

GRT2BOUTDOORS wrote:
rrosenkoetter wrote:
campy2010 wrote:
chaz wrote:You are a good parent.


IMO, good parents let their kids fail and allow them to learn how to pick themselves up again. Coddled children turn into adults who can't stand on their own two feet.


This. It's not good for them. In the back of your kids' minds, there's probably a tiny feeling of being a failure. They can ignore it most of the time, but they don't have the pride of standing on their own two feet. You don't want to be 80 and realize that your 50 year-old "child" is incapable of taking care of himself.


I don't think this is a case of "coddling". Given one of two obvious choices which would you prefer if it were your child? 1) Buy the home and let them stay in a warm,safe place that they can afford at a cost of $600 - $700 a month not including food, clothing, medical? or 2) Let them sink because "coddling is worse" (where is the rolling eye emoticon when you need one?) and have them wind up in a shelter? Again, because in today's fantastic economic enviornment in South Jersey where the jobs just aren't there or the employed are "underemployed", to offer financial assistance from your over the top portfolio would just be too much and send the wrong message to two young minors plus their adult parents.

I often thank my lucky stars that my parents think about the family unit rather than the individualistic "myself" kind of thinking that seems to permeate the Silas Marnas atmosphere I find to occur much too often here. I wonder what Dr. Stanley really practices in real-life rather than the books he wrote and people blindly accept as gospel.


All depends on the situation. It's not usually buy a house for them or they go to a shelter... Do they have cable? Expensive smart-phones? Waste money eating out? If you hand them $1000 a month for rent, and they waste $1000 on luxuries, you aren't helping them at all... And taking away that $1000 will not put them in a shelter, but will likely make them better people in the long run.

Seriously, tough-love works.

I wouldn't put my kids in a shelter, but I also wouldn't pay for their phones and their HBO. They would need to cut non-essentials out before they get money from me.

I might buy them a used dependable car so they don't have to worry about that. I might help them with new clothes now and then as a gift... I might let them move in with me (with a ton of rules and conditions).

But a monthly cash infusion is a TERRIBLE idea... It's the absolutely worst way to "help" your adult kids.
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Re: Lesser of two evils: House or cash for kids ???

Postby rai » Mon Apr 23, 2012 2:34 pm

nobody has said much about this, but I find it very hard to believe there are no extra jobs for 3 able body adults. I know people who work 2-3 jobs if they have to. You mean McDs or Pizza shops or 24-hr gas stations/convenience stores do not exist where you live?

Of course they would rather not do those kind of jobs and as of now they don't have to since you have given them enough money to keep them happy with being under-employed.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair
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Re: Lesser of two evils: House or cash for kids ???

Postby convert949 » Mon Apr 23, 2012 3:43 pm

Hi... This is the OP speaking... Well, I asked for financial advice and got a lot more than I bargained for. Lots of different points of view especially where parenting skills are concerned. I DO appreciate all of the advice but need to let you all know that there is nothing here that I have not thought of myself in dealing with these two children.

Neither are axe murderers, lazy or incompetent. Our daughter is a great mom with two kids (our grandkids) and a husband who works 6 days a week as an electricians helper. She worked up until the second child and is currently looking for part time work. They are in a rental that is not suitable in an older home owned by friends of ours that frankly is a fire trap. Our son is trained in automotive trim and upholstery and currently is working 6 days a week for an awning company and doing OK except that it is seasonal and he will be laid off come September. He has recognized that his own business will have to wait due to the economy and he will try to do it part time in the fall while he looks for another seasonable job. He had been sharing a condo with a friend whose father moved in (it was the families condo) due to divorce, forcing my son out. He is now with us (you know how that goes) in a smaller home that we built two years ago to downsize in retirement. A one bedroom apartment in our area is more than $1000 per month plus he rents space for his now part time business that could be accommodated in the garage of a home if we decide to go ahead with a purchase. That is not to say that they are not without their challenges...

Truly, I do believe that as one poster pointed out, they already feel a little like a failure. Is it possible that it is caused by their need to come to us for a check every month :?: What started the discussion was the desire to be able to give them a "reasonable" chance of becoming independent by charging them below market rent that might increase over time as they are able to pay. I am an experienced landlord and know all of the pitfalls. For what I indicated in the original post, In today's market, I can purchase an average home in good condition already converted to a mother/daughter setup in a safe neighborhood populated by other working families. In doing so, I can obtain a three bedroom apartment for our daughter and family and a one bedroom apartment for our son with a garage large enough for his part time trim and upholstery business for much less than the alternative. The original question was whether to make the investment in the home or to continue to subsidize them, hoping for the best.

My wife and I know and have discussed that this would be either the best or worst thing we have ever done, depending if they hold up their end of the bargain. We DO know what is at stake. I was "merely" wondering what the forum thinks of the financial impact of either approach. As pkcrafter said, watch the drain over time so as to stop it before it affects us in a significant way. Currently, that is my greatest fear...

GRT2BOUTDOORS wrote:
GRT2BOUTDOORS wrote:I'll second Chaz - you are a good parent.
Buy the house, keep it in your name, have them pay the taxes, maintenance, etc.
Hopefully, the economy in South NJ will turn around and they can get back on their feet.


Go one better to satisfy the ones who think you are "coddling them".
Buy the home, in your name. Prepare a lease document, charge them the exact cost of taxes, insurance and maintenance. Let's say they fail to pay because of no employment, what have you. Do this, keep a running tally and deduct it from the value of any inheritance they may receive "down the road". This will ensure that they are not receiving a disproportionate amount of assistance from you relative to your other children who do not need assistance. At the minimum this will solve two things, it will provide warm and steady, secure shelter and two, it will keep the assets under your control with little room for mismanagement.


Well said... This had be our intention from the beginning in how to manage this situation if we decide to go ahead. In the end, we will make our decision on what is likely to have the least impact on our retirement. That is what we were hoping to gain from the post.

Thank you for your help.

Best regards,

Bob
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Re: Lesser of two evils: House or cash for kids ???

Postby 3CT_Paddler » Mon Apr 23, 2012 4:34 pm

At some point in the future, assuming their job situation improves, our hope is that one of them will purchase the home from us so that we can recover our initial investment while offering the opportunity to purchase at a price that is not likely to be available in the future.


I think any expectation that they will purchase this house after years (or decades :?: ) of being dependent adults needing your monthly provision is not very likely IMO. What is going to make them change all of the sudden? Either consider it a gift with no strings attached or don't give it to them. Of course you have already given those two a lump some of money, only to watch them waste it. It makes me think a house will be no different.

I would encourage them to find a place where their money goes much further if they are struggling making ends meet with little prospects of wage growth. It is a tough economy out there for most people, but there are places where blue collar workers can make a better living for themselves with a lower cost of living.
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Re: Lesser of two evils: House or cash for kids ???

Postby ddb » Mon Apr 23, 2012 4:48 pm

I didn't read the replies, so I apologize if this is repetitive: if your goal is to help them but also get off the cycle of writing checks every month, and you're willing to spend $200K on a house, how about just giving them $200K today with a note stating that this is the end of the financial support, and then they can best decide how to use the $200K*. I don't see that buying a house will end your financial responsibilties. Home ownership entails lots of unexpected and potentially large costs. Plus, if you own the property you have issues of liability - with a net worth as large as yours, I'd be concerned about somebody looking for a quick buck in a lawsuit.

Or, if you don't like writing monthly checks, just make it an even $xx,xxx one time each year.

The majority of "underemployed" people manage to survive without generous subsidies from loving parents. Your kids will also figure out how to manage once the ATM machine closes down.

* If you do elect a lump sum gift, please be aware of gift tax consequences. You'd want to use up as little of your $5 million per person lifetime gift exclusion as possible. If you have a married child, then you can give them $52K per year without gift reporting, so maybe you'd want to spread a $200K gift over a few years.

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Re: Lesser of two evils: House or cash for kids ???

Postby Curlyq » Mon Apr 23, 2012 6:09 pm

To the OP. Are you gifting to your kids? Isn't the amount one can gift around $13,000 per child and it would be twice that if your spouse also gifted. Can't your kids make it on that? Something is wrong with this picture... :?:
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