What do I owe my children?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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widestance
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Re: What do I owe my children?

Post by widestance » Wed Aug 07, 2013 5:50 pm

Keep collecting payments, set it aside, then include it in the inheritance.
You'll be gone when they collect and they'll be old enough to not care when they split up the assets.
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Ciel
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Re: What do I owe my children?

Post by Ciel » Wed Aug 07, 2013 7:42 pm

widestance wrote:Keep collecting payments, set it aside, then include it in the inheritance.
You'll be gone when they collect and they'll be old enough to not care when they split up the assets.
I couldn't disagree more strongly with this, for two reasons:

1) This money would help the child more now than when the child him/herself is nearing retirement or retired (most likely)

2) This sounds like a much greater opportunity to introduce tensions (unequal inheritance) than the situation the OP describes

I too like the comment about equal treatment not necessarily being identical treatment.

2stepsbehind
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Re: What do I owe my children?

Post by 2stepsbehind » Wed Aug 07, 2013 7:55 pm

OP--I don't think you OWE anything to either child. That said, for the sake of family harmony if you end up forgiving the debt of your younger child, I'd encourage you to give something to the older child. It doesn't have to be the full $32,000; it can be $15,000 to $20,000 for example, but I'd give some amount that recognizes the achievements of the older child.

Why do I say this? You don't know what compromises/sacrifices the older child made so as to reduce your burden for the costs of his education. If he had known you would eventually foot the bill, perhaps he wouldn't have TA'd for a couple of semesters or taken that on-campus job to reduce expenses. He might have wished for the additional time to play credit card roulette with his classmates as I've heard many MBA candidates do or take part in certain networking/bonding trips. If you then turn around and "reward" the second child who may not have been as diligent about applying for scholarships/fellowships or seeking opportunities to TA/tutor/advise, then the older child may perceive you as not valuing his own efforts. Even if he doesn't say anything it may rankle, particularly if fortunes should turn and the younger sibling start to outpace the older.

And I would say give the money to the child 1 now--why wait til death to "settle scores" when you can simply attach a check with a note "Son: After much deliberation, your mother and I believe the best gift we can give you children is to start out your adult life without the burden of debt. With that in mind we have decided to forgive your brother's student loans. We recognize that because of the assistanship you did not incur any debt from your program. Nevertheless, while this may not be much, we wanted to let you know just how proud we are of you and your accomplishments. We hope you and your wife can use this.--Your Mom and Dad"
Last edited by 2stepsbehind on Wed Aug 07, 2013 10:03 pm, edited 1 time in total.

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Steelersfan
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Re: What do I owe my children?

Post by Steelersfan » Wed Aug 07, 2013 8:09 pm

I am decidedly on the side of treating them equally.

But when one child faced a medical condition that forced treatments that made him unable to work for an extended period of time, I gifted him amounts to live on way beyond the small amounts I normally gifted to each of them equally. When he got back on his feet, everything went back to normal.

I thought it was the right thing to do, I never told any of the other children, and I have no intention of making it up when the estate settles.

It has never been and never will be an issue.

Professor Emeritus
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Re: What do I owe my children?

Post by Professor Emeritus » Wed Aug 07, 2013 8:12 pm

IlliniDave wrote:
Professor Emeritus wrote: Historically people have moved up in economic class largely because someone invested in either physical or human capital for them when they were young.

You and I may have survived making it on our own, but that in no way makes it an optimum strategy.
If you believe the research and conclusions of the authors of The Millionaire Next Door, in the recent past in this country that has not been the case on the whole. According to the authors, ongoing financial support to adult children by well-to-do parents statistically lowers their prospects for achieving high levels of financial success on their own. The largest statistical group to move up in class are still the self-made types who do it largely on their own. Maybe things have shifted dramatically in the last 30 years (book was published in the mid-1990s I think).
Apples and oranges.
As many scholars have pointed out correlation is not causation and the studies Stanly used don't support his conclusions
You cant compare Children if parents give money to children who are already having life problems.
You have to compare children who are in equal situations.

How about comparing GIs who used the GI bill of rights after WWII with those who did not.

Think anyone claims the GI bill was a bad idea and corrupted all those future doctors and lawyers and engineers ?

I won an academic scholarship that paid my university tuition.
Paying room board and books took 400 hours work a year. As a practical matter the help was given by the society that funded the university. I borrowed my way through law school. Relative to government salaries the debt was manageable.

These are simply no longer true. whether it was ever true is a matter of debate As Wiki puts it

Several large studies of mobility in developed countries in recent years have found that the US among the lowest in mobility.[4][8] One study (“Do Poor Children Become Poor Adults?")[8][10][13] found that of nine developed countries, the United States and United Kingdom had the lowest intergenerational vertical social mobility with about half of the advantages of having a parent with a high income passed on to the next generation. The four countries with the lowest "intergenerational income elasticity", i.e. the highest social mobility, were Denmark, Norway, Finland, and Canada with less than 20% of advantages of having a high income parent passed on to their children. (see graph)[8]

http://en.wikipedia.org/wiki/Socio-econ ... ted_States

letsgobobby
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Re: What do I owe my children?

Post by letsgobobby » Wed Aug 07, 2013 8:22 pm

Here's my take from the well off adult children of well off parents.

My wife and I are late 30s, he MD, both employed, lots of assets and income, two young kids.

My sister and her husband are mid 30s, she MD, he MBA/CPA, no kids.

Their income is higher, but our assets are higher. We have two kids, they have none. I'm the oldest son, she's the only daughter. she's had some health problems, I haven't. My parents tend to pay for their vacations but not ours (when we are all vacationing together).

Who needs or deserves more? In my view, neither needs or deserves more. It seems to me there are so many variables that trying to equalize circumstances using something so crass as money would be a mistake.

Thus I vote to keep the money as equitable as possible, since the differences you describe between your children are not extreme.

scouter
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Re: What do I owe my children?

Post by scouter » Wed Aug 07, 2013 8:58 pm

As I've said in other threads, I vote for treating them as equally as possible when it comes to money. I've seen it handled both ways, and the "fair as possible" treatment yielded much better results in family harmony. So if you forgive the debt, I would gift the sibling an equal amount. Not because you owe either of them anything, but because you want them to know you're trying to be as fair as you can with your generosity.

Rebecca_S
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Re: What do I owe my children?

Post by Rebecca_S » Wed Aug 07, 2013 9:08 pm

Based purely on the title of the post, you don't owe your grown children anything anymore. I'm not one who considers $30K in grad school loans to be onerous to anyone who is employed with an MBA. Budgeting for debt can help teach financial awareness.

What if you had the son suspend payment on the note and then forgave the loan at a rate of $13K/yr while gifting the other child $13K/yr to avoid gift tax?

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Re: What do I owe my children?

Post by Ciel » Wed Aug 07, 2013 9:24 pm

letsgobobby wrote: Thus I vote to keep the money as equitable as possible, since the differences you describe between your children are not extreme.
"Equitable" is an interesting choice of words here. Is "equitable" equal? Is "fair" equal? And as previously stated, is equal identical?

To me, "equitable" would be considering both of the children's situations and acting with those in mind. And based on the first post, it would equitable in my opinion to gift money to the second child without an identical gift to the first.

However, I think 2stepsbehind brings up an EXCELLENT point -- what sacrifices did the first child have to make, when he was under the assumption that his expenses would not be paid off after his formal education was complete? I think that would certainly factor into my opinion of what would be equitable in this case. And acknowledgement of those sacrifices with a gift could be very well received.

letsgobobby
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Re: What do I owe my children?

Post by letsgobobby » Wed Aug 07, 2013 9:43 pm

The ambiguity of the term was somewhat intentional; equitable doesn't necessarily mean equal, but in the absence of compelling reasons to the contrary I would argue the natural inclination should be to let equitable equal equal.

dstac
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Re: What do I owe my children?

Post by dstac » Wed Aug 07, 2013 9:47 pm

I'm in the continue to treat them equally in this situation camp. $32k is not small change for them or you wouldn't be considering it.

I'd even go a step further than others though - loan forgiveness does equal a cash gift. If you offer child one a cash gift of $X, you should offer child 2 the same- with no strings attached.

If you believe the monthly payments are causing hardship and will do so for a certain number of months, I'd gift them both an amount equal to those payments with no implication that it go towards anything specific. Just a honest gift because you had a windfall (the luck you mentioned) and wanted to share your good fortune.

To be honest, if child 1 had known a loan for education was on the table he might've chosen to spend his university time differently (though like less financially rewarding).

With existing resentment flaring, I'm not sure I'd touch this at all.

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Re: What do I owe my children?

Post by harrychan » Thu Aug 08, 2013 12:29 am

I would also treat them equally. Simply because he married into a family who is wealthy should make no impact to how you differential between your boys. How would your DIL feel if she finds out you think this way simply because her parents are wealthy? Makes no sense and is very selfish.
This is not legal or certified financial advice but you know that already.

jane1
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Re: What do I owe my children?

Post by jane1 » Thu Aug 08, 2013 1:28 am

Why not postpone the loan repayment for say 5 years, or whatever time is needed for the MBA child to settle down? Communication with both children is key. The actual solution may not matter as much.

katsmeow
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Re: What do I owe my children?

Post by katsmeow » Thu Aug 08, 2013 1:44 am

I would do one of these alternatives:

1. Figure the loan and give $32,000 to Son 1. The fact he has a wealthy wife is irrelevant.

2. Don't forgive the loan. If you want to give money to your children, annually for a few years give equal gifts to both sons.

I don't like the true up through the estate. First, it complicates your estate and makes you have to spend money to change your will to account for the discrepancy in amount. Second, it is far enough off that it again seems to favor the second child. Getting an extra $32000 in the future is less valuable than getting it now.

IlliniDave
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Re: What do I owe my children?

Post by IlliniDave » Thu Aug 08, 2013 4:23 am

Professor Emeritus wrote:
IlliniDave wrote:
Professor Emeritus wrote: Historically people have moved up in economic class largely because someone invested in either physical or human capital for them when they were young.

You and I may have survived making it on our own, but that in no way makes it an optimum strategy.
If you believe the research and conclusions of the authors of The Millionaire Next Door, in the recent past in this country that has not been the case on the whole. According to the authors, ongoing financial support to adult children by well-to-do parents statistically lowers their prospects for achieving high levels of financial success on their own. The largest statistical group to move up in class are still the self-made types who do it largely on their own. Maybe things have shifted dramatically in the last 30 years (book was published in the mid-1990s I think).
Apples and oranges.
As many scholars have pointed out correlation is not causation and the studies Stanly used don't support his conclusions
You cant compare Children if parents give money to children who are already having life problems.
You have to compare children who are in equal situations.

How about comparing GIs who used the GI bill of rights after WWII with those who did not.

Think anyone claims the GI bill was a bad idea and corrupted all those future doctors and lawyers and engineers ?

I won an academic scholarship that paid my university tuition.
Paying room board and books took 400 hours work a year. As a practical matter the help was given by the society that funded the university. I borrowed my way through law school. Relative to government salaries the debt was manageable.

These are simply no longer true. whether it was ever true is a matter of debate As Wiki puts it

Several large studies of mobility in developed countries in recent years have found that the US among the lowest in mobility.[4][8] One study (“Do Poor Children Become Poor Adults?")[8][10][13] found that of nine developed countries, the United States and United Kingdom had the lowest intergenerational vertical social mobility with about half of the advantages of having a parent with a high income passed on to the next generation. The four countries with the lowest "intergenerational income elasticity", i.e. the highest social mobility, were Denmark, Norway, Finland, and Canada with less than 20% of advantages of having a high income parent passed on to their children. (see graph)[8]

http://en.wikipedia.org/wiki/Socio-econ ... ted_States
I agree PE, but in the spirit of the original poster I was referring to a situation involving two young men who had already completed graduate degrees (MBA and PHD). This isn't a case of a kid being kicked out of the house with no support on his 18th birthday or something. I clarified that further in the discussion with another poster. In the book I mentioned, the children of relatively well-to-do people were the subjects, not the children of the poor, nor GIs returning from a war. so it's not not a bad fit with the OP. I thought Stanly et. al., did their own research.

It's one thing to maintain the social class of your parents and another to move up to a higher social class. If one comes from a lower economic class then it's unlikely the parents will not only put them through college and graduate school, but then continue to provide them ongoing financial support and related advantages. The opposite is more likely to be true.

At some point the already educated young men need to take responsibility for their lives, and the parents are not consigning them to low economic status if they discontinue handing them money.

So I misunderstood. I thought the point you were making was meant in the context of the original discussion in the thread, not about poverty and the struggles of the lowest economic classes in general. My apologies.
Don't do something. Just stand there!

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wander
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Re: What do I owe my children?

Post by wander » Thu Aug 08, 2013 6:44 am

You owe them nothing. My question is what do your children owe you?

swaption
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Re: What do I owe my children?

Post by swaption » Thu Aug 08, 2013 7:20 am

Thought provoking topic. Seems like many well reasoned considerations on both sides. But then, as is often the case, my own opinion crystallizes, which leads me to the question I have yet to see asked:

What do you want to do?

Yes, it really is this simple. I think one of the big problems with the current era is that often times we tend to try to insulate others from reality. But reality is life. Your first son is apparently wealthy due to marriage. That is his reality. I mean after all, he is the Joneses. He has to live in that purgatory of getting questioning looks from his Honda Accord driving neighbors and deal with the challenges of maintaining friendships with those bothered by his apparent tendency to live beyond his means :wink:. But that is his reality that he has chosen for himself. It is not your job to make that any easier.

I get the sense I know what you want to do, which is essentially forgive the debt. For the benefit of whom would you do anything different? I think the answer is clear, basically for the benefit of your first child. When looked at in these terms, I don't really think that makes a lot of sense. Let the first child be concerned with himself. If he has a problem with it, let him come to you. A very simple answer might be, "I would have done the same for you."

Life is complicated. Much like investments, the more we simplify the better. Approaches like involving the inheritance go in the absolute wrong direction. Just over complicates things, all in an attempt to insulate all from reality. I think much of the complication in this case arises from an attempt to control things that can't really be controlled. That's just the reality of life.

Leemiller
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Re: What do I owe my children?

Post by Leemiller » Thu Aug 08, 2013 7:31 am

Treat your kids the same for the sale of their relationship with each other and you. My DH and his brother are both attorneys and are both married to attorneys. I happen to make a lot more money than my SIL and would be livid if my DH's parents treated us differently because of that. It is a little different than inherited wealth but your child may already feel awkward about his wife's wealth. My mother treats my sister as I differently and it has damaged out relationship somewhat.

mptness
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Re: What do I owe my children?

Post by mptness » Thu Aug 08, 2013 7:38 am

Forgive son #1's student loan, and gift son #2 $32,000. Now everything is equal and son #2 feels no resentment. Son #2 uses the money to buy a new car. Is everything still equal? How does son #1 feel now? I agree with the comment that equal doesn't mean identical. Maybe if you can afford it, you should just give them both cash and let each of them decide what to do with it. Does that make things equal?

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Re: What do I owe my children?

Post by Nowizard » Thu Aug 08, 2013 8:05 am

The one thing that is clear is that this issue is about money on the surface, ultimately about family dynamics/harmony. I am finding the comments to be helpful and a circumstance that others have faced. Are there those who have faced a similar circumstance and found the decisions did not lead to the desired outcome in terms of family dynamics/harmony?

Tim

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Re: What do I owe my children?

Post by technovelist » Thu Aug 08, 2013 9:29 am

reggiesimpson wrote:Hmmm very interesting. I just went through a similar situation with my two children (21 and 25). The philosophy of keeping it "balanced" is what i am referring to. My wife and i have a similar point of view regarding our children and it was emphasized in a book i lifted from this forum just recently. "Beyond the Grave" by Condon and Condon. About estate planning. I sat both of my children down and discussed our emphasis of giving equally to both. This was done in particular to prevent any riff between them that may take place during the reading of the will when the second parent dies (let alone in our lifetime). We all know that money magnifies problems and the way ones children think is not necessarily the way the parents think. So with that in mind i would follow your families philosophy of giving equally. If a family cannot do it now then think about balancing it out on your passing.
One other point i picked up in that book. Keep all third parties ( wives,husbands,grandchildren,accountants etc) far away from that reading of the will. They will likely only produce a riff i mentioned between your children. Thats the last thing most parents want on their passing!
+1 on "Beyond the Grave", which contains many stories of how unequal treatment can cause major problems in the family.
In theory, theory and practice are identical. In practice, they often differ.

just_trailing
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Re: What do I owe my children?

Post by just_trailing » Thu Aug 08, 2013 10:56 am

I am not making any particular suggestion. Sounds like you are agonizing too much over a small amount, given your family fortunes. There will be several opportunities for correction, should your decision cause ill-will e.g. during inheritance. Also know that you probably were unequal to them every step of the way. One probably needed more classes, more handholding, more emotional support, wrecked the car more etc. Many of these directly equate to dollars. So you have in fact given them different amounts at every stage of life anyway.

minneapples
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Re: What do I owe my children?

Post by minneapples » Thu Aug 08, 2013 11:49 am

Nowizard wrote:The one thing that is clear is that this issue is about money on the surface, ultimately about family dynamics/harmony. I am finding the comments to be helpful and a circumstance that others have faced. Are there those who have faced a similar circumstance and found the decisions did not lead to the desired outcome in terms of family dynamics/harmony?

Tim
My brother and I both have received some assistance from my parents. Some for school, other gifts later in young adulthood not due to particular hardship or need (cash wedding gift or assistance paying for a wedding, whichever we chose, for example). I don't know whether the gifts they've given us have been comparable (though I suspect they are, just due to my parents' personalities) but we've never talked about it, and we are far enough apart in age and life circumstances that our situations are never really comparable at a sinlge snapshot in time so any difference wouldn't really be obvious. 10 year age difference, he has 3 kids and lives in a small town, I have 1 new baby and live in a much higher cost city, etc. I do know of one way they tried to make things more or less equal in their assistance. They told each of us they would fund the undergrad degree of our choosing. My brother's was a 5-year program that took him 6 years; mine was a 4-year program that took me 3 due to taking big course loads and things like that. Because my brother had taken twice as long to finish his undergrad degree compared to me, my parents offered to cover my first year tuition and my housing expenses throughout grad school (they bought a 2-BR condo that I lived in, my roommate's rent paid the mortgage). I accepted, it was really great not to have to take out those loans (though I expected to do so and would have if they hadn't offered). I never did the math, but it probably came out to roughly the same amount of money per kid, though allocated differently.

The comments about gifting your first son a comparable amount of money because you don't know what sacrifices he had to make to graduate without debt rang true to me, since that was basically the situation in my family. I took school really seriously, and gave up some opportunities that maybe in retrospect I would not make again (not studying abroad, for example, which would have required me to take longer for my bachelors degree); my brother, though he's very smart and has been very happy and successful in his field, took a more scenic, social route through college. It felt really nice to feel that my parents appreciated my hard work and didn't want to, in effect, reward my brother for screwing around a bit more.

Professor Emeritus
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Re: What do I owe my children?

Post by Professor Emeritus » Thu Aug 08, 2013 11:51 am

IlliniDave wrote:
It's one thing to maintain the social class of your parents and another to move up to a higher social class. If one comes from a lower economic class then it's unlikely the parents will not only put them through college and graduate school, but then continue to provide them ongoing financial support and related advantages. The opposite is more likely to be true.

At some point the already educated young men need to take responsibility for their lives, and the parents are not consigning them to low economic status if they discontinue handing them money.

So I misunderstood. I thought the point you were making was meant in the context of the original discussion in the thread, not about poverty and the struggles of the lowest economic classes in general. My apologies.
Fair enough but these are not only problems of poverty

My point is simply what is "young" varies by profession and training. The higher you aim the longer you are "in training" and in need of support and investment.
However what is young for other purposes is different.
E.g. My wife's parents wanted grandchildren. They knew I graduated from law school deeply in debt and my wife was still a med student. We had great prospects but no money.
My MIL was 28 when she had her last successful pregnancy. I was brought up that having children without adequate money was the height of irresponsibility.
They went out of their way to make it clear that there would be financial support for grandchildren. They said that we could not expect us to both aim high in careers and support children at an early stage of our career. It all worked out fine in the end although my wife had much the same problems as her mother.
We have made the same promises to our daughters. Our daughter finishing a PhD just had our first grandchild. Our daughter the lawyer knows that we are there to help if she needs it.

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prudent
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Re: What do I owe my children?

Post by prudent » Thu Aug 08, 2013 12:13 pm

Leemiller wrote:Treat your kids the same for the sale of their relationship with each other and you. My DH and his brother are both attorneys and are both married to attorneys. I happen to make a lot more money than my SIL and would be livid if my DH's parents treated us differently because of that. It is a little different than inherited wealth but your child may already feel awkward about his wife's wealth. My mother treats my sister as I differently and it has damaged out relationship somewhat.
One of my close friends is going through a family situation regarding "fairness" vs. "equal". His father owned a business. Three of the four children worked in the business, my friend was the one who did not. The father sold the business and informed the children they will all get an equal share of the estate when the time comes. It turns out the other three, who worked in the business, feel they should get a larger share than my friend because they helped make the business as successful as it was, and almost the entire estate value will come from the sale of the business.

When my friend talked to me about this, he said how hurt he is because when they worked in the business they were all grossly overpaid for what they did, had a lot of personal expenses paid for by the business, and could come and go as they pleased with nearly unlimited time off (although not all of it was paid time off). One of his siblings would take a month off at a time, three times a year. My friend had no problem with any of that, it's how family businesses work. But he feels they ought to remember they did quite well during a time my friend was getting zero family help (did not want or need it), and getting an equal part of the estate doesn't seem unreasonable.

No matter what happens now, someone will feel slighted.

Crow Hunter
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Re: What do I owe my children?

Post by Crow Hunter » Thu Aug 08, 2013 12:33 pm

You don't "owe" your children anything.

If anything, like me and my parents, they "owe" you for bringing them up well and providing for them.

That being said, both myself and my wife are in situations where our respective parents spend much more time, money and effort on our siblings. While we both take great pride in the fact that we are financially independent from our parents, it does breed a level of resentment that the "needier" sibling seems to take advantage of the situation by taking the lion share of our parents time and effort and money. Especially when the "prodigal siblings" seem to have come to expect that level of treatment. It often feels that doing the "right things" and being the "good children" is a bad idea, but we won't/can't not do it because it is the way we are wired.

If I were in your shoes, I would explain the situation to the PhD son and make the offer of giving him an equal amount of money. Most likely, if he is like me, he would turn it down because he wouldn't need it and would agree that his sibling needs the help, but the offer and acknowledgement of the parent would make a him feel appreciated and loved.

But I don't have kids, so all I can do is give you what my feelings on the subject are after being in a similar situation. Helping my brother buy a ridiculously oversized and overpriced house that he is likely now to lose because of other poor decisions that I am trying to help them sort out. :|

Leesbro63
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Re: What do I owe my children?

Post by Leesbro63 » Thu Aug 08, 2013 1:04 pm

Someone referenced helping adult kids as discussed in THE MILLIONAIRE NEXT DOOR. I think this is totally different than paying for (or helping to pay for) an advanced professional degree. I agree with the conclusion in the book (now 15 years old, BTW) that paying for your 38 year old's car is counterproductive. But helping your kid become a doctor, lawyer or Indian Chief, debt free by age 30, to me seems like a hugely rewarding goal with little downside (if you have the funds to do it). The money is MUCH better invested in a good young adult child NOW versus when both parents are dead in 30-40 years, IMHO, if you have the money anyway. I consider it "inheritance time diversification". If I lose my wealth before my kids would otherwise get it, at least they'll be professionals with no school debt. That cannot be taken away from them (generally).

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Re: What do I owe my children?

Post by beachplum » Thu Aug 08, 2013 1:26 pm

Leesbro63 wrote:Someone referenced helping adult kids as discussed in THE MILLIONAIRE NEXT DOOR. I think this is totally different than paying for (or helping to pay for) an advanced professional degree. I agree with the conclusion in the book (now 15 years old, BTW) that paying for your 38 year old's car is counterproductive. But helping your kid become a doctor, lawyer or Indian Chief, debt free by age 30, to me seems like a hugely rewarding goal with little downside (if you have the funds to do it). The money is MUCH better invested in a good young adult child NOW versus when both parents are dead in 30-40 years, IMHO, if you have the money anyway. I consider it "inheritance time diversification". If I lose my wealth before my kids would otherwise get it, at least they'll be professionals with no school debt. That cannot be taken away from them (generally).
Thank you so much for saying exactly how I feel on this subject. In addition I would add that I want my 20 something daughters to always remember that life isn't always fair.

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Re: What do I owe my children?

Post by Leesbro63 » Thu Aug 08, 2013 1:45 pm

beachplum wrote:
Leesbro63 wrote:Someone referenced helping adult kids as discussed in THE MILLIONAIRE NEXT DOOR. I think this is totally different than paying for (or helping to pay for) an advanced professional degree. I agree with the conclusion in the book (now 15 years old, BTW) that paying for your 38 year old's car is counterproductive. But helping your kid become a doctor, lawyer or Indian Chief, debt free by age 30, to me seems like a hugely rewarding goal with little downside (if you have the funds to do it). The money is MUCH better invested in a good young adult child NOW versus when both parents are dead in 30-40 years, IMHO, if you have the money anyway. I consider it "inheritance time diversification". If I lose my wealth before my kids would otherwise get it, at least they'll be professionals with no school debt. That cannot be taken away from them (generally).
Thank you so much for saying exactly how I feel on this subject. In addition I would add that I want my 20 something daughters to always remember that life isn't always fair.
I'm glad someone agreed with me! :D I expected to get flamed, to tell you the truth. Sometimes I think the Boglehead "tough love/make 'em hustle" approach to raising kids goes beyond common sense.

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Re: What do I owe my children?

Post by LaraZP » Thu Aug 08, 2013 3:46 pm

How about having the child with the debt giving half of it to the other child?

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Re: What do I owe my children?

Post by Leesbro63 » Thu Aug 08, 2013 3:51 pm

LaraZP wrote:How about having the child with the debt giving half of it to the other child?
The better way to handle this (mathematically the same) would be for the father to remain as the middle man and forgive half the debt while gifting the same amount to the "rich" kid. Otherwise you will create a situation where the "poor" kid is subservient to the "rich" kid and create exactly the family dynamic that the OP wishes to avoid. The relationship of debt from child to parents should not transfer to become a relationship of debt between siblings.

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Re: What do I owe my children?

Post by Meg77 » Thu Aug 08, 2013 4:37 pm

There is no reason in this case to treat your sons differently. They are of similar ages and similar education levels and neither is struggling financially. If you had one child who went into mission work and another who was a surgeon this might be a relevant discussion. Treat them the same and save everybody a lot of angst.

And by the way it seems to me that you do favor the younger son. You even admit that the older one has noticed/verbalized this. The seeds of resentment have already been planted along the way, somewhere or another. Forgiving the younger child's loan will just be watering them. You have never mentioned why you want to forgive the loan; there seems to be no good reason to do so. But if you'd like to then give your other son a lump sum too. You seem to be penalizing him for marrying somebody with means and living life according to his wife's means and desires. I don't think that's fair. If he were being irresponsible it would be one thing but you repeatedly insist that is not the case. So don't act like it by favoring your younger son financially speaking.
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Re: What do I owe my children?

Post by Professor Emeritus » Thu Aug 08, 2013 6:34 pm

Leesbro63 wrote:
beachplum wrote:
Leesbro63 wrote:Someone referenced helping adult kids as discussed in THE MILLIONAIRE NEXT DOOR. I think this is totally different than paying for (or helping to pay for) an advanced professional degree. I agree with the conclusion in the book (now 15 years old, BTW) that paying for your 38 year old's car is counterproductive. But helping your kid become a doctor, lawyer or Indian Chief, debt free by age 30, to me seems like a hugely rewarding goal with little downside (if you have the funds to do it). The money is MUCH better invested in a good young adult child NOW versus when both parents are dead in 30-40 years, IMHO, if you have the money anyway. I consider it "inheritance time diversification". If I lose my wealth before my kids would otherwise get it, at least they'll be professionals with no school debt. That cannot be taken away from them (generally).
Thank you so much for saying exactly how I feel on this subject. In addition I would add that I want my 20 something daughters to always remember that life isn't always fair.
I'm glad someone agreed with me! :D I expected to get flamed, to tell you the truth. Sometimes I think the Boglehead "tough love/make 'em hustle" approach to raising kids goes beyond common sense.
I cerrtainly agree with you and we did it

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Re: What do I owe my children?

Post by jackholloway » Thu Aug 08, 2013 6:36 pm

Owe? Likely nothing.

Should do to prevent later pain? Try to be fair, and to be seen as fair. If you see something that could be taken as favoritism, settling it now while you are still alive would be a good idea. Forgiving the debt of the younger one without helping the older one, even if the older one does not need it, could be problematic, or could be nothing at all. It truly depends on the two people and the family.

Each of your children has made life choices. You may or may not agree, you may or may not approve, but after you are gone, they will have a relationship, and if that is poisoned by (lack of) money, then you may have done ill. If you made a reasonable attempt to do the right thing, and tried to get them on board, then you probably will do just fine.

I might have a very frank talk with the older sibling, perhaps offering an equivalent amount of money. Perhaps put it in trust.

I do not agree with the "millionaire next door try to deprive your children so they are strong and mighty" view. For every wastrel trust fund baby, I expect there are many "paid off the house, and got a chance to do something they have always wanted to do" kids. I would not do the same thing with a windfall as my sibling, but what we do with the inheritance is not my parent's problem. I hope that when my child is of age, she gets an inheritance, and that it lets her do something great.

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Re: What do I owe my children?

Post by White Coat Investor » Thu Aug 08, 2013 7:51 pm

Nowizard wrote:We have two children who have completed a doctorate and MBA, and we paid expenses for the one earning a doctorate and an equal amount for the second child. His costs were greater since the first child had an assistantship, and we loaned the second child $35,000 to cover the remainder of his expenses. The first child is now married and very stable financially due to his wife's assets, primarily. The second child is well employed and making monthly payments on his loan. A key fact is that we have always attempted to provide equally for our children. We are now wanting to forgive the remaining ($32,000) debt of the second child but are struggling with the concept of having always equalized what we have provided for each child. The first child's wife has no need to work due to her inherited assets, and he has easily traveled, taken substantial vacations when a child was born, etc. In other words, they do not need the money. The first child is engaged to a woman completing her MBA and who is paying for it herself with savings from prior employment. They will buy a house, a second car, etc., and they will have substantial incomes since both will have MBA's from prestige schools. They are currently leading a "student life" that is not opulent, but not overly Sparta, due to my son's employment but have nowhere near the assets of the other son.

The above is a rather tediously detailed description, but the question is this: Should we give the first son $32,000 also if we forgive the debt of the second son? We can afford to do that, but think that the "equalization" issue does not meet "To each his own need" concept, but does meet the history of support within our family. Comments on this problem many would like to have is appreciated.

Tim
There's no right answer, but I just wanted to chime in on how impressive your attitude toward all this is.
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Re: What do I owe my children?

Post by Leesbro63 » Thu Aug 08, 2013 9:41 pm

His attitude reflects what a lot of us struggle with: how to do right by our kids. When to give, when to make 'em do the hustle. How to give. And how to correctly distinguish between what was right for us or our parents and what's right for a vastly changed generation/era.

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Re: What do I owe my children?

Post by Garco » Thu Aug 08, 2013 11:52 pm

To me, families are like communes -- communistic. This is where the old Karl Marx line actually makes sense: "From each according to his ability; to each according to his needs." One of my kids is well on his way to becoming very rich, through his own entrepreneurship and genius. The other is doing reasonably well, even earning a 6-figure income; but her MBA program cost a mint, and put her into substantial debt and the loans (federal Direct Loans) have a ridiculously high interest rate (7.5%). We paid for the undergraduate educations of both kids. The older one didn't go for an advanced degree. We love them equally. We're proud of both of them.

So what to do now that we have some extra money ourselves (bequest). Give equally to both children? We did that all the way through their undergraduate college years. But giving a large chunk of money to our son just to keep things even would require us to give away a lot more of our own cash than we're comfortable with. And he really doesn't need it (we'd help him if he did). So we're just going to help to pay off our daughter's loan. She's the one in need, not him.

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Re: What do I owe my children?

Post by 2stepsbehind » Fri Aug 09, 2013 6:35 am

Meg77 wrote: And by the way it seems to me that you do favor the younger son. You even admit that the older one has noticed/verbalized this. The seeds of resentment have already been planted along the way, somewhere or another. Forgiving the younger child's loan will just be watering them. You have never mentioned why you want to forgive the loan; there seems to be no good reason to do so. But if you'd like to then give your other son a lump sum too. You seem to be penalizing him for marrying somebody with means and living life according to his wife's means and desires. I don't think that's fair. If he were being irresponsible it would be one thing but you repeatedly insist that is not the case. So don't act like it by favoring your younger son financially speaking.
I have to agree. Reading between the lines it appears that the OP may not get along with his daughter-in-law and that friction is distancing him from his first son.
Last edited by 2stepsbehind on Fri Aug 09, 2013 6:54 am, edited 1 time in total.

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Re: What do I owe my children?

Post by 2stepsbehind » Fri Aug 09, 2013 6:53 am

Garco wrote:To me, families are like communes -- communistic. This is where the old Karl Marx line actually makes sense: "From each according to his ability; to each according to his needs." One of my kids is well on his way to becoming very rich, through his own entrepreneurship and genius. The other is doing reasonably well, even earning a 6-figure income; but her MBA program cost a mint, and put her into substantial debt and the loans (federal Direct Loans) have a ridiculously high interest rate (7.5%). We paid for the undergraduate educations of both kids. The older one didn't go for an advanced degree. We love them equally. We're proud of both of them.

So what to do now that we have some extra money ourselves (bequest). Give equally to both children? We did that all the way through their undergraduate college years. But giving a large chunk of money to our son just to keep things even would require us to give away a lot more of our own cash than we're comfortable with. And he really doesn't need it (we'd help him if he did). So we're just going to help to pay off our daughter's loan. She's the one in need, not him.
But she's not really in need--she makes a six figure income and can afford the payments. Any help from you is just going to allow her to increase her discretionary spending. If you think the other son who has likely put his nose to the grindstone, scrimped and saved in order to put himself in that position isn't going to be somewhat hurt I think you are a bit unrealistic. Also as an aside, if you don't have the flexibility to both pay off her loans as well as give your son a similar amount, you are probably stretching yourself to even pay off her loans. Consider just contributing towards her unsubsidized loans and letting her deal with the subsidized. And again, I'd say consider giving your son some amount even if it isn't the exact value of her student loans with a note letting him know how proud you are of his accomplishments.

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Re: What do I owe my children?

Post by wander » Fri Aug 09, 2013 7:05 am

I love my parents for what they have done for me, not how much they gave me. When it came to the point that I could support myself, I helped my parents to raise my younger brothers. I never think about fair or unfair, it's their money, they can do what they want.

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Re: What do I owe my children?

Post by Leesbro63 » Fri Aug 09, 2013 8:21 am

I think "From each according to his ability; to each according to his needs" applies, but only when kids are actually kids. If Little Johnny needs $5000 orthodontics but little Susie has a perfect smile, there is no obligation to equalize Suzie. With adult children I don't believe this should apply.

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Re: What do I owe my children?

Post by Nowizard » Fri Aug 09, 2013 8:23 am

Meg and 2steps behind: Interesting comments. Family dynamics are always changing. The first child was the "favored" one during the earlier years, though the word does not really accurately reflect feelings so much as ease of interaction. For example, the second child is now "favored" due to being single, having more time for us, living closer, etc. while the first child lives further away, is married, has two children which results in a required, greater focus on his family as should be the case. I doubt that any festering seeds of perceived favoritism have been sown in the past and would certainly feel there have been frequent comments to that effect by both sons since you do have discussions with adult children about childhood. However, the comments by many do congeal the belief that each son should be treated the same regarding this issue since it involves one of the last remaining ones from childhood/early adulthood and that the issue can be used to foster a discussion about the future regarding money. If we were making a "clean cut" in this regard, the remaining "unequal" aspect of monetarily related issues would be the eventual wedding of the second child.

Thanks for the comment, Emergdoc. Your focus is the source of the OP, along with hoping the topic would provide some interest for those of us who gain from a forum such as this. It does seem to be a topic a number of others have faced in one way or another.

Tim

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Re: What do I owe my children?

Post by sesq » Fri Aug 09, 2013 8:50 am

This thread rules, in terms of the discussion. I am sympathetic to all the positions, but on the balance I am in the camp of let the kid pay his debt. He'll be prouder of the achievement than happier from the relief.
beachplum wrote: Thank you so much for saying exactly how I feel on this subject. In addition I would add that I want my 20 something daughters to always remember that life isn't always fair.
I said that to my four year old son this morning. Little bugger got me back and asked me "why?"

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Re: What do I owe my children?

Post by IlliniDave » Fri Aug 09, 2013 9:05 am

beachplum wrote:
Leesbro63 wrote:Someone referenced helping adult kids as discussed in THE MILLIONAIRE NEXT DOOR. I think this is totally different than paying for (or helping to pay for) an advanced professional degree. I agree with the conclusion in the book (now 15 years old, BTW) that paying for your 38 year old's car is counterproductive. But helping your kid become a doctor, lawyer or Indian Chief, debt free by age 30, to me seems like a hugely rewarding goal with little downside (if you have the funds to do it). The money is MUCH better invested in a good young adult child NOW versus when both parents are dead in 30-40 years, IMHO, if you have the money anyway. I consider it "inheritance time diversification". If I lose my wealth before my kids would otherwise get it, at least they'll be professionals with no school debt. That cannot be taken away from them (generally).
Thank you so much for saying exactly how I feel on this subject. In addition I would add that I want my 20 something daughters to always remember that life isn't always fair.

I think I'm the guilty party there, and I definitely am not, and don't think the authors of the book are talking at all about providing for a child's education. The general idea discussed in the book is about well-meaning parents who continually feed money to allow their adult children to live a lifestyle above what they are willing/able to achieve on their own, often hoping to provide the son or daughter impetus to achieve success on their own. I thought it was suggested (I misunderstood the comment) that such support is necessary for a grown, educated child to move up in economic class. The research concluded it was more likely to be a hinderance to the child's degree of achievement. Of course that was a statistical conclusion, and individual situations can often be different, and this isn't about helping out in bona fide emergencies or the like.
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Re: What do I owe my children?

Post by Garco » Fri Aug 09, 2013 9:11 am

2stepsbehind wrote:
Garco wrote:To me, families are like communes -- communistic. This is where the old Karl Marx line actually makes sense: "From each according to his ability; to each according to his needs." One of my kids is well on his way to becoming very rich, through his own entrepreneurship and genius. The other is doing reasonably well, even earning a 6-figure income; but her MBA program cost a mint, and put her into substantial debt and the loans (federal Direct Loans) have a ridiculously high interest rate (7.5%). We paid for the undergraduate educations of both kids. The older one didn't go for an advanced degree. We love them equally. We're proud of both of them.

So what to do now that we have some extra money ourselves (bequest). Give equally to both children? We did that all the way through their undergraduate college years. But giving a large chunk of money to our son just to keep things even would require us to give away a lot more of our own cash than we're comfortable with. And he really doesn't need it (we'd help him if he did). So we're just going to help to pay off our daughter's loan. She's the one in need, not him.
But she's not really in need--she makes a six figure income and can afford the payments. Any help from you is just going to allow her to increase her discretionary spending. If you think the other son who has likely put his nose to the grindstone, scrimped and saved in order to put himself in that position isn't going to be somewhat hurt I think you are a bit unrealistic. Also as an aside, if you don't have the flexibility to both pay off her loans as well as give your son a similar amount, you are probably stretching yourself to even pay off her loans. Consider just contributing towards her unsubsidized loans and letting her deal with the subsidized. And again, I'd say consider giving your son some amount even if it isn't the exact value of her student loans with a note letting him know how proud you are of his accomplishments.
Every case is different. In our case, my daughter is getting by on her income but lives in a very high cost location. The size of the outstanding loans is prodigious (>$100k), and the interest rate is outrageous (7.5%). Believe me, our son never scrimped and saved. He just worked hard, found a niche in the economy, built a reputation, and is making more money over a 5 year period than I've made in my entire career. He doesn't need it and he won't miss it or be jealous. We are not stretching ourselves to pay off the loan, since the money is "found money" as I mentioned previously; but we would be crimping our own retirement if we had to pay double that amount.

Added: Our will divides our estate equally between the two children. But while we and they are both alive, we provide support on an as-needed basis. However, we also give a lot to our son (roughly the same as to our daughter) at birthday and holiday times. (The money we will put up to liquidate our daughter's education loans, which equals about 1 year's gross income for our daughter, equals about one month's income for our son.)
Last edited by Garco on Fri Aug 09, 2013 10:56 am, edited 1 time in total.

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Re: What do I owe my children?

Post by 6miths » Fri Aug 09, 2013 9:56 am

Great thread. I lean toward letsgobobby's 'equitable but not necessarily equal'. The decision on what exactly is 'equitable' is very fluid and changes as everyone's life circumstances change. With 4 children ranging from 14 to 20, we have tried to make things equitable and do feel that 'outpatient financial care' doesn't so much apply to funding education as it does to financing unrealistic lifestyles in adult children. We can hope that our children might reach our level of income/net worth but statistics are very much against us and we try to live frugally lest our children get swept up in keeping up with the Jones's which is the path to unhappiness.
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Re: What do I owe my children?

Post by technovelist » Fri Aug 09, 2013 10:22 am

Crow Hunter wrote:You don't "owe" your children anything.

If anything, like me and my parents, they "owe" you for bringing them up well and providing for them.

That being said, both myself and my wife are in situations where our respective parents spend much more time, money and effort on our siblings. While we both take great pride in the fact that we are financially independent from our parents, it does breed a level of resentment that the "needier" sibling seems to take advantage of the situation by taking the lion share of our parents time and effort and money. Especially when the "prodigal siblings" seem to have come to expect that level of treatment. It often feels that doing the "right things" and being the "good children" is a bad idea, but we won't/can't not do it because it is the way we are wired.

If I were in your shoes, I would explain the situation to the PhD son and make the offer of giving him an equal amount of money. Most likely, if he is like me, he would turn it down because he wouldn't need it and would agree that his sibling needs the help, but the offer and acknowledgement of the parent would make a him feel appreciated and loved.

But I don't have kids, so all I can do is give you what my feelings on the subject are after being in a similar situation. Helping my brother buy a ridiculously oversized and overpriced house that he is likely now to lose because of other poor decisions that I am trying to help them sort out. :|
I'm in a situation similar to yours although of course not identical. I'm not sure if it's worse or better that the main reason my mother has enough assets to be able to favor my siblings is that I'm her financial manager. :confused
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Re: What do I owe my children?

Post by Nowizard » Fri Aug 09, 2013 10:36 am

Meg: In reading your comment, I recognized not responding to part of it. The reason for wanting to forgive the loan for the second child is because he and his fiancé will be marrying and starting their life together after she graduates this Spring. They will need a second car, be thinking of a house, etc. The concept is that they can use money now more than later due to their earning possibilities. Our first son, by the way, has just moved into a new home and we have helped them move, given them a house warming gift, etc. There are other things that are not, and would not, necessarily ever be equal. For example, if one son had three children, the other one, it would be absurd to equalize based on what was spent on the three children. We are trying to get out of the equalization business but obviously have some feelings that the educational expense issue has some bearing on past commitments made if we were able to be financially supportive. From what has been said, the best approach in our situation is to "even up" with child number one whether it be by inheritance, trust for children, cash now or some other means. Nothing will be done in the immediate future so my wife and I can mull over how to accomplish this, but I will comment when a concrete decision has been made, assuming there would be some interest in that since everyone has been so gracious with their comments. That does not mean there will be no more comments made in direct response to any questions by others now, however. Thanks, again, for reinforcing how helpful this forum can be on a variety of subjects.

Tim

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Re: What do I owe my children?

Post by 2stepsbehind » Fri Aug 09, 2013 11:27 am

I for one would love to hear what you and your wife decide. I commend you for your candor and responsiveness in this thread. Often people ask for advice then grow defensive or fail to respond altogether. You have been remarkably open to the advice you've received on this thread and I hope we've been helpful in this process.

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Re: What do I owe my children?

Post by Nowizard » Fri Aug 09, 2013 12:46 pm

Thanks for the comment. The thread has resulted in new awareness, specifically that my wife and I are products of the "hustle and get it" approach, having had parents who were unable to help us financially due to a variety of reasons. We have been frugal, made less than six figure salaries but have had very fortunate investment success, particularly when we were dumb and, frankly, lucky. So, having more to give is new to us both, and having a son who married into a family that has very significant assets, we are observing that as well. I might add that my first son's wife has very similar values to his/ours, so there are situations that involve both those who "hustled" and those who had more of a silver spoon where the children become remarkable adults. We just want to try and keep that ball rolling and recognize that money is only a part of that, though not an insignificant one.

Wayne

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