Opportunity cost of helping out relatives

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
User avatar
Topic Author
Stef
Posts: 358
Joined: Thu Oct 10, 2019 10:13 am

Opportunity cost of helping out relatives

Post by Stef » Tue Jan 07, 2020 1:31 am

My parents are from Eastern Europe and I visit my family there once a year. Makes me realize every year how fortune I am living in a developed country with a salary that is 20x higher than their avg. salary.

I have a cousin (my favorite one), he is 33 years old and living with his parents (you usually do that till you marry). They have a big unfinished house with 3 floors. His brother already managed to finish the 2nd floor and move in with his wife and kid. The 3rd floor is still unfinished. He needs roughly 6000-7000$ to finish it. Will probably take him 5+ years to save enough to finish it. Takes me 3 months.

I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months. Maybe he won't be the last one? Maybe I'll delay my financial indepedence by 1-2 years helping out others?

Anyone in a similiar situation? What's your opinion on that?

123
Posts: 5436
Joined: Fri Oct 12, 2012 3:55 pm

Re: Opportunity cost of helping out relatives

Post by 123 » Tue Jan 07, 2020 1:40 am

You could easily get a reputation as Mr/Ms Moneybag with the relatives. If you're giving away money there will be no end to it. Do you have or plan to have your own family here that will need all your income for their support?
The closest helping hand is at the end of your own arm.

User avatar
Topic Author
Stef
Posts: 358
Joined: Thu Oct 10, 2019 10:13 am

Re: Opportunity cost of helping out relatives

Post by Stef » Tue Jan 07, 2020 1:43 am

123 wrote:
Tue Jan 07, 2020 1:40 am
You could easily get a reputation as Mr/Ms Moneybag with the relatives. If you're giving away money there will be no end to it. Do you have or plan to have your own family here that will need all your income for their support?
I'm 28yo with no kids planned within the next 5-6 years. But I get your point.

Is it my moral obligation to do it? Am I a selfish person if I just look out for myself?

AlohaJoe
Posts: 5081
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Opportunity cost of helping out relatives

Post by AlohaJoe » Tue Jan 07, 2020 1:59 am

123 wrote:
Tue Jan 07, 2020 1:40 am
You could easily get a reputation as Mr/Ms Moneybag with the relatives. If you're giving away money there will be no end to it.
Of course there's an end to it. You just say no. That said, I agree with you that you should consider the impact on family dynamics. If you give money to one brother and not another, is that going to cause the brothers to stop speaking to one another? People are often weird about money, unfortunately.

I live in Vietnam where helping out family is customary. I have no problems saying yes to some things and no to others.

In any case, simply living in America is all it takes to be labelled as "Mr/Ms Moneybags", in my experience.
Stef wrote:
Tue Jan 07, 2020 1:31 am
I have a cousin (my favorite one), he is 33 years old and living with his parents (you usually do that till you marry). They have a big unfinished house with 3 floors. His brother already managed to finish the 2nd floor and move in with his wife and kid. The 3rd floor is still unfinished. He needs roughly 6000-7000$ to finish it. Will probably take him 5+ years to save enough to finish it. Takes me 3 months.
I probably wouldn't give him money since it is just a quality of life upgrade. Giving money to help start a business, restructure a loan with onerous terms, get an education, or get medical treatment are something different IMHO.

What's the point of even finishing the floor now anyway? Why not wait until he's married -- when he needs the space -- and give him the money to finish it as a wedding present? That's what I'd do, at least.

For your broader question of how much to help others and how much to be selfish....I think it is better to try to come up with a more general answer for yourself rather than this one-off thing about helping your cousin. Peter Singer has a couple of thought-provoking books on the subject -- The Life You Can Save and its sort-of followup The Most Good You Can Do. William MacAskill's Doing Good Better is another good book on the subject. The Life You Can Save website has a "giving pledge calculator" where you input your income and it has recommended annual giving for yourself.

https://www.thelifeyoucansave.org/Take-the-Pledge/

User avatar
Watty
Posts: 18124
Joined: Wed Oct 10, 2007 3:55 pm

Re: Opportunity cost of helping out relatives

Post by Watty » Tue Jan 07, 2020 2:27 am

Stef wrote:
Tue Jan 07, 2020 1:31 am
The 3rd floor is still unfinished. He needs roughly 6000-7000$ to finish it. Will probably take him 5+ years to save enough to finish it. Takes me 3 months.

I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months.
Not that it really matters but since you are 28 that money could instead be invested instead for the next 35 years. It might doubled(adjusted for inflation) three times by the time you retire. If so that $6K would then be worth $48K which would likely delay your retirement by a lot more than three months.

I would save any big support for when someone over there has a lot of need for it like if there was an illness or disabled kid. If it was for someone like an elderly relative that might also be a bit different.

That does not mean that you should not give him anything. Giving something like $500 in tools to get him started on the work might really help him and might not seem overly generous.

You might also ask your parents what they think is appropriate since they have likely been dealing with similar issues for years.

shess
Posts: 369
Joined: Wed May 17, 2017 12:02 am

Re: Opportunity cost of helping out relatives

Post by shess » Tue Jan 07, 2020 2:37 am

Stef wrote:
Tue Jan 07, 2020 1:43 am
123 wrote:
Tue Jan 07, 2020 1:40 am
You could easily get a reputation as Mr/Ms Moneybag with the relatives. If you're giving away money there will be no end to it. Do you have or plan to have your own family here that will need all your income for their support?
I'm 28yo with no kids planned within the next 5-6 years. But I get your point.

Is it my moral obligation to do it? Am I a selfish person if I just look out for myself?
I do not have as severe of a gradient as you do, but due to lucky career choices, I ended up making multiples of what the rest of my family made. I really wrestled with myself over this, but something which really kept me from diving in is having seen many failures from many directions. There are families where one or more of the relatives is pushy with their money, always "helping" out but often really using it as a way to remotely control things. Then there are families where one or more of the relatives seem to never be right with money, they have good jobs but are always short on cash, and have no end of reasons for why. And there are lots of families full of resentment about money matters, especially around inheritances or family business activities.

So in the end, we decided to mostly just use our excess to lubricate anything we could, and to give money for specific one-time things like education. On the lubrication side, I mean things like mtaining spare living space so people don't use the high cost of hotel rooms as a reason not to visit, or being up-front about taking them to a nice place because WE like it, so we're going to pay for this one.

Also, I totally agree about asking your parents (or you could ask the cousin's parents). They might tell you "Absolutely not!", and give you five excellent reasons for it, or they might tell you some alternate way to contribute which might not cause resentments. Or, since you're young, maybe even ask grandparents. Basically, I think the good advice will come from the generation which has had parents and uncles/aunts die, so they've maybe seen some of these issues, and maybe they're thinking on how to deal with it themselves.

perikleez
Posts: 22
Joined: Sun Jan 05, 2020 2:47 am

Re: Opportunity cost of helping out relatives

Post by perikleez » Tue Jan 07, 2020 3:10 am

Stef wrote:
Tue Jan 07, 2020 1:31 am
I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months. Maybe he won't be the last one? Maybe I'll delay my financial indepedence by 1-2 years helping out others?

Anyone in a similiar situation? What's your opinion on that?
So this is not an uncommon situation as I've seen there is always a sibling in the family that ends up doing financiallybetter than the others, and it creates some unusual dynamics, or at least it has for me. And you know as everyone gets older, the needs become greater, including situations like who pays for funeral expenses when others are living on tight budgets. By default, others may look to you for financial assistance in times of need because of the impression you have the means to cover unexpected needed expenses. Over the years, I've learned to say I don't have any extra money to give free money away and live paycheck-to-paycheck, which is true because I "pay myself first" ASAP and live off whatever is left over.

But to your question and point:''

1. Did they ask you for help? Not through another relative suggesting or passing along a message, did they contact you directly? I'm a believer that directly asking you for help creates credibility, accountability, and gratitude, so it makes your decision easier.

2. For various reasons and from experience, I don't believe in giving free money to relatives unless it's a gift or special (and rare) occasion, like you know they are in a pinch and a surprise donation would be greatly appreciated. And by the way, have you thought through a Will or some other way you will leave/bequeath your savings/estate to loved ones if you suddenly passed away? That may be a way of addressing some of your moral obligations to others, at least for contingency planning.

3. I always make exceptions for food, certain bills and other basic necessities (e.g., car repairs), but again I gotta get a call from them instead of my mom asking on their behalf. If they are too proud to ask or can't personally ask for some other reason, I guess it's not that imperative. And from my experience, everyone welcomes unsolicited free money with a thank you. I can't do that anymore at my expense (specifically, my future financial plans). Like they say why your jumping off a boat, get your life jacket on first before trying to save others.

4. For non-emergency/general financial help, make a deal where they or others collectively pitch in. Like for every $100 they raise you will send in $200. Or plan a trip there where you will buy the supplies and together you guys will try to get as much done as possible while you are there. That will help avoid any diverting of funds to other personal needs, along with you having a better idea of what it will take to finish the project, which you could figure out how to get it done/paid through completion.

5. I also regularly give to church, gofund.me, and other charitable opportunities when I know my donations have an impact. In fact, my current estate plans is to leave an unused retirement savings as education funds for my nieces and nephews under 18 because those are the type of extra savings that are out of reach for most parents who are already worried about their retirement savings.

Hope that helps.

User avatar
LiveSimple
Posts: 1465
Joined: Thu Jan 03, 2013 7:55 am

Re: Opportunity cost of helping out relatives

Post by LiveSimple » Tue Jan 07, 2020 3:33 am

Go ahead and help if you think so or your family cultural values allows that.
Have a plan before you do.

In the end think as charitable giving to the family and move on.

OogieBoogie
Posts: 7
Joined: Wed Nov 06, 2019 2:21 pm

Re: Opportunity cost of helping out relatives

Post by OogieBoogie » Tue Jan 07, 2020 5:58 am

The amount is probably close to a yearly salary to that person. So it is really a lot, which will create probably envy and questions. If your cousin would marry, then that is a great reason to help the new family out for their future.

To avoid the classical FIRE trap to buy something and calculate it in "how much longer until I am FIRE", put a certain small percentage per year aside for charity what kind ever. Then if you want to give somebody something, it should come straight from the heart (and should not get challenged too much by the brain).

But what ever you will decide, you have your heart on the right place!

User avatar
RickBoglehead
Posts: 5608
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: Opportunity cost of helping out relatives

Post by RickBoglehead » Tue Jan 07, 2020 6:06 am

Stef wrote:
Tue Jan 07, 2020 1:43 am
123 wrote:
Tue Jan 07, 2020 1:40 am
You could easily get a reputation as Mr/Ms Moneybag with the relatives. If you're giving away money there will be no end to it. Do you have or plan to have your own family here that will need all your income for their support?
I'm 28yo with no kids planned within the next 5-6 years. But I get your point.

Is it my moral obligation to do it? Am I a selfish person if I just look out for myself?
No, it is not your moral obligation to help your cousin or any other relative. Lookup the definition of "moral obligation".

Your cousin can earn the money in a year, as you note. He could also come to this country and earn it in 3 months. You are not a charity. If he was in need, on the streets, unable to provide for himself due to sickness or injury and needed temporary help, maybe that would be a moral obligation. But that is not the case. Otherwise, when cousin Mary needs a TV, you're the bank. Cousin Fred needs a car, you're the bank. When would it end?
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

User avatar
Topic Author
Stef
Posts: 358
Joined: Thu Oct 10, 2019 10:13 am

Re: Opportunity cost of helping out relatives

Post by Stef » Tue Jan 07, 2020 6:54 am

Thank you all for your replys. To summorize a couple of points:

1. Nobody asked me anything directly nor would they even ask me something like this (because they don't actually see me as Mr. Moneybag). It's an idea that came out of my heart. My father always helped his close family there after he left the country 35 years ago. He sent money every month to his parents who lived on a 200$ pension, he bought his sister an apartment because she is close to 60 and lost her job (unable to even get a new one due to the economical situation). I always gave something to my cousins there. Old clothes, old smartphones when I bought a new one, my whole tennis equipment when I quit playing, old PC when I bought a new one etc. But now I'm older, earn more, learned to live frugal and save much more. So my potential ability to help financially is a lot higher.

2. The economy down there is really bad. Most people that graduate from the university are unemployed for years because it's so hard to find something. They end up doing basic jobs to survive. Average salary is around 400$/month. They can't really go on vacations or save a lot of money. Food is extremely expensive relative to the salary. They are not in the EU so they can't really leave the country and work abroad and get higher salaries. They are basically stuck there. That's why he will need 5+ years of work to get there.

3. I asked my parents. My mother said that I should look out for myself, my fatgdr said I should do whatever feels right for me and that he would support the idea of helping him out.

But your inputs helped me decide what to you. You are right that it's not an emergency, that he has a place to live. So next time I visit my family I'll give him something like 500-1000$. That's "nothing" for me, but 1 year of saving for him while working 6 days a week.

FI4LIFE
Posts: 322
Joined: Sun Apr 28, 2019 9:27 am

Re: Opportunity cost of helping out relatives

Post by FI4LIFE » Tue Jan 07, 2020 7:32 am

I don't think the situation warrants your help based on the information provided. This is the life they are accustomed to. Of course, you actually speak to them so you know their situation better than us. I think paying for things like funerals, health-related emergencies, etc. would be a better use of your money when needed. I agree with others that there may be unintended consequences in giving to one relative and not the others.

Leemiller
Posts: 1277
Joined: Sat Jun 01, 2013 12:42 pm

Re: Opportunity cost of helping out relatives

Post by Leemiller » Tue Jan 07, 2020 8:30 am

I really like the idea of some cash as a gift towards his savings without burdening yourself with the whole amount. That seems very reasonable for your situation. I also think you should look into what it would take to help him and others immigrate to the US.

Shallowpockets
Posts: 1503
Joined: Fri Nov 20, 2015 10:26 am

Re: Opportunity cost of helping out relatives

Post by Shallowpockets » Tue Jan 07, 2020 8:41 am

Do whatever you feel you want to do, but don’t take the negative tack that you will delay your retirement by three months. You are 28 years old. You have tons of upside earning potential and if you think that $7k spent at 28 is going to mean a delay in your retirement 37 years down the line, that’s nitpicking your excuses. You said this idea came from your heart,
Many here will castigate this approach by stating the increase over 37 years of that $7k. But, really, come on.

Next time you visit. Talk about what he wants to do. Not necessary to give cash, at that time you could just say, I’ll buy this much lumber for you so you can at a least partition out the space, or something similar.
After all, what’s it mean when you visit? You are imposing on their hospitality and that always costs any host something beyond what they normally would spend.

User avatar
JoeRetire
Posts: 4527
Joined: Tue Jan 16, 2018 2:44 pm

Re: Opportunity cost of helping out relatives

Post by JoeRetire » Tue Jan 07, 2020 8:49 am

Stef wrote:
Tue Jan 07, 2020 1:31 am
I have a cousin (my favorite one), he is 33 years old and living with his parents (you usually do that till you marry). They have a big unfinished house with 3 floors. His brother already managed to finish the 2nd floor and move in with his wife and kid. The 3rd floor is still unfinished. He needs roughly 6000-7000$ to finish it. Will probably take him 5+ years to save enough to finish it. Takes me 3 months.

I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months.

What's your opinion on that?
How much do you value those extra 3 months of retirement? How much do you value your favorite cousin?

Compare and contrast.

Will your cousin pay you back over a 5+ year period? How soon do you expect to retire? Unless you expect to retire within 5 years, then it won't actually delay your retirement at all, right?
Very Stable Genius

Jack FFR1846
Posts: 10815
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Opportunity cost of helping out relatives

Post by Jack FFR1846 » Tue Jan 07, 2020 9:06 am

A way you can help without giving out money is to help your cousin when you're over there. Look at what's being done and what tools are needed that he doesn't have access to. Maybe a circular saw or simply a little lumber. While you're there helping, you could buy "yourself" a circular saw to speed the work and when you leave, just leave it there. That helps him out without being given free cash.

The numbers for salary quoted are sort of meaningless. If someone there lives on $200 a month, that tells me that buying the things they need can be done for $200 a month. Perhaps in the US, that translates into $2000 a month because what's needed is different and more expensive.
Bogle: Smart Beta is stupid

Freetime76
Posts: 168
Joined: Wed Jun 26, 2019 8:26 pm

Re: Opportunity cost of helping out relatives

Post by Freetime76 » Tue Jan 07, 2020 10:02 am

Whatever you decide, you have no moral obligation (I.e. you are not a bad person if you hold off on the 7K). Actually, you sound like a very generous person who wants to do the most good and thinks about family legacy.

In the long term, you might consider setting aside some amount in a fund to support just these types of expenses. Such a thing could grow to do something really special for your home/family. Grandparents in my and my in-laws’ families both were great contributors to their home communities (bailed out failing business in economic downturn, helped build community pool and new church). Like you, it’s been an inspiration to us.

LFS1234
Posts: 126
Joined: Fri Feb 08, 2019 4:13 am

Re: Opportunity cost of helping out relatives

Post by LFS1234 » Tue Jan 07, 2020 10:06 am

No mention yet about the downsides to recipients of giving them substantial (for them) amounts of money for nothing in return?

The recipient often pays a psychological price for this. With a 10-second action on your part (writing a check), you can take away a five-year hard-earned achievement from the recipient. Communities generally respect people who work hard to create a good life for themselves. You might be risking not only compromising his self-respect, but the respect he otherwise could have earned from others. This type of damage can be very difficult to undo.

In "The Millionaire Next Door" (an excellent book), a major theme is that high earners often screw up their kids by showering them with excessive amounts of money, thereby reducing the kids' incentive and self-confidence and often turning them into life-long dependents.

It makes sense to help provide opportunity for the young as well as necessary aid for the old and infirm, but subsidizing able-bodied, capable people in the prime of their lives should not be done without a whole lot of forethought.

There is a saying: "he who lends money to a friend, loses both the money and the friend." This is often true when significant sums are involved, and there is a risk of a similar result arising from excessively generous gifts.

User avatar
dm200
Posts: 22923
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Opportunity cost of helping out relatives

Post by dm200 » Tue Jan 07, 2020 10:12 am

Stef wrote:
Tue Jan 07, 2020 1:31 am
My parents are from Eastern Europe and I visit my family there once a year. Makes me realize every year how fortune I am living in a developed country with a salary that is 20x higher than their avg. salary.
I have a cousin (my favorite one), he is 33 years old and living with his parents (you usually do that till you marry). They have a big unfinished house with 3 floors. His brother already managed to finish the 2nd floor and move in with his wife and kid. The 3rd floor is still unfinished. He needs roughly 6000-7000$ to finish it. Will probably take him 5+ years to save enough to finish it. Takes me 3 months.
I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months. Maybe he won't be the last one? Maybe I'll delay my financial indepedence by 1-2 years helping out others?
Anyone in a similiar situation? What's your opinion on that?
No experience - but I do see several of the issues here.

While helping with the whole amount is not a big problem for you, I do see some downsides to that (as others have pointed out).

If it makes sense, perhaps you could offer about half of what is needed to fully complete the job - and he would have a good headstart on getting it done with his own resources.

Jags4186
Posts: 4096
Joined: Wed Jun 18, 2014 7:12 pm

Re: Opportunity cost of helping out relatives

Post by Jags4186 » Tue Jan 07, 2020 10:22 am

Be careful. You're rich compared to them. You say its a 20x difference between your home country and here. Let's pretend you make $1,000,000/yr. Would you give a 33 year old cousin in the United States $140,000 to fix up his house?

Nothing wrong with helping out family. You just don't want to alter the relationship.

Perkunas
Posts: 172
Joined: Tue May 10, 2016 7:24 pm

Re: Opportunity cost of helping out relatives

Post by Perkunas » Tue Jan 07, 2020 10:25 am

Have you asked the cousin whether they need, want, or are willing to accept your financial help?

Are there other things s/he may want or need that would be more beneficial than help fixing up his/her parents' house?

Vanguard Fan 1367
Posts: 1249
Joined: Wed Feb 08, 2017 3:09 pm

Re: Opportunity cost of helping out relatives

Post by Vanguard Fan 1367 » Tue Jan 07, 2020 10:33 am

In reading about Warren Buffett and others I read the thought that a dollar saved and invested when you are young is worth 8 dollars later. I am a little further down the road than you and I am glad that my wife and I started our investing with 20K each into mutual funds in 1994. My wife's 20K has expanded to approximately 150k. (We have other investments too).

I admire your desire to help. The wife and I are pretty good savers and at this point in our lives are able to help relatives with cash and gifts and do so.

Dave Ramsey says if you live like no one else (saving and living below your means) later you get to live like no one else.

Unladen_Swallow
Posts: 182
Joined: Tue Dec 10, 2019 6:12 pm

Re: Opportunity cost of helping out relatives

Post by Unladen_Swallow » Tue Jan 07, 2020 11:07 am

Stef wrote:
Tue Jan 07, 2020 1:31 am
My parents are from Eastern Europe and I visit my family there once a year. Makes me realize every year how fortune I am living in a developed country with a salary that is 20x higher than their avg. salary.

I have a cousin (my favorite one), he is 33 years old and living with his parents (you usually do that till you marry). They have a big unfinished house with 3 floors. His brother already managed to finish the 2nd floor and move in with his wife and kid. The 3rd floor is still unfinished. He needs roughly 6000-7000$ to finish it. Will probably take him 5+ years to save enough to finish it. Takes me 3 months.

I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months. Maybe he won't be the last one? Maybe I'll delay my financial indepedence by 1-2 years helping out others?

Anyone in a similiar situation? What's your opinion on that?
Has he asked for help? If he hasn't, I wouldn't. Favourite cousin notwithstanding.

I am from a culture where helping out family is common, even expected. We all do it. However, there are certain personal and respectful boundaries we wouldn't cross. None of it has to do with being looked upon as "Moneybags". That is up to you to decide. Just having the means to help does not qualify.

1. Has your cousin asked for help? If he hasn't, I wouldn't.
- I would find it insulting (to him), and hence wouldn't do it. This is exactly the scenario where it would look like pompous charity on your part. If I were him, I would be very offended.

2. I would only offer unsolicited help to my parents, or any relationship that was very close. Even in such cases, I would just give a generous gift or such. I would never say "here is $XXX to fix the roof". Maybe only with my parents I would be so candid, because that nature of the relationship is different. But they would never ask anyway, so I would still be very careful about making sure I was not insulting.

I am a huge proponent of families looking out for each other. Even extended families. But it only works because it comes from a place of respect. One must consider that we all have pride.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

michaeljc70
Posts: 6083
Joined: Thu Oct 15, 2015 3:53 pm

Re: Opportunity cost of helping out relatives

Post by michaeljc70 » Tue Jan 07, 2020 2:25 pm

Even though they are your favorite cousin, I am not sure how close you are to this cousin especially since you see them once a year. I think giving them some money to get them started is not a bad idea. I don't know this person but what if you give them $7k and they use it for something else? What if they get married and have a kid and know you have all this extra money and need it? What if other family members find out and resent it (they aren't the favorite)? You are single now, but if you get married and have kids in the future that $7k could pay for part of their college education or other things and not just 3 months of retirement. You are also young so what % of your net worth is $7k? If you were older and it was a small % of your NW I would look at it differently.

ohai
Posts: 1307
Joined: Wed Dec 27, 2017 2:10 pm

Re: Opportunity cost of helping out relatives

Post by ohai » Tue Jan 07, 2020 3:06 pm

My advice, which is probably the same as everyone who is wealthy relative to family, is NEVER talk to them about money. Don't give them money, don't tell them your salary, and don't talk about anything like you said above. The worst case is there will be potential for people to ask you for money that you will be uncomfortable refusing. They might also feel like you are bragging and it might disrupt family dynamic. This is not about how you communicate your relative wealth - people inevitably react in certain ways to people who have more money.

Thegame14
Posts: 1354
Joined: Mon May 07, 2018 11:53 am

Re: Opportunity cost of helping out relatives

Post by Thegame14 » Tue Jan 07, 2020 3:21 pm

bow much does it cost you to go there? how about one year don't go, but send the money you would have spent going there to them to fix that floor?

michaeljc70
Posts: 6083
Joined: Thu Oct 15, 2015 3:53 pm

Re: Opportunity cost of helping out relatives

Post by michaeljc70 » Tue Jan 07, 2020 3:34 pm

Assuming they'd be interested, is there any chance in helping them get somewhere with better economic prospects? Like sponsoring them to come here or helping with the costs of getting a visa for somewhere else? It seems like that might be more helpful over the long run. It is probably a long shot as I know in the US only children, spouses and parents get preferential standing.

WhiteMaxima
Posts: 2087
Joined: Thu May 19, 2016 5:04 pm

Re: Opportunity cost of helping out relatives

Post by WhiteMaxima » Tue Jan 07, 2020 4:50 pm

Ukraine?

User avatar
Elsebet
Posts: 810
Joined: Mon Feb 08, 2016 2:28 pm
Location: Washington state

Re: Opportunity cost of helping out relatives

Post by Elsebet » Tue Jan 07, 2020 5:10 pm

Can you give a generous cash gift to your family for holidays/birthdays? I do this for my 2 nephews and niece since I don't have kids myself. That way at least it should be contained to those special times of year.
"...the man who adapts himself to his slender means and makes himself wealthy on a little sum, is the truly rich man..." ~Seneca

StealthRabbit
Posts: 497
Joined: Sat Jun 13, 2009 1:25 am

Re: Opportunity cost of helping out relatives

Post by StealthRabbit » Tue Jan 07, 2020 5:11 pm

I commend your thoughts and perspective. I have always tried to give away more than I spend on myself, and have helped relatives and my parents. (and more so neighbors)

For this specific need, I would address with Parents of cousin (since they own the home) and IF they desire to add the remodel / value, have an itemized plan with cost and project breakdowns and timeline. I would consider paying up front for materials, and 'limited' custom labor that must be hired. + permits (if required). i.e. Expenses that may be delaying their progress.

Do this only if it benefits the family and is desired by them. No stings attached by either party. (Because very unpredictable stuff happens, especially to families, especially in international destinations...)

I have found... you will be taken care of... and end up retiring / when needed and with benefits adequate for you. (barring divorce / or health issues)

Almost there
Posts: 918
Joined: Thu Jan 03, 2008 7:06 pm
Location: Arizona USA

Re: Opportunity cost of helping out relatives

Post by Almost there » Tue Jan 07, 2020 8:27 pm

Sometimes it is better for a future recipient to have to work for it instead of receiving the money.
I agree with Watty who wrote:Giving something like $500 in tools to get him started on the work might really help him and might not seem overly generous.
So help buying the needed to tool ($500?) might be preferable than paying for everything. Or working with your cousin and I'm sure he would appreciate that.

IMO
Posts: 709
Joined: Fri May 05, 2017 6:01 pm

Re: Opportunity cost of helping out relatives

Post by IMO » Tue Jan 07, 2020 8:46 pm

Stef wrote:
Tue Jan 07, 2020 1:43 am
123 wrote:
Tue Jan 07, 2020 1:40 am
You could easily get a reputation as Mr/Ms Moneybag with the relatives. If you're giving away money there will be no end to it. Do you have or plan to have your own family here that will need all your income for their support?
I'm 28yo with no kids planned within the next 5-6 years. But I get your point.

Is it my moral obligation to do it? Am I a selfish person if I just look out for myself?
Seen this type of thing personally. For some people, it's easy to just say no. For others, it can be difficult and don't be surprised if people are continuing to come out of the woodwork even if one is elderly.

Only you can decide if you are okay with it or not, and I suspect it's not as easy of a decision as many will make out.

Dottie57
Posts: 7561
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Opportunity cost of helping out relatives

Post by Dottie57 » Tue Jan 07, 2020 9:50 pm

LiveSimple wrote:
Tue Jan 07, 2020 3:33 am
Go ahead and help if you think so or your family cultural values allows that.
Have a plan before you do.

In the end think as charitable giving to the family and move on.
This. I think it is a happy circumstance to be able to help family. Set your savings goals (reasonable) and then use the rest for what you want including helping others.

KlangFool
Posts: 14709
Joined: Sat Oct 11, 2008 12:35 pm

Re: Opportunity cost of helping out relatives

Post by KlangFool » Tue Jan 07, 2020 10:02 pm

Stef wrote:
Tue Jan 07, 2020 1:31 am

I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months. Maybe he won't be the last one? Maybe I'll delay my financial indepedence by 1-2 years helping out others?
Stef,

1) And, how does that help this person in the long-run? You are giving him fish instead of helping him to fish.

2) You are making this person dependent on you. How does this help either of you?

3) We, (uncles and aunties), pooled our money and sponsored many of our nephews and nieces (not our kids) to come to the USA for a college education. That is a worthwhile investment.

KlangFool

Unladen_Swallow
Posts: 182
Joined: Tue Dec 10, 2019 6:12 pm

Re: Opportunity cost of helping out relatives

Post by Unladen_Swallow » Tue Jan 07, 2020 10:07 pm

KlangFool wrote:
Tue Jan 07, 2020 10:02 pm
Stef wrote:
Tue Jan 07, 2020 1:31 am

I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months. Maybe he won't be the last one? Maybe I'll delay my financial indepedence by 1-2 years helping out others?
Stef,

1) And, how does that help this person in the long-run? You are giving him fish instead of helping him to fish.

2) You are making this person dependent on you. How does this help either of you?

3) We, (uncles and aunties), pooled our money and sponsored many of our nephews and nieces (not our kids) to come to the USA for a college education. That is a worthwhile investment.

KlangFool
This. All of it.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

Startingover2019
Posts: 54
Joined: Thu Oct 17, 2019 7:24 pm

Re: Opportunity cost of helping out relatives

Post by Startingover2019 » Tue Jan 07, 2020 10:59 pm

Stef wrote:
Tue Jan 07, 2020 1:43 am
123 wrote:
Tue Jan 07, 2020 1:40 am
You could easily get a reputation as Mr/Ms Moneybag with the relatives. If you're giving away money there will be no end to it. Do you have or plan to have your own family here that will need all your income for their support?
I'm 28yo with no kids planned within the next 5-6 years. But I get your point.

Is it my moral obligation to do it? Am I a selfish person if I just look out for myself?
Bless others you love when you are blessed. Nothing wrong with that. I am African and help out as well.
As far as the house, you don’t have to assist him with the whole 7k. You can do about 1k total. That is still a lot for him and something you won’t miss in the grand scheme of things.
Honestly, people who aren’t from poorer countries, or didn’t grow up in huge extended communities like some of us did, will never understand.
This country is all about my spouse and kids and nothing more for the most part. I see people on here talking about how poor their parents are and how they never saved for retirement, while they have millions in the bank and it’s amazing to me.

Startingover2019
Posts: 54
Joined: Thu Oct 17, 2019 7:24 pm

Re: Opportunity cost of helping out relatives

Post by Startingover2019 » Tue Jan 07, 2020 11:00 pm

KlangFool wrote:
Tue Jan 07, 2020 10:02 pm
Stef wrote:
Tue Jan 07, 2020 1:31 am

I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months. Maybe he won't be the last one? Maybe I'll delay my financial indepedence by 1-2 years helping out others?
Stef,

1) And, how does that help this person in the long-run? You are giving him fish instead of helping him to fish.

2) You are making this person dependent on you. How does this help either of you?

3) We, (uncles and aunties), pooled our money and sponsored many of our nephews and nieces (not our kids) to come to the USA for a college education. That is a worthwhile investment.

KlangFool
This is also helpful as well.

Money Market
Posts: 117
Joined: Thu Mar 16, 2017 10:36 am

Re: Opportunity cost of helping out relatives

Post by Money Market » Sat Jan 11, 2020 11:16 am

Most Americans are self-sufficient and feel ashamed to ask for help after a lifetime's worth of mistakes. Contrast this with other cultures whose individuals don't hesitate to drag an entire person's financial life significantly under the guise of family. I've seen it first hand with my in-law's side of the family and it's sickening.

As long as there's no pattern of expected financial dependence from him, it would make for a good wedding gift.

Fractalleaf
Posts: 10
Joined: Wed Jan 01, 2020 6:30 pm

Re: Opportunity cost of helping out relatives

Post by Fractalleaf » Sat Jan 11, 2020 8:33 pm

In your situation I would give the same amount of money to each cousin and the parents. Showing favoritism may cause problems since everyone is living under one roof. Certainly the second floor cousin with family probably feels his needs are much greater than the single guy living with the parents. When I give money to people in need I tell them I had an unexpected windfall that I’d like to share. It seems to ease the stigma of charity and the expectation of ongoing support.

Financologist
Posts: 86
Joined: Wed Jan 01, 2020 11:16 pm

Re: Opportunity cost of helping out relatives

Post by Financologist » Sat Jan 11, 2020 10:59 pm

Have you considered making a monthly contribution to a fund earmarked for assisting relatives back home? Something like 1% of your take home pay or some other percentage that works for you. Then you could enlist an elder back home to make decisions about how those funds are distributed. This allows you to to be generous with your family without involvement in day-to-day decisions which could be stressful. If on the other hand you want to help your favorite cousin on a one-off basis then I think that's a wonderful thing to do also.

Good luck

User avatar
geerhardusvos
Posts: 177
Joined: Wed Oct 23, 2019 10:20 pm

Re: Opportunity cost of helping out relatives

Post by geerhardusvos » Sun Jan 12, 2020 12:17 am

Stef wrote:
Tue Jan 07, 2020 1:43 am
123 wrote:
Tue Jan 07, 2020 1:40 am
You could easily get a reputation as Mr/Ms Moneybag with the relatives. If you're giving away money there will be no end to it. Do you have or plan to have your own family here that will need all your income for their support?
I'm 28yo with no kids planned within the next 5-6 years. But I get your point.

Is it my moral obligation to do it? Am I a selfish person if I just look out for myself?
Family ties are strong, and the pressures can be very difficult to navigate. Different cultures have different expectations and pressures. In my opinion, you are in no way obligated or selfish for not giving money to anyone. However, if you can afford it, and you can set the expectations that you want to match them dollar for dollar for what they spend on it up to $3000 of your own money, that’s fine. Or if there is an arrangement or they can do some sort of work for you so that it is not just a gift, that also maybe promotes the right behaviors. But all in all, you have no need to give money to family outright. If their basic needs are met and this is not emergency, then don’t just start handing out money, but that’s just my opinion. We have many Family members who have way less than we do, and if one of their basic needs wasn’t mad, we would consider helping, but in general they have squandered their money and I would be in the same place as they are if I didn’t educate myself and work hard. So help them learn and have the tools to build their life and help where you feel so led
VTSAX and chill

User avatar
danielc
Posts: 944
Joined: Sun Dec 10, 2017 4:48 am
Location: Iowa, USA
Contact:

Re: Opportunity cost of helping out relatives

Post by danielc » Sun Jan 12, 2020 6:16 am

Stef wrote:
Tue Jan 07, 2020 1:31 am
My parents are from Eastern Europe and I visit my family there once a year. Makes me realize every year how fortune I am living in a developed country with a salary that is 20x higher than their avg. salary.

I have a cousin (my favorite one), he is 33 years old and living with his parents (you usually do that till you marry). They have a big unfinished house with 3 floors. His brother already managed to finish the 2nd floor and move in with his wife and kid. The 3rd floor is still unfinished. He needs roughly 6000-7000$ to finish it. Will probably take him 5+ years to save enough to finish it. Takes me 3 months.

I could easily help him out and finishing it in a couple of months. But that would delay my retirement by 3 months. Maybe he won't be the last one? Maybe I'll delay my financial indepedence by 1-2 years helping out others?

Anyone in a similiar situation? What's your opinion on that?
I think that 3 months of your life is irrelevant. I would be infinitely more concerned about how this might affect your relationship with your family. Will it make future meetings awkward? Will your family treat you differently? Will he feel insulted? Will he feel jealous? I think that those are the kinds of questions you need to answer.

User avatar
danielc
Posts: 944
Joined: Sun Dec 10, 2017 4:48 am
Location: Iowa, USA
Contact:

Re: Opportunity cost of helping out relatives

Post by danielc » Sun Jan 12, 2020 6:22 am

Stef wrote:
Tue Jan 07, 2020 1:43 am
I'm 28yo with no kids planned within the next 5-6 years. But I get your point.

Is it my moral obligation to do it? Am I a selfish person if I just look out for myself?
The answer to your first question is "no". The answer to your second question is "I don't know / perhaps a little". There is an argument to be made that acting like your time is 20x more valuable than your cousin's is a selfish act. But as I said in my other post, I think that considerations of how either choice may affect your relationship with your family far outweigh all other considerations. Both options can go badly. I don't know your family, or you, so I cannot give you good advice. But I do suggest that you focus on the non-financial aspects of this decision.

User avatar
danielc
Posts: 944
Joined: Sun Dec 10, 2017 4:48 am
Location: Iowa, USA
Contact:

Re: Opportunity cost of helping out relatives

Post by danielc » Sun Jan 12, 2020 6:25 am

AlohaJoe wrote:
Tue Jan 07, 2020 1:59 am
For your broader question of how much to help others and how much to be selfish....I think it is better to try to come up with a more general answer for yourself rather than this one-off thing about helping your cousin. Peter Singer has a couple of thought-provoking books on the subject -- The Life You Can Save and its sort-of followup The Most Good You Can Do. William MacAskill's Doing Good Better is another good book on the subject. The Life You Can Save website has a "giving pledge calculator" where you input your income and it has recommended annual giving for yourself.

https://www.thelifeyoucansave.org/Take-the-Pledge/
+1

Highly recommend The Life You Can Save. I haven't read the other one.

User avatar
danielc
Posts: 944
Joined: Sun Dec 10, 2017 4:48 am
Location: Iowa, USA
Contact:

Re: Opportunity cost of helping out relatives

Post by danielc » Sun Jan 12, 2020 6:34 am

OogieBoogie wrote:
Tue Jan 07, 2020 5:58 am
The amount is probably close to a yearly salary to that person. So it is really a lot, which will create probably envy and questions. If your cousin would marry, then that is a great reason to help the new family out for their future.

To avoid the classical FIRE trap to buy something and calculate it in "how much longer until I am FIRE", put a certain small percentage per year aside for charity what kind ever. Then if you want to give somebody something, it should come straight from the heart (and should not get challenged too much by the brain).

But what ever you will decide, you have your heart on the right place!
What does FIRE mean? I've seen that acronym a lot in this forum.

AlohaJoe
Posts: 5081
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Opportunity cost of helping out relatives

Post by AlohaJoe » Sun Jan 12, 2020 6:46 am

danielc wrote:
Sun Jan 12, 2020 6:34 am
OogieBoogie wrote:
Tue Jan 07, 2020 5:58 am
The amount is probably close to a yearly salary to that person. So it is really a lot, which will create probably envy and questions. If your cousin would marry, then that is a great reason to help the new family out for their future.

To avoid the classical FIRE trap to buy something and calculate it in "how much longer until I am FIRE", put a certain small percentage per year aside for charity what kind ever. Then if you want to give somebody something, it should come straight from the heart (and should not get challenged too much by the brain).

But what ever you will decide, you have your heart on the right place!
What does FIRE mean? I've seen that acronym a lot in this forum.
For what its worth, the Bogleheads wiki lists a lot of common acronyms. FIRE is in there: https://www.bogleheads.org/wiki/Abbrevi ... d_Acronyms

But a fuller explanation:

https://en.wikipedia.org/wiki/FIRE_movement

It is kinda like "supercharged Bogleheads". Not just Live Below Your Means but live really below your means, which will make you financially independent (which does not necessarily mean "rich") at a relatively young age, giving you the freedom to choose what you do with your life. It tends to have a lot of overlap with anti-materialism, anti-consumerism, and minimalist lifestyles (since those tend to go hand in hand with living below your means).

OogieBoogie's comment is referring to the fact that many people planning on FIRE have a spreadsheet that tells them things like "at my current savings rate and portfolio growth it will take 19.4 years to reach my goal. If I increase my spending by $1,000 (by going on vacation with my family) then it pushes back my goal by 1.24 years. So I won't go on vacation with my family." That kind of quantification, though it has a place in helping you make tradeoffs, can make people miss out on the important things in life. It is easy to quantify "years left to financial independence" and harder to quantify "I am happier because I spent more time with my family".

User avatar
danielc
Posts: 944
Joined: Sun Dec 10, 2017 4:48 am
Location: Iowa, USA
Contact:

Re: Opportunity cost of helping out relatives

Post by danielc » Sun Jan 12, 2020 7:04 am

AlohaJoe wrote:
Sun Jan 12, 2020 6:46 am
danielc wrote:
Sun Jan 12, 2020 6:34 am
What does FIRE mean? I've seen that acronym a lot in this forum.
For what its worth, the Bogleheads wiki lists a lot of common acronyms. FIRE is in there: https://www.bogleheads.org/wiki/Abbrevi ... d_Acronyms

But a fuller explanation:

https://en.wikipedia.org/wiki/FIRE_movement

It is kinda like "supercharged Bogleheads". Not just Live Below Your Means but live really below your means, which will make you financially independent (which does not necessarily mean "rich") at a relatively young age, giving you the freedom to choose what you do with your life. It tends to have a lot of overlap with anti-materialism, anti-consumerism, and minimalist lifestyles (since those tend to go hand in hand with living below your means).

OogieBoogie's comment is referring to the fact that many people planning on FIRE have a spreadsheet that tells them things like "at my current savings rate and portfolio growth it will take 19.4 years to reach my goal. If I increase my spending by $1,000 (by going on vacation with my family) then it pushes back my goal by 1.24 years. So I won't go on vacation with my family." That kind of quantification, though it has a place in helping you make tradeoffs, can make people miss out on the important things in life. It is easy to quantify "years left to financial independence" and harder to quantify "I am happier because I spent more time with my family".

Thanks for the fuller explanation! That was very interesting. I learned something new today.

basspond
Posts: 1272
Joined: Wed Nov 27, 2013 4:01 am

Re: Opportunity cost of helping out relatives

Post by basspond » Sun Jan 12, 2020 7:05 am

danielc wrote:
Sun Jan 12, 2020 6:34 am
OogieBoogie wrote:
Tue Jan 07, 2020 5:58 am
The amount is probably close to a yearly salary to that person. So it is really a lot, which will create probably envy and questions. If your cousin would marry, then that is a great reason to help the new family out for their future.

To avoid the classical FIRE trap to buy something and calculate it in "how much longer until I am FIRE", put a certain small percentage per year aside for charity what kind ever. Then if you want to give somebody something, it should come straight from the heart (and should not get challenged too much by the brain).

But what ever you will decide, you have your heart on the right place!
What does FIRE mean? I've seen that acronym a lot in this forum.
I hate acronyms. I was taught that if you ever use them in writing, the first instance you need to spell it out, Financial Independence, Retire Early (FIRE).

User avatar
Topic Author
Stef
Posts: 358
Joined: Thu Oct 10, 2019 10:13 am

Re: Opportunity cost of helping out relatives

Post by Stef » Sun Jan 12, 2020 7:15 am

I think there are many Bogleheads who pursue FIRE. Average male life expectancy in a couple of countries: Switzerland: 81.7, Japan: 81.3, Canada: 80.3, UK: 79.5, US: 76.3. So why work 40-45 years and then retire for just 10-15 years? Isn't that a bad deal? Wouldn't it be great to retire at 50-55 (while still young in relative terms) and enjoy life for another 20-30 years?

So I think the question about spending x amount on a thing should really be considered. Let's assume you are able to save 2.5k/month and have already 30k. Getting to 2 million (assumed FIRE number) with 6%/year will take 315 months (~26 years). Spending 20k on a car (basically 8 months of saving), will extend the time to 323 months (~27 years). So it's a rather straightforward formula. Cost of x / monthly savings rate = additional months till FIRE. This works with every rate of return.

AlohaJoe
Posts: 5081
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Opportunity cost of helping out relatives

Post by AlohaJoe » Sun Jan 12, 2020 7:16 am

basspond wrote:
Sun Jan 12, 2020 7:05 am
I hate acronyms. I was taught that if you ever use them in writing, the first instance you need to spell it out, Financial Independence, Retire Early (FIRE).
Do you want me to give you the bad news of how many times you've posted about IRAs with spelling out that acronym first? :happy

Or CDs? Or the IRS? Or DW? Or SS? Or RMD? Or ARM? Or SALT? Or TSP?

Hey, you actually use a lot of acronyms for someone who hates acronyms!! :wink:

Post Reply