Helping Adult Children (but not too much)

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BradJ
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Re: Helping Adult Children (but not too much)

Post by BradJ » Sat May 19, 2018 7:17 pm

I think I could follow this thread for years and never be bored. Inheritance, financial help past high school/college, and parental funded down payments are completely alien to me.

Broken Man 1999
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Re: Helping Adult Children (but not too much)

Post by Broken Man 1999 » Sat May 19, 2018 7:24 pm

BradJ wrote:
Sat May 19, 2018 6:18 pm
Parents who do help their kids out, what are your thoughts on parents who don’t help their kids? When I say help, I mean things like college, home, grandkids college, etc.
I have never worried about what others do or not do for their children. It isn't any of my business. However, I do believe that helping your children and grandchildren does not have to result in adults who are any less capable (or willing) of being self-supportive adults.

Though we have been generous to our children, I have only lent a small amount once (less than $1000) since they graduated from college. And, it was paid back promptly.

And, not everybody has the ability to help their children all that much. With our children, and grandchildren, some of our spending was because my father was generous in leaving his children with an inheritance. I figure we are paying it forward. I am grateful we are able to do so.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Archimedes
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Re: Helping Adult Children (but not too much)

Post by Archimedes » Sat May 19, 2018 7:31 pm

We have two children in their 20's and they couldn't be more different.

Our daughter has launched a very successful career with a generous 6 figure income. She is very financially responsible with a large savings account, maxed out retirement accounts, and a large taxable account. She has no interest in a fancy lifestyle and lives well below her means. She is still on the family cell phone plan as her account only adds $20 per month to our bill and she gets unlimited talk and data. A plan of her own would cost 3 or 4 times as much. Everything else that she does in her personal life she pays for on her own. However, when we are together we pay for restaurant meals and international family vacations because we have way more financial resources than we will ever need, and she is so responsible financially that we are happy to treat her.

Our son is a different story. He has some significant medical issues that have been a struggle for him. He has almost graduated from college after 6 years, but still has two more classes he needs to finish next year to complete his double major. He was living on his own at school but he moved back into our house, rent free. He has two part time jobs, but he got somewhat depressed over his illness and ran up large credit card debt. He is now in the process of paying down his credit card debts, but he still indulges in optional spending at times when he feels the desire. We feel that we need to wean him off the parental support because he is not being as responsible as we feel he should be at his age. Since he is still a student we cover his health insurance, tuition, and room and board. He pays his other expenses like books and entertainment, but we are looking at a path to get him to more fully support himself. We don't want this to go on much longer but it is a struggle due to his health issues and his not yet having completed college. Both our son and his parents are a work in progress in terms of weaning him off the parental payroll. It is perhaps easier to keep supporting him but we feel it is time for him to take responsibility for his life as an adult.

Meme
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Re: Helping Adult Children (but not too much)

Post by Meme » Sat May 19, 2018 8:02 pm

We fully covered undergrad education for our daughter & son.

Gave them an old Honda to drive, included them on the cell plan and funded a Roth when they graduated from college. We continue to contribute to the Roth & they also put $ into it. Once they started working, they came off our cell plan.

When they started graduate school, we helped with some of their expenses. Both received scholarships but daughter’s school was more expensive so we gave her the funds we had set aside for her wedding (20k). When our son got married he also received 20k.

We cover airfare for her trips home since she is working on her student loans & funding her 401k. We have put 3k towards her 5k bill for braces. She had braces as a child but her teeth have shifted & are a mess.

We expect to stop working within the next year, & expect to continue help them in the future for a home purchase. If they have children, we’ll fund a 529 plan.

We try to treat them fairly & equitably which can be hard at times.

Dandy
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Re: Helping Adult Children (but not too much)

Post by Dandy » Sat May 19, 2018 8:03 pm

Parents who do help their kids out, what are your thoughts on parents who don’t help their kids? When I say help, I mean things like college, home, grandkids college, etc.
If they can afford to and don't I feel that most are trying to help their children by trying to make sure that they can get along in life without their parents help. Maybe that is the way they were treated by their parents and it worked so they feel that is a good and valid approach. Some may also have children that are always looking for the easy way out and help will just reinforce that behavior.

As I stated in a prior post if the adult kids are pretty independent and manage finances and life well and still need or would benefit from some financial help -- I couldn't come up with a good reason not to help. Struggle a bit while I'm alive and get a windfall when I die? That doesn't make any sense to me. My kids don't ask for help/money. I want see them enjoy a bit of a better life and less stress while I am alive -- not a toast to dad when I'm gone. example below

When my daughter bought a house with a new born we offered them help with the down payment. I didn't tell them I was holding another amount for later. Of course they stretched their savings to buy the house and as most of you may have experienced didn't have much left after closing. Lots of expenses they didn't expect from paying home insurance for a full year, buying a lawn mover, garbage cans, lawyer fees, etc, etc. They had a bit of a deer in the headlights look when we met with them that week. That is when I handed them the check for a nice amount. The look of stress relief was a joy to watch. My son-in-law said that is what I am going to do if my kids buy a house. Much better than a toast after I am gone.

TravelforFun
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Re: Helping Adult Children (but not too much)

Post by TravelforFun » Sat May 19, 2018 8:41 pm

Archimedes wrote:
Sat May 19, 2018 7:31 pm
Both our son and his parents are a work in progress in terms of weaning him off the parental payroll. It is perhaps easier to keep supporting him but we feel it is time for him to take responsibility for his life as an adult.
Toughest dilemma for parents. I’ve heard of people kicking their kids out to the curb but no way my wife and I could do that. One of our kids was irresponsible for a long time but we continued to help her and believe it or not, they do change.

TravelforFun

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Watty
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Re: Helping Adult Children (but not too much)

Post by Watty » Sat May 19, 2018 8:45 pm

Stormbringer wrote:
Sat May 19, 2018 7:43 am
Her new job starts in the mid 30's, so she isn't exactly rolling in cash, but being debt-free and living in the Midwest I think she'll manage.
The median US household income is only about $59,000 so she should be able to do fine.

If her lifestyle will be a step down from what she is used to you need to be to not be condescending about it. She very well could be proud(and rightly so) about something like a modest apartment that she managed to get and furnish on her own.
HongKonger wrote:
Sat May 19, 2018 1:37 pm
I would tell her she can have $X as a graduation gift to spend on what she needs when she needs it with no questions asked, then back off.
+1

Learning how to manage money is a learning process and it is good for her to learn it while the amounts are relatively small.

I hate to stereotype but this is especially important for a woman. Occasionally there are posts by a recently widowed or divorced woman that is middle age or a senior that is in a panic because she suddenly has to manage money and she has never done that before.

md&pharmacist
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Re: Helping Adult Children (but not too much)

Post by md&pharmacist » Sat May 19, 2018 9:31 pm

I will live for my kids until the day I die.

That doesn't mean spoiling them or reinforcing bad habits. It means giving proper direction...and financial resources...and time, love, support, education, attention, priority, security, wisdom, advice, experiences, example, real world education, resources, empathy and forgiveness. Whatever it is they need (not necessarily want) for financial, emotional, spiritual well-being. It also means denying them when their requests do not lead to well-being or promote self-reliance/strength, but done with love, respect and communication. In this manner, one can be more comfortable telling them what they need to hear instead of what they want to hear.

These are your children! These are the experiences that matter. I will not be on extended vacations in retirement, I will be helping with grandchildren and home repairs. Any trips should first be with them if possible and desired.

In our last days, what accomplishments will be going thru our minds? If not our families we have issues. If so, will we be content with our interactions or regretful?

I feel strongly about this as I see too many broken families and dysfunction due to ego, miscommunication, selfishness, stubbornness, misplaced priorities, dereliction, etc. I watch cautiously so I do not fall into this.

BradJ
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Re: Helping Adult Children (but not too much)

Post by BradJ » Sat May 19, 2018 11:58 pm

[quote=md&pharmacist post_id=3936029 time=1526783495 user_id=132644

I feel strongly about this as I see too many broken families and dysfunction due to ego, miscommunication, selfishness, stubbornness, misplaced priorities, dereliction, etc. I watch cautiously so I do not fall into this.
[/quote]

Why are broken families such a common thing now? This seems to be more prominent through all social economic levels. I once told a leader at my church they would be surprised by the number of people who would attend a “Prodigal Parents” class. This question is probably for a different thread, and possibly a different site.

msk
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Re: Helping Adult Children (but not too much)

Post by msk » Sun May 20, 2018 4:58 am

In order to help, the parent needs to have the ability to help. Greater ability, more options. If you know that you are going to leave at least a several million $ inheritance to each kid in a few years (because you are already at an advanced age) then why not start the inheriting earlier? Ability to gift varies all the way from nothing, to college tuition, to family vacations, to mortgage deposit, to whole house purchase, to a well paying job in the family firm, to... If initiating the inheritance process early does not endanger your own retirement planning then, frankly, I do not see many negatives in running through the whole gamut depending on NW available; assuming you are convinced that the kid is a responsible adult. Many of the people who do immense good in this world are lowly paid (Mother Theresa?) so financial success/acumen should not be the primary indicator for how you initiate the inheriting. It's the whole package. Things get more difficult when you have more than one adult kid since one could be profligate and irresponsible financially (large, out-of-the-blue gift?), another struggling financially with young kids (monthly stipend?).

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Cernel
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Re: Helping Adult Children (but not too much)

Post by Cernel » Sun May 20, 2018 5:15 am

We have 3 adult children. After getting them through college without any student loans and about $10K in their Individual accounts, we made an agreement with them that we would contribute to their Roth IRAs as long as they contributed 10-15% to their company's 401(k), which they gladly agreed to. Now that they are building their families, we also now contribute $1K to each of our Grandchildren's 529 plan on their birthday's.

Archimedes
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Re: Helping Adult Children (but not too much)

Post by Archimedes » Sun May 20, 2018 6:51 am

That is our conundrum. We have young adult children who span the spectrum of financial responsibility. We have the means to provide support, but what is support and what is enabling bad financial behavior?

One child is extremely responsible, financially secure and already independently well off.

The other child has run up his credit card debt saying that the zero percent interest for 6 months is “free money” so why not take advantage of that too good to be true offer. And he did this despite our exhortations that this is how the bank gets people on the financial treadmill of working for the banks long term. He is now scrambling to pay off his debts to avoid high interest charges. And he took out a student loan to pay for unnecessary extras this year despite the fact that we fully paid his tuition and room and board. We have advised him that we are going to cut him off financially if he doesn’t demonstrate an ability to be financially responsible. We have discussed this at length, our desire is to support him but not to provide funds that lead him down a path of poor financial habits.

We are hoping our profligate child will shape up before we start sharing an early inheritance with either of them. The other child is already on a path to independent wealth and doesn’t need any support.

SQRT
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Re: Helping Adult Children (but not too much)

Post by SQRT » Sun May 20, 2018 7:00 am

Every family is different not to mention each individual child. We have one daughter, aged 34 married no children yet. She has a very good job as does her husband, a CPA. We paid for her education (graduate degree in Industial Relations) and supported her through university by paying her tuition, rent and giving her an allowance and car.

We paid for an expensive wedding as I promised her as a young girl that I would. I think it was mostly a waste, but I promised.

We take them on wonderful trips and have created fantastic memories this way. We would continue to do this with any grandkids too.

Most importantly, she displays no sense of entitlement, works very hard, saves money and is not a spend thrift. I would say she is better with money than I was at her age. Maybe because she has a better role model than I did.

They live in Toronto and are looking to buy their first house. We have given them a generous gift of stock to effect a decent down payment (about $1million).

By any definition we have been very generous. If I thought our generosity was weakening her work ethic or creating a sense of entitlement, I might have done things differently. She is our only heir and will inherit the vast majority of our wealth. I figure waiting to help her out until we die is less than optimal. She would get a very large sum but not probably until her 60’s. A little help while starting out (education, and house) seems so much better. Also, gives us a chance to see see our gifts at work.

I believe the value of struggle is overrated. I really could have used some help as a young person but I knew my parents weren’t in a position to do so. I personally don’t see how say graduating with a lot of student debt or living in a bad neighbourhood in a small house would build character and make you more successful. But depending on the person, it might. As a parent you know your kid the best and can act accordingly. Everybody needs to assess their kids and their means and act accordingly.

Obviously, not everybody is in a position to help their kids in this way. We are extremely lucky to have the means to do so and intend to continue with any grandkids. What others do is no concern of mine.
Last edited by SQRT on Sun May 20, 2018 7:47 am, edited 3 times in total.

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JPH
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Re: Helping Adult Children (but not too much)

Post by JPH » Sun May 20, 2018 7:09 am

What do you mean by "too much?" What are your concerns? If you are afraid you will "spoil" her, I doubt that your gift would have that much power.
While the moments do summersaults into eternity | Cling to their coattails and beg them to stay - Townes Van Zandt

msj16
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Re: Helping Adult Children (but not too much)

Post by msj16 » Sun May 20, 2018 7:12 am

I think kids should get educated in personal finance and demonstrate the ability to save and let their money grow before money is given. Once I feel that is accomplished I am fine giving a substantial amount of money over time - as long as it does not impede my own retirement.

MikeG62
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Re: Helping Adult Children (but not too much)

Post by MikeG62 » Sun May 20, 2018 7:13 am

Dandy wrote:
Sat May 19, 2018 3:11 pm

For those who expect they might leave a decent inheritance -- it seemed strange to us to provide total support as children, no support as adults basically at all and then leave a wonderful inheritance as they reach retirement age.

Basically, If you are going to leave them a bundle down the road anyway why not some now - assuming they are not young untested adults that need to learn how to live independently and mange money wisely? And of course if you are not putting your own retirement at risk.
Although I already commented above, as I was following this thread I wanted to add that I agree with Dandy sentiments.

Basically any money we provide while alive is simply coming off their inheritance later. Why make them struggle more than is necessary (and by the way I believe some struggling is warranted as it teaches some important lessons about choices and consequences) when we are sitting on a pile of $ - a good deal of which will be their money one day anyway?

We are still young (50’s) and so are my kids (early/mid 20’s), so we want them to learn to live on their own and develop the skills that come along with that. However, as we get older I am sure we will want to share more of our wealth with them so they can enjoy it while they are still relatively young (and we get to enjoy watching them benefit from it).
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Stormbringer
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Re: Helping Adult Children (but not too much)

Post by Stormbringer » Sun May 20, 2018 7:39 am

JPH wrote:
Sun May 20, 2018 7:09 am
What do you mean by "too much?" What are your concerns? If you are afraid you will "spoil" her, I doubt that your gift would have that much power.
I think I view it like having someone spot you while weight lifting. If you're trying to lift a heavy weight, your goal is to do it yourself, but there is that person behind you who is there to help just enough (if necessary) to make sure you make it and maybe coach you through it and give you encouragement.

Also, I think that how the assistance is given makes a difference:
  • Directly giving your adult child $250 a month for 18 years is probably a terrible idea, but contributing $250 a month to your grandchild's college fund for 18 years is probably okay. But it has the same effect of easing that burden on your adult child, who can worry less about the college fund and focus on their other bills.
  • Renting a vacation home and inviting your adult children to stay there with you is probably better than cutting them a check afterwards to reimburse them for a hotel room.
  • Buying an adult child an iPad for their birthday would be better than giving them $800 to pay off their credit card bill after buying one themselves.
It seems that there are subtle ways to help out without causing too many other issues.
"Compound interest is the most powerful force in the universe." - Albert Einstein

maywood
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Re: Helping Adult Children (but not too much)

Post by maywood » Sun May 20, 2018 9:53 am

When my kids were younger, I thought we should never buy them a car, but I've since changed my mind.

To summarize, I think it depends on the child, and also whether of course parents can help. If the child is just going to blow the extra money, then definitely not, but if they are responsible and save a lot of money, then yes.

I grew up middle class and parents were and are quite frugal. They paid for my college education, so I graduated debt free, with a little starter money from a savings bond my grandfather gave me at birth. I didn't have to work during college, but worked during summers for spending money. Senior year, my parents bought me a little car, and I paid them back interest-free over 3 years. Got married young and we immediately started saving a lot and paid off our first house 9 years out of college.

We also gave our kids a good start. Paid for my 25-year-old daughter's college education, now she has a great job working as a registered nurse, recently promoted to nurse shift manager. The work is tough, three 12 hours days a week. We bought her a car freshman year of college. Each year that she worked, we funded her Roth IRA. She contributes 20% to her 401k. She also is saving a lot of money.

9 years ago we moved just 6 houses down the same street and kept the old house. My husband, and my daughter helped a lot, remodeled the old house and now my daughter lives there. We considered charging her rent but then we would have to declare the rent as income, and depreciate the house etc. We decided that would not be financially good for us either, and a hassle, so we decided to let her live there rent-free. She does pay utilities. She could support herself, but she is saving the extra money so we figured why not. She is still on our cell plan and also car insurance, which we probably need to eventually take her off of the car insurance.

My 22-year-old son is extremely self-motivated, graduated valedictorian of his high school class and got a full scholarship. He just graduated from college. We had money put aside in college accounts for his undergraduate, which we will now use for his graduate degree in computer science. We have no doubt he will be able to get a great job when he graduates. We also gave him a car. He didn't work summers (forbidden to work per the scholarship program he was on, he was required to do unpaid internship or summer study abroad). So he only has a small Roth.

Other than that, the Christmas and birthday gifts are pretty modest, maybe $150 per year total. Occasionally a larger gift like a laptop for high school graduation.

Since the giving to each child has been uneven so far (more in Roth for my daughter and now letting her live rent-free in the house), we are keeping track of gifts so we can eventually even things out between the two.

My parents each got some inheritance from their respective parents, but since they lived to about 90, my parents were already retired and had planned and saved for their own retirement. The inheritance basically did nothing to help them and will get passed to their kids. If that trend continues generation after generation, you kind of wonder what the point is. Better to give at least part of the money to people when they could use it, or to charity. When my last parent dies, I plan to (and have told my parents this) disclaim my portion so it can go straight to my kids. At that point they will most likely be in their mid or late 30's, so the money could be used for a downpayment or to pay off their house, or to allow one parent (assuming they even get married and have their own kids) to stay home with their future young children.

Of course you want to make sure your children are motivated to earn and save, and careful with their money. But once you are sure of that, if you are able, I don't see the harm in helping them out even more.

My daughter sees some of her friends struggling with high student loan debt, so I believes she appreciates that she graduated debt-free. She complains she has a lot of vacation time built up but none of her friends can afford to go on a trip with her.

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Re: Helping Adult Children (but not too much)

Post by ChrisC » Sun May 20, 2018 10:34 am

Point wrote:
Sat May 19, 2018 6:06 pm
We fund our daughters Roth. We see this as matching her work income and it means she’ll be compounding for years to come.
So, I don't understand the point, Point. I know it would provide a nice tax free nest egg that you're funding for children, but why not make them fund their own Roths, especially if they might be inheriting Roths from their parents? Isn't this like giving away $5500 a year to each child with little behaviorial finance return on their end? I know parents who for years have funded Roths for their children (and I'm not even sure they told their children about these accounts that they opened for them) -- it's just adding to the wealth they might be inheriting with no discernible purpose other than to add wealth to their children's net worth at their retirement.

I think many parents become enticed by funding Roths and adding to the wealth for children (starting out as soon as their children earn income) when the better play to me would be to strongly encourage them to fund their own Roth accounts, even if the Roth contributions are modest ones. It strikes me that this would make children more responsilbe for their financial independence. My 3 children all put away very modest amounts into Roth accounts when they were working in high school and college -- each one put away $75 per month (and continued way into gainful employment) until they were no longer eligible to make front door contributions. It was more important to me that they save, rather than I save for their retirement.

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munemaker
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Re: Helping Adult Children (but not too much)

Post by munemaker » Sun May 20, 2018 10:55 am

JPH wrote:
Sun May 20, 2018 7:09 am
What do you mean by "too much?" What are your concerns?
Have not read it lately, but I do remember there was a section in the "Millionaire Next Door" on this where they refer to such help as ECONOMIC OUTPATIENT CARE. An example I remember was parents wanted their adult kid, wife and children to live in a wealthy neighborhood, so they helped them buy a house there. The problem was the adult kids did not have the income to support the lifestyle there and fit in. I don't remember the specifics...maybe like a nice vehicle for carpooling kids around, lawn care provider, kids and adults belonging to social organizations and kid's sports, kids keeping up with brand-name clothes/ sneakers and toys of their neighborhood friends, etc. Just owning a house does not mean you and especially your kids will fit in. You get the idea.
From wikipedia:
Economic Outpatient Care
Economic Outpatient Care (EOC) is a term used to express when an affluent parent provides money to an adult child. Besides offspring observations resulting in UAW children, EOC is a contributing factor to the passing on of the UAW belief. Offspring who receive EOC have 98% of the annual income compared to their counterparts who are not recipients of EOC. In comparison, they also have 57% of the net worth.[1] EOC gives recipients a false sense of financial security. For this reason they purchase homes in upscale neighborhoods that exceed the recommended value according to their incomes. Thirty percent of American families live in homes valued at $300,000, yet only earn an annual income of $60,000.[1] These homes then demand nice cars for the driveway, nice furniture for the living room, and a nice plasma TV to complement the furniture. These offspring also purchase and consume the EOC rather than invest it. If a dose of EOC is given on a regular basis, the EOC can actually be absorbed into the individual’s perceived annual income. Expenditures are then calculated with the anticipation of a regularly scheduled dose of EOC.
reference: https://en.wikipedia.org/wiki/The_Millionaire_Next_Door

Dandy
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Re: Helping Adult Children (but not too much)

Post by Dandy » Sun May 20, 2018 11:54 am

My post college job provided health insurance, dental insurance, an investment plan with a company match before there was a 401k and a pension (that I still collect). When I added a family they were covered with a nominal rate increase. They also provided raises to all that were in good standing--yearly. My wife could afford to stay at home and I could afford college and an MBA (some paid for by the firm) without debt. I could work in the summer and pay my undergrad tuition. I doubt I could fund a course working summers now.

Both my daughters' husbands jobs don't provide health or dental insurance or pensions. My daughters jobs provide the insurance and possible pensions. Despite being in good standing one daughter and all the admin staff hasn't received a raise in 5 years due to state budget cuts. Just got one but not retroactive. Day care, since both parents have to work comes to about $3000/month. And there is "after care" expense since working parents can't always pick up the kids at say 3 or 4pm.

The point is -- times have changed - pensions are rare and most are significantly underfunded. 401k matches are sometimes withheld. For better or worse depending on your view - more risk is being off loaded on the individual. What will Medicare and Social Security look like a few decades from now??

So, I think helping fund your children's investments is not spoiling them but parents adapting to a changing safety net environment that their children and grand children are likely to face. What some might consider spoiling others might think it is looking out for your loved ones. If you can afford it what is the worst that can happen? They have a nicer retirement??

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Re: Helping Adult Children (but not too much)

Post by ChrisC » Sun May 20, 2018 12:20 pm

Dandy wrote:
Sun May 20, 2018 11:54 am
So, I think helping fund your children's investments is not spoiling them but parents adapting to a changing safety net environment that their children and grand children are likely to face. What some might consider spoiling others might think it is looking out for your loved ones. If you can afford it what is the worst that can happen? They have a nicer retirement??
Well, I truly love my children and I'm sure that they truly love their parents, whether we help provide a nicer retirement for them. I'm sure they won't regret us not funding their Roth accounts. I look after all aspects of their lives to the extent I'm permitted. But it's their lives to live not mine. The worse that could happen -- they become reliant on you and use your financial resources as a crutch. Or they are not facing some challenges in life (like modest savings for retirement) that could make them better persons.

Not being judgemental here -- we do what we can for our children. We just have a different approach to doing what we can do for them.

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Re: Helping Adult Children (but not too much)

Post by bubbadog » Sun May 20, 2018 12:24 pm

I have a child in college and one in high school so I have not decided how much "economic outpatient care" to provide them as young adults. We are paying for my oldest son's college education and will do the same for his younger sister.

I do worry that too much help may rob them of the satisfaction of making it on their own as young adults.

If my wife and I step in and provide house down payments, cars, retirement funding, and other big ticket items, does it set the wrong precedent?

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RetiredMule
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Re: Helping Adult Children (but not too much)

Post by RetiredMule » Sun May 20, 2018 12:25 pm

Archimedes wrote:
Sun May 20, 2018 6:51 am
That is our conundrum. We have young adult children who span the spectrum of financial responsibility. We have the means to provide support, but what is support and what is enabling bad financial behavior?

One child is extremely responsible, financially secure and already independently well off.

The other child has run up his credit card debt saying that the zero percent interest for 6 months is “free money” so why not take advantage of that too good to be true offer. And he did this despite our exhortations that this is how the bank gets people on the financial treadmill of working for the banks long term. He is now scrambling to pay off his debts to avoid high interest charges. And he took out a student loan to pay for unnecessary extras this year despite the fact that we fully paid his tuition and room and board. We have advised him that we are going to cut him off financially if he doesn’t demonstrate an ability to be financially responsible. We have discussed this at length, our desire is to support him but not to provide funds that lead him down a path of poor financial habits.

We are hoping our profligate child will shape up before we start sharing an early inheritance with either of them. The other child is already on a path to independent wealth and doesn’t need any support.
+1 on Archimedes' earlier post with the specifics on daughter's and son's situations, and how far apart on the spectrum of financial behaviors they're. Our two grown-ups (in early/mid 30s) are mostly similar to what Archimedes says.

As many of the fellow BHs noted, it depends a lot on each child's personality, and financial responsibility he/she demonstrates. Sometimes, you learn it after the fact, as was the case in our experience.

We brought up our children with conservative financial outlooks, with emphasis on living with-in one's means, savings, retirement savings etc. (and we role modeled that behavior). But...

The older one - we knew her pay, but mostly opaque to us on her finances/spending- was making very decent money with a great career (6 figures) after her grad school for nearly 5 years, but, (in hindsight) we spoiled her by supporting too much when she asked for handouts in the form of a few thousands in cash every 6 months or so during those years; we even paid off her student loans...all the while, she was happily "clicking and spending away" crazily, incurring 5 figure balances on multiple credit cards, unbeknownst to us. Undeserved handouts, in hindsight, as we should've gotten tougher with her from the start; we were "fools" really, as I realized later, when she quit her job in Spring 2015, moved in with us after squandering away savings and remained unemployed for almost two and a half years. I had to have a real tough talk with her (with threats of cutting her off completely etc.) to finally get her serious about employment. Thankfully, she has remained employed through the past 7 months, I'm still unsure about her, worry about her...This is one child on whom I would wait for several more years before ever handing out any "early inheritance" - she needs to demonstrate serious change, for the better, in her "financial behavior".

The younger one is/has been so different from her older sibling from her early adulthood, and is fiercely finanicially independent, living with-in her means and using my knowledge/experience to manage her investments/retirement savings.


Two additional points to make:
1) In many cases where both the parents are involved: both parents need to realize the significance of such cases...in many cases, one of the parents maybe too lenient/soft and that's a problem in arriving at the right stance towards a "problem adult child".

2) The easiness of buying this online has made the situation tougher for those adult children who might get into unnecessary/addictive shopping habits.

delamer
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Re: Helping Adult Children (but not too much)

Post by delamer » Sun May 20, 2018 12:30 pm

ChrisC wrote:
Sun May 20, 2018 10:34 am
Point wrote:
Sat May 19, 2018 6:06 pm
We fund our daughters Roth. We see this as matching her work income and it means she’ll be compounding for years to come.
So, I don't understand the point, Point. I know it would provide a nice tax free nest egg that you're funding for children, but why not make them fund their own Roths, especially if they might be inheriting Roths from their parents? Isn't this like giving away $5500 a year to each child with little behaviorial finance return on their end? I know parents who for years have funded Roths for their children (and I'm not even sure they told their children about these accounts that they opened for them) -- it's just adding to the wealth they might be inheriting with no discernible purpose other than to add wealth to their children's net worth at their retirement.

I think many parents become enticed by funding Roths and adding to the wealth for children (starting out as soon as their children earn income) when the better play to me would be to strongly encourage them to fund their own Roth accounts, even if the Roth contributions are modest ones. It strikes me that this would make children more responsilbe for their financial independence. My 3 children all put away very modest amounts into Roth accounts when they were working in high school and college -- each one put away $75 per month (and continued way into gainful employment) until they were no longer eligible to make front door contributions. It was more important to me that they save, rather than I save for their retirement.
Speaking for myself, not Point, the Roths are a way to contribute to your child’s long-term financial security, with the dividends/interest/capital gains accumulating tax free. In addition, there will be tax free withdrawals later. If parents are already contributing what they need to their own retirement, or are in retirement, Roths for the kids are a good option tax wise. Plus they get money out of your estate. Even if you won’t be subject to federal estate taxes, many states have their own version.

I can flip the question around — you have a large nest egg that you don’t expect to spend down during your lifetimes. You plan to leave anything that is left to your kids anyway. Why wouldn’t you contribute to their Roths?

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RetiredMule
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Re: Helping Adult Children (but not too much)

Post by RetiredMule » Sun May 20, 2018 12:44 pm

RetiredMule wrote:
Sun May 20, 2018 12:25 pm
Two additional points to make:
1) In many cases where both the parents are involved: both parents need to realize the significance of such cases...in many cases, one of the parents maybe too lenient/soft and that's a problem in arriving at the right stance towards a "problem adult child".

2) The easiness of buying this online has made the situation tougher for those adult children who might get into unnecessary/addictive shopping habits.
2nd point should read:..."of buying things online these days..."

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Re: Helping Adult Children (but not too much)

Post by ChrisC » Sun May 20, 2018 12:51 pm

delamer wrote:
Sun May 20, 2018 12:30 pm
ChrisC wrote:
Sun May 20, 2018 10:34 am
Point wrote:
Sat May 19, 2018 6:06 pm
We fund our daughters Roth. We see this as matching her work income and it means she’ll be compounding for years to come.
So, I don't understand the point, Point. I know it would provide a nice tax free nest egg that you're funding for children, but why not make them fund their own Roths, especially if they might be inheriting Roths from their parents? Isn't this like giving away $5500 a year to each child with little behaviorial finance return on their end? I know parents who for years have funded Roths for their children (and I'm not even sure they told their children about these accounts that they opened for them) -- it's just adding to the wealth they might be inheriting with no discernible purpose other than to add wealth to their children's net worth at their retirement.

I think many parents become enticed by funding Roths and adding to the wealth for children (starting out as soon as their children earn income) when the better play to me would be to strongly encourage them to fund their own Roth accounts, even if the Roth contributions are modest ones. It strikes me that this would make children more responsilbe for their financial independence. My 3 children all put away very modest amounts into Roth accounts when they were working in high school and college -- each one put away $75 per month (and continued way into gainful employment) until they were no longer eligible to make front door contributions. It was more important to me that they save, rather than I save for their retirement.
Speaking for myself, not Point, the Roths are a way to contribute to your child’s long-term financial security, with the dividends/interest/capital gains accumulating tax free. In addition, there will be tax free withdrawals later. If parents are already contributing what they need to their own retirement, or are in retirement, Roths for the kids are a good option tax wise. Plus they get money out of your estate. Even if you won’t be subject to federal estate taxes, many states have their own version.

I can flip the question around — you have a large nest egg that you don’t expect to spend down during your lifetimes. You plan to leave anything that is left to your kids anyway. Why wouldn’t you contribute to their Roths?
Hmmm, I understand the tax benefits of Roth accounts. My wife and I have decent sized Roths and will convert annually from our tIRAs to Roths over the next few years until we face RMDs. And each of our children have Roths and one does backdoor Roth contributions as well. We will probably never use our Roths so they will be inherited by our children.

In our case, funding our childrens' Roths is overkill in my view and would not be welcomed by our children. The short answer to your question is that they have enough and if they didn't have enough they would want to save on their own. For us, we would rather buy a second family home for our kids to use for vacations than funding their retirement accounts or pushing money onto them so they could watch their retirement accounts grow. With purchasing a second home or funding family vacations, our family would get better bang for our bucks -- the kids would likely agree. Mind you, we give generously to our children -- we enjoy doing that at appropriate occasions and our children are very grateful for our gifts.

delamer
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Re: Helping Adult Children (but not too much)

Post by delamer » Sun May 20, 2018 12:57 pm

ChrisC wrote:
Sun May 20, 2018 12:51 pm
delamer wrote:
Sun May 20, 2018 12:30 pm
ChrisC wrote:
Sun May 20, 2018 10:34 am
Point wrote:
Sat May 19, 2018 6:06 pm
We fund our daughters Roth. We see this as matching her work income and it means she’ll be compounding for years to come.
So, I don't understand the point, Point. I know it would provide a nice tax free nest egg that you're funding for children, but why not make them fund their own Roths, especially if they might be inheriting Roths from their parents? Isn't this like giving away $5500 a year to each child with little behaviorial finance return on their end? I know parents who for years have funded Roths for their children (and I'm not even sure they told their children about these accounts that they opened for them) -- it's just adding to the wealth they might be inheriting with no discernible purpose other than to add wealth to their children's net worth at their retirement.

I think many parents become enticed by funding Roths and adding to the wealth for children (starting out as soon as their children earn income) when the better play to me would be to strongly encourage them to fund their own Roth accounts, even if the Roth contributions are modest ones. It strikes me that this would make children more responsilbe for their financial independence. My 3 children all put away very modest amounts into Roth accounts when they were working in high school and college -- each one put away $75 per month (and continued way into gainful employment) until they were no longer eligible to make front door contributions. It was more important to me that they save, rather than I save for their retirement.
Speaking for myself, not Point, the Roths are a way to contribute to your child’s long-term financial security, with the dividends/interest/capital gains accumulating tax free. In addition, there will be tax free withdrawals later. If parents are already contributing what they need to their own retirement, or are in retirement, Roths for the kids are a good option tax wise. Plus they get money out of your estate. Even if you won’t be subject to federal estate taxes, many states have their own version.

I can flip the question around — you have a large nest egg that you don’t expect to spend down during your lifetimes. You plan to leave anything that is left to your kids anyway. Why wouldn’t you contribute to their Roths?
Hmmm, I understand the tax benefits of Roth accounts. My wife and I have decent sized Roths and will convert annually from our tIRAs to Roths over the next few years until we face RMDs. And each of our children have Roths and one does backdoor Roth contributions as well. We will probably never use our Roths so they will be inherited by our children.

In our case, funding our childrens' Roths is overkill in my view and would not be welcomed by our children. The short answer to your question is that they have enough and if they didn't have enough they would want to save on their own. For us, we would rather buy a second family home for our kids to use for vacations than funding their retirement accounts or pushing money onto them so they could watch their retirement accounts grow. With purchasing a second home or funding family vacations, our family would get better bang for our bucks -- the kids would likely agree. Mind you, we give generously to our children -- we enjoy doing that at appropriate occasions and our children are very grateful for our gifts.

I can certainly understand using the potential Roth money to purchase something else that would be beneficial to the family.

My comment was directed more toward the option of funding your kids’ Roths versus hanging onto the money in your own investments and having them inherit it.

Dandy
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Re: Helping Adult Children (but not too much)

Post by Dandy » Sun May 20, 2018 12:59 pm

The worse that could happen -- they become reliant on you and use your financial resources as a crutch. Or they are not facing some challenges in life (like modest savings for retirement) that could make them better persons
.

A lot depends on the age, maturity and actions of the children. It they have proven to be hardworking, thrifty and responsible the odds are that they are facing the challenges in an independent fashion. In that case helping them, in my opinion, is low risk/high benefit.

By the time the "children" are mature adults they will have had time to prove themselves. It isn't like giving an immature pre-teen a blank check. If they are poor money managers, overspend on things they truly can't afford, keep getting into credit card debt despite decent income, etc. then it makes a lot of sense to be careful about the amount and kind of help to give. Advice might be better than money.

Some seem to want to continuing to teach a lesson, like you should save for retirement, or manage your money responsibly, even when it may already have been learned. If the life lessons you care about have been learned, why make them wait till you die? (if you can afford to help now).

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JPH
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Re: Helping Adult Children (but not too much)

Post by JPH » Sun May 20, 2018 2:24 pm

Stormbringer wrote:
Sun May 20, 2018 7:39 am
JPH wrote:
Sun May 20, 2018 7:09 am
What do you mean by "too much?" What are your concerns? If you are afraid you will "spoil" her, I doubt that your gift would have that much power.
I think I view it like having someone spot you while weight lifting. If you're trying to lift a heavy weight, your goal is to do it yourself, but there is that person behind you who is there to help just enough (if necessary) to make sure you make it and maybe coach you through it and give you encouragement.
That's a good answer. So something that would be meaningful in helping her to launch successfully rather than a feel-good gift or something that might encourage bad financial habits or dependence. Does she know much about investing? Maybe a cash gift for that purpose. Help her set investment goals, time horizon, etc., then make it a parent-child project to choose the best vehicles to meet the goals. Keeping with your weight lifting spotter analogy, you could contribute to her emergency fund.
While the moments do summersaults into eternity | Cling to their coattails and beg them to stay - Townes Van Zandt

getthatmarshmallow
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Re: Helping Adult Children (but not too much)

Post by getthatmarshmallow » Sun May 20, 2018 2:34 pm

I find this fascinating. I met lots of people at the elite universities I attended who had parents financing every little luxury. Some were responsible, some weren't; I think how people are likely to respond to extra money is a highly individual factor. (I graduated with Stafford loans and $1500 to my name and worked summer jobs before my real job started so I could afford an office wardrobe, so it's not something I ever experienced. Wealthy people are still weird to me.)

My advice to the OP would be to (gently) cut off paying any recurring expenses. Daughter is not going to live within her means if she carefully budgets for her new grown-up-job but doesn't have to pay for car insurance, or rent, or a cell phone. I'd also put a down payment for a house in that category -- buying too much house nails a lot of people. But I would pay for a wedding and fund grandkids' 529s, and give nice gifts at birthdays and Christmas. Putting money in a Roth might be nice, if the kid isn't of the personality that won't take that as a reason not to save.

Honestly, probably the best gift you're giving her is knowing that she isn't going to be supporting you in retirement, and the happy mental peace of knowing that if everything went wrong for her at once, Mom & Dad are a safety net.

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Re: Helping Adult Children (but not too much)

Post by sport » Sun May 20, 2018 2:55 pm

getthatmarshmallow wrote:
Sun May 20, 2018 2:34 pm
But I would pay for a wedding...
We told our daughter how much we would pay towards her wedding. We gave them the money and told them they could spend it on the wedding, or they could do anything else they wanted with it. I hoped they would invest it for retirement, or use it towards the purchase of a house. Nevertheless, they spent it on a nice wedding. She was 30 years old, so she was entitled to make her own choices. I still think it was not the best decision, but it was not my decision to make and they are happy they had the nice wedding.

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munemaker
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Re: Helping Adult Children (but not too much)

Post by munemaker » Sun May 20, 2018 3:26 pm

sport wrote:
Sun May 20, 2018 2:55 pm
getthatmarshmallow wrote:
Sun May 20, 2018 2:34 pm
But I would pay for a wedding...
We told our daughter how much we would pay towards her wedding. We gave them the money and told them they could spend it on the wedding, or they could do anything else they wanted with it. I hoped they would invest it for retirement, or use it towards the purchase of a house. Nevertheless, they spent it on a nice wedding. She was 30 years old, so she was entitled to make her own choices. I still think it was not the best decision, but it was not my decision to make and they are happy they had the nice wedding.
From past discussions, seems like a lot of Bogleheads share your opinion on weddings.

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Re: Helping Adult Children (but not too much)

Post by FireProof » Sun May 20, 2018 3:46 pm

I agree that funding regular expenses once they are independent is not ideal, because it distorts their lifestyle to live above their means. It's better to provide backup in an emergency, provide the occasional one-time gift, and MAYBE provide small incentives to be financially responsible (but not too much, or it becomes meddlesome and controlling).

But when one does provide help, consider long-term impact and what one is encouraging. If you give them $20,000 for a wedding, it encourages wastefulness and will leave them no better off than they started. If you give $20,000 for the downpayment on a house, it will encourage saving and building equity, and will help them on their way to stability and independence.

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Re: Helping Adult Children (but not too much)

Post by ChrisC » Sun May 20, 2018 3:50 pm

Dandy wrote:
Sun May 20, 2018 12:59 pm


Some seem to want to continuing to teach a lesson, like you should save for retirement, or manage your money responsibly, even when it may already have been learned. If the life lessons you care about have been learned, why make them wait till you die? (if you can afford to help now).
That’s a fair point especially for some of us who grew up in poverty and frequently are jaded by a school of hard knocks education and upbringing. Why make them wait to obtain some or all of my wealth? Because in my view too much is too much. Certainly, I’d dispense with my wealth to help children that have hit hard times through little or no fault of their own.

But I can’t see any meaningful good (and neither could they) for we as parents to fund their retirement accounts — btw, why stop at Roths, how about making contributions to their 401ks? I will take some of the financial brunt from them with family vacations or grandkid educations (and we already have resistance from our children about us doing that) but why transfer money to their retirement accounts when they have the ability to make their own contributions?

Pawpatrol
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Re: Helping Adult Children (but not too much)

Post by Pawpatrol » Sun May 20, 2018 4:47 pm

Anyone reading this forum by definition lives their lives with some BH principle and models some degree of financial responsibility. You have modeled this behavior for years and this has been seen by your children whether spoken or not. Hence, for people reading this the stakes are much lower for how to deal financially with adult children because they have learned passively up until adulthood and that is more important than any specific idea in this thread. The mere fact that you put thought into how this money might afffect your children makes it very unlikely that you will harm your children.

Also, many roads to Rome. I came from a family that had very poor financial responsibilty and also enabled me to not understand the value of a dollar. I made terrible finiancial decisions in my 20’s. Recognizing my deficit on my own and getting to where I am now is a source of pride for me.

Dandy
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Re: Helping Adult Children (but not too much)

Post by Dandy » Sun May 20, 2018 5:35 pm

Recognizing my deficit on my own and getting to where I am now is a source of pride for me.
And well it should that is an extremely difficult thing to do. Congrats!!

nonurseorpurse
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Re: Helping Adult Children (but not too much)

Post by nonurseorpurse » Sun May 20, 2018 5:42 pm

I love this topic! The Millionaire Next Door was the book that inspired me to contribute to my adult children's Roth IRAs when they started their "real jobs." I didn't want to contribute "economic outpatient care" for life so I contributed $2,000/year for 10 years. This $20,000 each is their inheritance and was given with the understanding that it not be touched until retirement. They also do not expect an inheritance because I've told them I'm spending my last penny the day I die. :P

Once the grand kids started arriving I've contributed $1,000/year each into their 529 plans. The total will cover approximately 25% of the cost of an in state school. This gift is in lieu of extravagant gifting on birthdays or holidays.

Wedding anniversaries are celebrated by gifting $100/year of marriage up to $1,000. They can save or spend the money on something meaningful to them. One child isn't married so that money is gifted to the Roth IRA.

Birthdays are $100, Christmas $3000 to adult children, $100 to grand kids. The adult children were also each gifted $50,000 for a house down payment.

The best financial gift I can give my kids is to have my finances in order with a good up to date estate plan. I also share my net worth statement with them so there are no surprises.

Jackson12
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Re: Helping Adult Children (but not too much)

Post by Jackson12 » Sun May 20, 2018 6:11 pm

Stormbringer wrote:
Sat May 19, 2018 7:43 am
Our daughter graduates college this weekend. She's debt free, owns her 3 year-old car outright, has about $3K in a Roth-IRA plus another $1K in savings and an "okay" (money-wise) job lined up. So she off to a decent start.

Until now we've subsidized her through car insurance, mobile phone, groceries (mom would buy extra for her), a new computer or iPad now and then, etc. Her new job starts in the mid 30's, so she isn't exactly rolling in cash, but being debt-free and living in the Midwest I think she'll manage. We've thought to help her out a bit yet -- maybe a little money for starter furniture and a new computer as a graduation gift, but ultimately want her to stand on her own. I figure at some point we'll pay for a wedding, and start a 529 for any grandchildren. We plan on paying for a family vacation each year.

I'm curious what other families with means do for their adult children, if anything.
Our kids worked hard, got good grades, graduated from college and got jobs sufficient to support themselves ( one is special needs so,that’s a totally different situation ). There is no bragging intended. We were lucky, pure and simple. Even the best parents have kids who get derailed and never get back on track.

One of our sons had a budget so tight that he struggled mightily to stay out of debt for his first 2 years out of college- and succeeded. No debt. So we helped cover some expenses he couldn’t . He used our frequent flier miles to come home on holidays ( and it was the only way he could afford to get home so there was self interest too). We helped cover some dental expenses. We purchased a sofa for him. When his computer died and was beyond repair, we bought him a new one.

None of this lessened his motivation to get a better job. He still covered the basics...electricity, food, rent, etc. He’s now earns enough to contribute to his retirement account, cover the basics, and some discretionary items. He doesn’t require our help but if he faced a crisis which depleted his emergency funds we’d be there.

The other son graduated with a degree which netted him a good job and didn’t need our help. But then he got married and 2 kids came along, His wife stopping working for a few years to care for one of their kids who needed several major surgeries. There were lengthy recuperative periods.

The good news is that he’s just fine now.

But when their budget was exceeded we helped out, as we could afford, to lessen their anxieties and ease financial,worries . They’re now back on their feet and doing fine. We’re probably more generous during the holidays than the average family but not insanely so.

skp
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Re: Helping Adult Children (but not too much)

Post by skp » Sun May 20, 2018 6:38 pm

I struggle with this as well. Oldest doesn't need help married to a Dr and smart with money. He invests well and has already accumulated a nice nest egg
I myself have been raised and am very frugal. I sometimes wonder if I have unrealistic expectaions. But my youngest has a decent job but has bought a house which imo is over what I think he can afford. He is adopting and I wonder if I should assist. Since its very expensive. The problem is I waffle as to whether it would be helpful. Also if I help one I feel the other should get the same since he shouldn't be punished for being successful

What I think I will probably do is help with childcare expenses
I was lucky in that my in-laws did the childcare for me. As someone above said I believe in paying back the help I got from my own parents.

Alan S.
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Re: Helping Adult Children (but not too much)

Post by Alan S. » Sun May 20, 2018 6:55 pm

If you decide to assist with on going expenses and your payments will last for an extended period, the child might acquire a sense of entitlement for the assistance. if a sense of entitlement develops, you will have a problem if you want to stop or even reduce the payments. This could occur if the child does OK and eventually does not need as much help or perhaps your own circumstances are such that you can no longer afford to continue.


Therefore, you should have an exit plan and that will often include periodic reminders that any assistance is not necessarily going to continue indefinitely.

getthatmarshmallow
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Re: Helping Adult Children (but not too much)

Post by getthatmarshmallow » Sun May 20, 2018 6:55 pm

FireProof wrote:
Sun May 20, 2018 3:46 pm
I agree that funding regular expenses once they are independent is not ideal, because it distorts their lifestyle to live above their means. It's better to provide backup in an emergency, provide the occasional one-time gift, and MAYBE provide small incentives to be financially responsible (but not too much, or it becomes meddlesome and controlling).

But when one does provide help, consider long-term impact and what one is encouraging. If you give them $20,000 for a wedding, it encourages wastefulness and will leave them no better off than they started. If you give $20,000 for the downpayment on a house, it will encourage saving and building equity, and will help them on their way to stability and independence.
I never said $20K for a wedding! I see your point, but I think weddings are (ideally ) a one-time celebration; at least I've never known anyone who developed a taste for fluffy white gowns and flowers and tiered cakes over it.

But more importantly, my thinking is that one-time special occasion gifts are less likely to lead to lifestyle creep than subsidizing houses or cars (housing may be an exception in some markets.) What that occasion might be will depend on the family and its values.

wrongfunds
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Re: Helping Adult Children (but not too much)

Post by wrongfunds » Sun May 20, 2018 7:05 pm

aspirit wrote:
Sat May 19, 2018 4:53 pm
BradJ wrote:
Sat May 19, 2018 4:33 pm
To the OP, I say continue helping and being there for your kids, no doubt they appreciate it. Ignore people like me who, at times, have a chip on their shoulder because their parents chose not to help them financially. I find it to be somewhat of a social barricade, those who get help can’t seem to click with those who don’t. I’m a millenial whose parents raised their kids like they were living in the 50s. Expected to hold a job at 14, pay for my first car, college and even vacations when we all go together. My wife was raised just a “rough”, and we will both admit we have a tiny chip on our shoulder over those who get help from their parents. But looking back, my parents believed that chip on the shoulder is what sets you apart from the others and helps you survive those tough times.
As another contrarian I see people kidding themselves all the time.

Theres only one way adults* or children*, or adultchildren* as you seem to prefer, learn to thrive in this world alone, ..do not kid yourself w/exceptions & platitudes.

What happens when your support is gone?
Answering the above question:- The kid becomes multi-multi-millionaire! I don't think you expected that as an answer but isn't that the real answer?

The folks who are funding kid's whole house are certainly in a whole different stratosphere that the parents who are still keeping the adult children on their cell phone plan.

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Re: Helping Adult Children (but not too much)

Post by Stormbringer » Sun May 20, 2018 8:19 pm

JPH wrote:
Sun May 20, 2018 2:24 pm
That's a good answer. So something that would be meaningful in helping her to launch successfully rather than a feel-good gift or something that might encourage bad financial habits or dependence. Does she know much about investing? Maybe a cash gift for that purpose. Help her set investment goals, time horizon, etc., then make it a parent-child project to choose the best vehicles to meet the goals. Keeping with your weight lifting spotter analogy, you could contribute to her emergency fund.
She doesn't know much about investing, and doesn't seem all that interested right now. However, she does seem to understand the importance of saving for the future and I sat down and showed her the math of compounding returns. She took a personal finance course in her senior year of college. A couple years ago I seeded a Roth IRA for her with $1000 and she adds $25 from every paycheck and invests it in Vanguard's 2060 target date fund (VTTSX). She now has $3,000 which she seems proud of. Her friends look at her like she is from Mars.
"Compound interest is the most powerful force in the universe." - Albert Einstein

golfCaddy
Posts: 704
Joined: Wed Jan 10, 2018 10:02 pm

Re: Helping Adult Children (but not too much)

Post by golfCaddy » Mon May 21, 2018 12:45 am

Stormbringer wrote:
Sun May 20, 2018 7:39 am
JPH wrote:
Sun May 20, 2018 7:09 am
What do you mean by "too much?" What are your concerns? If you are afraid you will "spoil" her, I doubt that your gift would have that much power.
I think I view it like having someone spot you while weight lifting. If you're trying to lift a heavy weight, your goal is to do it yourself, but there is that person behind you who is there to help just enough (if necessary) to make sure you make it and maybe coach you through it and give you encouragement.

Also, I think that how the assistance is given makes a difference:
  • Directly giving your adult child $250 a month for 18 years is probably a terrible idea, but contributing $250 a month to your grandchild's college fund for 18 years is probably okay. But it has the same effect of easing that burden on your adult child, who can worry less about the college fund and focus on their other bills.
  • Renting a vacation home and inviting your adult children to stay there with you is probably better than cutting them a check afterwards to reimburse them for a hotel room.
  • Buying an adult child an iPad for their birthday would be better than giving them $800 to pay off their credit card bill after buying one themselves.
It seems that there are subtle ways to help out without causing too many other issues.
Support your kids if you want, but it amazes me how some people rationalize some forms of economically identical support as good and others as bad. To the extent your kids were planning to pay for college for their kids anyway, giving $250/month directly vs in a 529 should make no difference, ignoring tax advantages. Money is fungible. There's clearly cognitive biases at work in trying to pretend there's some substantive difference between renting a vacation home or renting a hotel room. Since we're on the weight lifting analogy, it's like trying to claim there's a difference between a 45lb weight vs a 25lb and two 10lb weights.

SQRT
Posts: 868
Joined: Sat Feb 05, 2011 9:44 am

Re: Helping Adult Children (but not too much)

Post by SQRT » Mon May 21, 2018 7:54 am

Alan S. wrote:
Sun May 20, 2018 6:55 pm

Therefore, you should have an exit plan and that will often include periodic reminders that any assistance is not necessarily going to continue indefinitely.
This is a good point. My daughter has gradually, over time, taken on sole responsibility for her regular recurring expenses such as her car and rent. Some of these we subsidized early on. Always with the proviso that we expected her to assume them once she was able. She has done so.

The most recent example had us paying the initiation fees and yearly dues for my son in law to join the social/sporting club that my daughter belongs to. I committed to paying the dues for 3 years and then reassessing. These expenses are quite high and really out of reach for someone their age, but a wonderful club. They appreciate our support but never ask for it or abuse it. Again it depends on the child.

Point
Posts: 106
Joined: Mon Jul 10, 2017 9:33 pm

Re: Helping Adult Children (but not too much)

Post by Point » Fri May 25, 2018 10:15 pm

It’s a cheap way of getting it on track. I can wait for them to do it, and years of compounding potential go by the wayside. Or I can prime the pump. At the five year point I will have her take it over incrementally. It’s about getting the momentum going in the right direction. Besides, this kid saved me 20K a year by getting a merit based scholarship. An easy decision for me...
ChrisC wrote:
Sun May 20, 2018 10:34 am
Point wrote:
Sat May 19, 2018 6:06 pm
We fund our daughters Roth. We see this as matching her work income and it means she’ll be compounding for years to come.
So, I don't understand the point, Point. I know it would provide a nice tax free nest egg that you're funding for children, but why not make them fund their own Roths, especially if they might be inheriting Roths from their parents? Isn't this like giving away $5500 a year to each child with little behaviorial finance return on their end? I know parents who for years have funded Roths for their children (and I'm not even sure they told their children about these accounts that they opened for them) -- it's just adding to the wealth they might be inheriting with no discernible purpose other than to add wealth to their children's net worth at their retirement.

I think many parents become enticed by funding Roths and adding to the wealth for children (starting out as soon as their children earn income) when the better play to me would be to strongly encourage them to fund their own Roth accounts, even if the Roth contributions are modest ones. It strikes me that this would make children more responsilbe for their financial independence. My 3 children all put away very modest amounts into Roth accounts when they were working in high school and college -- each one put away $75 per month (and continued way into gainful employment) until they were no longer eligible to make front door contributions. It was more important to me that they save, rather than I save for their retirement.

RickBoglehead
Posts: 802
Joined: Wed Feb 14, 2018 9:10 am

Re: Helping Adult Children (but not too much)

Post by RickBoglehead » Sat May 26, 2018 7:02 am

There is no right answer here, because whatever you do, or don't do, someone is going to say it's too much, or too little.

We have a 30 year old and a 25 year old. 30 year old was living on his own years back, and decided to apply to an MBA program, with his retail store employer paying a good portion of the cost. He knew we had 529 funds that his undergrad tuition had been paid from, and that his younger brother was using 529 funds at that time. He asked if there was anything left to cover what his employer wasn't and we looked and said sure. Once he completed the program and moved out of state that was the end of that.

Younger son's undergrad and grad paid for by 529, he lived at home after grad school but finally left. Not only did we NOT pay for him to live at home once a few months had gone by but we started charging him rent to give him the incentive to leave. He didn't get the idea, so we increased the rent. He still didn't have a job, and didn't leave, so we increased it more and basically took all his savings from a co-op and two summer jobs during college, but this went on for almost 2 years. Then, since he was out of money, we gave him a deadline to get a job and start making payments, or he had to move out. He got within a week of the deadline and got the job of his dreams. But he had no money to relocate, pay first and last, etc., although relocation and temporary living expenses would be reimbursed at a later date by his employer. We discussed with him eliminating the rent debt for the 90 day period prior to his getting the new job (but not the remainder), and loaning him money (interest free) for 90 days to get him started, with a signed agreement that he paid us back no later than 90 days later. We also insisted that he take more than he needed and fully fund his ROTH IRA for the prior year (this was before April 15th of the year we were in), up to the max he could based on the small amount of earnings he had. He repaid some of the funds, and then missed the deadline. Gave him a few days, called, and asked where the funds were. His employer's repayment of moving costs had been delayed, but he hadn't seen fit to inform us. Gave him 3 weeks more, and the funds fully arrived.

Each year IF we decide to go skiing, we usually invite both of them. They pay their own travel costs, we pay for the lodging, food, and lifts. Otherwise, no other funds.

When my FIL passed away, my wife inherited low 6 figures. We decided he would have wanted each boy to get some, so we gave them $10,000 each from him. We suggested that he would have wanted them to fully fund a ROTH IRA for the year, then spend the rest as "mad money", his term. They did whatever they did.

We have 6 figures left in 529 accounts, and plan on these funds being used for future grandchildren's college, but since neither has yet married nor have children, we haven't said a word. Figure we'll kick in some on weddings, but will ensure that things are equal all the way down the line. We haven't told either of them what our estate is worth, but they do know that they are now added to a deed for our cottage (Lady Bird deed) that we inherited from my FIL, but they obviously know that our estate goes to them, they just have no idea of how much that is.

IMO, once they are living on their own with a full time job, it's up to them to cover their costs. We have friends with kids in their late 20s, some living at home, some living in other cities, and they continue to pay a good deal of their expenses. To us, this is nuts, but the kids aren't ours, so that's not our business.

Leemiller
Posts: 1051
Joined: Sat Jun 01, 2013 12:42 pm

Re: Helping Adult Children (but not too much)

Post by Leemiller » Sat May 26, 2018 9:38 am

I don’t think being poor benefited me. Also, I think it delayed my having kids and buying a home, so I will be helping my own children. Besides they will inherit seven figures - I’d rather see them enjoy the money now. For now my kids are young but once they get a job, I’m contributing to their Roths to the max.

Cruise
Posts: 621
Joined: Mon Nov 21, 2016 7:17 pm

Re: Helping Adult Children (but not too much)

Post by Cruise » Sat May 26, 2018 10:20 am

Three financial gifts received from my parents were enormously helpful.

First, a college education.

Second, a car that enabled me to easily commute between my residential campus and a science campus. (Having easy access to the science campus resulted in me getting a graduate student fellowship even though I was an undergrad, and launched my eventual entry into grad school and my career. )

Third, my parents helped my wife and I to put a down payment on our first home. Thirty years later, their $10k gift has grown to $1M in home equity.

My parents were not highly educated and were of very modest means. They were frugal and, in retrosospect, were great investors in their children.

Locked