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SHOULD LEAVING money to our children be a formal part of our financial strategy—or should we focus on our own wants and needs, and let the chips fall where they may?
My wife and I have four children ages 45 to 50. They’re all married and, between them, have 13 children ages five to 17. They’re also all college graduates, with almost the entire cost paid by my wife and me. Three have master’s degrees. Arguably, we did our job when it comes to our children. They were given every opportunity.
Since graduating college, however, all four have had more employers than I did in 50 years. None has a pension. Only two have a 401(k), one with the employer match suspended. Raises have been scarce. One son works on commission.
Like many Americans, they’re caught in the crunch of saving for both their children’s college and their own retirement. They’ll have kids in college—some just starting college—when they reach retirement age. By contrast, I was age 55 when my youngest graduated college.
Here I sit with a pension, Social Security, no debt and investments I don’t plan to spend. Instead, those investments will be liquidated only if I predecease my wife and she needs the money or if there’s an extreme emergency, such as long-term-care expenses in excess of what our insurance will cover.
I’ve made it clear in the past that I’m big on reasonable frugality, living within your means, personal responsibility and so on. And yet I very much want to—and am planning to—leave as much money to my children as possible.
Is there any contradiction between my advocacy of personal responsibility and my determination to help my kids? There would be if I concluded my kids weren’t responsible individuals. But that isn’t the case. I don’t expect them to be exactly like me and I hesitate to hold them to my somewhat unique standards.
What if they violate my financial philosophy with the money we bequeath? I can’t do anything about that. But in any case, they won’t be receiving enough to become beach bums.
Admittedly, I occasionally cringe at how they spend money. It just isn’t what I would do. But they aren’t spendthrifts or, as far as I know, drowning in consumer debt. I have no reason to believe they’re financially irresponsible. I do know paying the bills, while saving for college and retirement, is a challenge for them.
My views on money were shaped by my parents, who grew up during the Depression of the 1930s. My parents were frugal, had no investments of any kind and what money they had was in a checking account. In retirement, they lived almost solely on Social Security.
My children grew up in a very different environment and society—one that’s more affluent and more consumption-oriented. That’s shaped their financial behavior. The fact that they’re married to people who also grew up in different environments and family structures also affects their money-related behavior. So be it.
Unless there comes a time when I see extreme irresponsibility, my goal of leaving them as much as possible will not change. What if I see irresponsibility in one or more of my children? I’ll leave their share of the inheritance to the grandchildren instead.
On a retirement planning forum, I asked, “Should financial planning include a strategy to help the kids and grandkids and, if so, how?” I wanted to know what people thought about having a well-defined strategy for bequeathing a significant sum, as opposed to leaving it to chance or aiming to spend the money yourself. I quickly learned how personal the issue was. Here’s a sampling of the comments I received:
The broad consensus among commenters: We aren’t planning to leave a legacy, but if there’s money left, that’s okay. In response to my question, a number of folks said they preferred to assist their adult children while they’re still alive:
Like the commenters above, no doubt readers of this article will have different points of view. I suspect some will see this as a “first world problem,” because they’re struggling to amass enough for their own retirement. For me, I see it as an obligation owed to my family. Yes, my wife and I are fortunate to be able to help our kids. But I can’t think of many better ways to use our money.
Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, he was a compensation and benefits executive. Follow Dick on Twitter @QuinnsComments and check out his earlier articles.
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Richard, thanks for the thoughtful discussion about leaving money to one’s children as part of a retirement plan. My wife and I are recently retired and have more than enough through a small pension, social security, and IRAs to support ourselves comfortably and travel. We have no mortgage and no debt. Two of our three adult children have finished college and are successful in their careers and reasonably frugal. We have no concerns about their ability to manage their finances and save for retirement. Our youngest, in his mid-20s, has struggled to launch himself in a career or in life. He is a creative guy who has worked independently; he sees himself as an entrepreneur but has no business acumen. We provide some support to him now and are trying to help him without creating dependence on ‘mom and dad.’ It is challenging. His siblings empathize with his struggles and do not appear to resent the additional support we provide to him. We subscribe to the idea of using our resources to support our children while we are alive and continue to pay for family vacations that they would not be able to afford with out our help. We’re trying to figure out how to structure things the next time we revise our will. (No grandkids yet.) Probably TMI but your article raised a number of great points.
My frugal and conservative sides make me very cautious when spending retirement assets even though I don’t need them to live on today. My number one priority is that if my wife survives me, she can live comfortably no matter what and never becomes a financial burden on the children. A financial planner may look at us and conclude there is nothing to worry about. But it’s not his wife and not what may affect his nights sleep.
Your children were part of your financial plan the minute you decided to have them. Why would you stop that plan at some arbitrary point? While your level of support may vary over time, it is in everyone’s interest to always have a plan — and evolve that plan as life unfolds.
For myself, I want to enjoy my children while I am around, and if my financial plan looks like I’m going to have a lot left over when I’m gone, I’ll revise that plan to spend more today. And what better way to spend than on your own family?
I expect them to make their own way (and well they have). But I also take great joy in sharing in their success, and sharing mine when I can.
“ Your children were part of your financial plan the minute you decided to have them. Why would you stop that plan at some arbitrary point?”
I wouldn’t exactly call one’s death an arbitrary point. It might be the least arbitrary point of one’s entire life.
Richard, thanks for a well written and enjoyable article. This is a fascinating topic that touches many people. Those of us who have had the experience of financially supporting parents often have a goal of “not being a burden to our kids”. Planning for a long life, and possible long term care, can free up your thinking for leaving a legacy.
For those planning to use their savings to spend more time with their children, make sure they want to spend more time with you.
Good article, Richard. I relate. We both received inheritances and that allowed us to put our three daughters through college debt free, and solidify our own situation heading into retirement. Top priority is making sure we do not become a burden to our daughters, and considering both my parents lived to be 97, we recognize the need for long term planning. Still, we hope to host some family get-togethers, seed 529 accounts for our grandkids, etc. We live a frugal life but enjoy it and occasionally travel. We have no debts and a pension covers our expenses pretty well. Feels like we have a pretty good balance, as long as the politicians do not try to confiscate our retirement nest egg to help pay for their pork.
Sounds like a good balance for sure. Just be sure your frugal life is not at the expense of enjoying your retirement years. I’m sure your daughters appreciate your goals but want you to enjoy your retirement.
One of our young adult daughters is going on 27. She dropped out of college, which we were paying for, without a degree. She works as a restaurant server in an affluent area and was doing OK until the pandemic. She was laid off from the good job that she had (even with health benefits, which is unusual in restaurant work). She has a new job now, but the last year has been a struggle, and we’ve been helping her financially.
She’s a hard worker and appreciates our help, but she definitely has a mind of her own. We begged and pleaded with her to finish college—she had just over a year to go—but she always hated school and just couldn’t bring herself to do it.
So we have mixed feelings about how much to help her. We love her and have a good relationship with her that we want to keep. We want her to thrive. But we’re not sure whether being her safety net is in her long-term benefit. Now, while COVID is still affecting things, is one thing. But two years from now? Five years from now? Just not sure. We can afford it—but should we?
It’s a tough one — and I’m not sure what the right answer is. One thought: Post-pandemic, you might continue to help financially, but not on a regular and predictable basis. That way, your daughter will be compelled to live within her income and have an incentive to earn more, but you’ll also have the pleasure of making her life a little easier.
I suggest you stop all forms of charity and monthly redirect to your daughter !
Good job by your daughter completing 3 years. If I had a daughter she would receive annual 30 k from us. Plus cash.
I have a niece with BA political science U Iowa and “Masters” Oxford UK looking for a job at 28. I also have nieces and nephews fully employed as MD, business partners, forester, nurses, computer analysts, PhD agriculture and adoptive Mom of four children in need . All these were excellent students, college graduates and all had challenges along the long path of life.
Many students are Columbus day drop outs. Drugs, alcohols and lack of discipline take out these students the first year with first set of exams. Yet you can make a come back from this experience.
College is not for everyone and many college graduates never make a living in their major. The last 2 years of college in most majors needs to be full time to get the required 50 credits of 300 and 400 level courses during the day.
A little secret just because a student attends 3 years of college does not mean one more year is required to graduate. In many majors you need to be all in and study like a maniac. Many students hit a brick wall when taking the difficult 300 and 400 level courses which require a pyramid of knowledge in your major.
First year all chemical technology students must take General Chemistry and Lab together not in normal student population. Add in physics and lab, calculus, English and economics no electives.
Example schedule of second year of AAS degree in chemical technology 1970s
0800 MWF Organic Chemistry
0900 MWF Chemical unit operations engineering
1000 MWF Analytical Chemistry and Instrumental analysis
1100 MWF Physical Chemistry and Advanced Inorganic Chemistry
1200 Lunch and study
Tu and Th Chemistry and engineering Labs to support above
“Free time” do problems, prepare lab reports and study.
Throw in your part time weekend plumbing job.
Date Saturday Night and Church Sunday morning.
Next year for BA Chemistry NO required 300 and 400 level courses offered at night.
MA Chemistry all courses at night but research required all day.
My buddy studied economics never exceeded 40 hours of study per semester and had a B average. He was also an auto mechanic. Another buddy majored in Biology, wife and two children, and worked 40 hr night shift on line at GM. He graduated was called into managers office and was made foreman. This accelerated his career 15 years.
Parents who did not attend college do not know anything about the commitment needed to graduate. Also most students attending college do not know anything about the commitment necessary to graduate and obtain a career in their field of study. Generally if you do not have a B average your not working in your field. This was based on 1970 s when there was one or two As per class. Now days a psychiatrist would have to be on stand by for one A per class.
Keep Smiling perhaps your daughter can finish up with some help or take another path.
I’m going to assume you don’t want your daughter to either starve or not have a roof over her head. In a similar situation, if I had concerns over how my former dependent might use a “blank check”, there are perhaps other ways to achieve safety goals while not feeling you’re in some way aiding and abetting. For example, while it may be a hardship for you, could your daughter move home, versus financially supporting an apartment. Same holds true for meals, she could eat at home. You could continue to dangle the offer for completing her degree, but that flirts with the idea of bribery which may not be well received. But nonetheless a challenging situation, my best wishes to you.
Just wanted to comment. I was offered a full ride to college by my parents which I refused and wanted to make my own way. It was my late-20s when I realized how held back I was by not having that degree. By this time I was married with kids, so I went to night school and it took almost 8 years for that 4 year degree. 8 years of missed jobs, promotions, and expenses that could have been take care of years before. One of my biggest regrets was not getting that degree when it would have been so much easier.
You might consider that instead of her knocking out that last year full time, just take 1-2 classes a semester. She will still hate it, but school won’t be her entire life. There is nothing worse than applying for a job that doesn’t require a degree, but everyone else that applies has one so you are immediately disqualified. An employer has to weed people out somehow, and a degree is one of the easiest. At the most basic level, it shows some level of commitment to a goal…..
Yes, I’ve made that suggestion to her about going part-time for a couple years to finish. She likes working better than school—she feels good about herself working and never did at school. Hopefully she’ll do that at some point soon!
A difficult decision indeed. You don’t want her to suffer, but you want her to stand on her own. I think the number one thing is making sure she is not taking advantage of you and that regardless of what she does work wise, she is doing her best and living within her means, not yours.
I can relate, I disliked school. I graduated high school with no thought of college. I started at nights after working five years and quit after one semester. I only started again to get an early out from the army and ended up going nine years at night to get a degree while my wife and I raised four children. It was not fun.
Knowing that compound interest and time is the magic of wealth accumulation my wife and I have aggressively set aside money for our four children in everything from Roth IRA’s, 529’s, and two trusts. One trust was seeded with a lump sum, and the other is seeded with our annual gift exemption of $15K from each parent. Even though we are in our 40’s we have decided to make wealth transference a priority for us. This strategy has taken a lot of cash flow to be diverted to the kids but we see this as a 10-15 year plan and then we will stop and let Mr. Market do his thing. My wife and I didn’t start giving to them until our retirement account was fully funded and we became debt free. They’re not spoiled on a day to day basis, clothes from LL Bean or Target, one gift for birthday’s and Christmas.
We have many many conversations with our children around spending, saving, giving, faith, consumption, happiness, and what success looks like. We are hoping that this sacrifice becomes a blessing and not a curse to them.
Scrooge_McDuck88 – That’s an excellent strategy. That was what I was trying to say above. It’s smart in so many ways, and teaches as it works. Large lump sums are difficult to deal with unless you already have enough money that it’s no big deal to incorporate within your finances. Now I realize not everyone can do this. But look around and you have to ask if there’s little financial wisdom passed on to heirs, are large lumps sums the unalloyed good we assume they will be? And what if your kids understood that if there was excess they’d be splitting a lump sum with a children’s charity for the benefit those without what they’ve had? Would this be an insult or a part of your legacy?
A lump sum without financial education and practice has little value to a good chunk of the recipients. There’s endless studies of lottery winners, insurance payees and athletes who get big bucks over a short period and end up bankrupt within a few years. At least inheritance and family wealth transfers are usually private and don’t make the recipient a financial target.
I show my kids what my wife and I have given them. I show them the account a few times a year and how it’s grown. We play with investment calculators and dream what it can become over the long run.
I also enjoy helping my grandchildren with modest monthly 529 contributions. It’s not much, but by the time they go to college it should cover one years tuition at a public school.
The thing is, you never know exactly how much you’ll need in retirement. A long term debilitating illness? Long term care? 24 hr in-home care? The unexpected cost of critical health care can quickly exhaust most family’s resources.
You save for the worst possible outcome (if you can), but most of us will have resources left at the end. And, in all likelihood, when you do die, your children will already have worked for 30+ years and their spending and saving (if any) habits will be well established.
Giving children a pile of money in their 50’s-60’s may not have the same impact as it would when they were younger. We paid for our son’s college education. We paid off his car loan. And, we helped him buy his first house. We’ll probably continue to help where we can without enabling him as the impact is more meaningful now, plus we get to enjoy making these gifts now, which we would not get to do if we left him a large estate at our deaths.
By comparison to what young people face today to save, buy a house and educate their children, my generation has been lucky and I see no reason why our children should not share in our good fortune. My intent is not to make our son rich, but its unlikely that he will have the retirement savings that I was fortunate enough to accumulate.
If you think you will have more than you will need, give it to your children or anyone else you want to help when you are still alive and they can “thank you” for it.
My mother left me a nice inheritance when she died at 90+. I was 60+ and didn’t need it. But when I was building a house 20 years earlier, I really could have used the extra money instead of depleting all my savings.
Richard, thanks for pointing out just how personal these decisions are, and how they’re not so much fact-based as they are family-based. As a general observation, it is kinda first world problem, where if you didn’t have the money to potentially give/inherit it wouldn’t be an issue in the first place. But if you find yourself on the giving or receiving end, then I’ve observed that there are both immense opportunities as well as pitfalls possible, and am not quite sure if there’s a guaranteed path to avoid unintended consequences. If my family, we have been fortunate in recent generations, and that good fortune has been applied primarily to education, but also to home down payments and potentially to other larger capital investments (car, etc., although that hasn’t happened yet). Most of all, I want my children to view wealth as a means to a beneficial end, not simply accumulation as the end result. They’ll each get to define the specifics themselves, that’s not for me to say, and thus far they’ve made solid choices. I’ve long understood that there’ll come a limit to my influence, ultimately lifespan limited, but in pragmatic terms we’ve set up what I think is a solid estate plan, and have had the discussions with the kids while we’re still of relatively sound mind. But if I were able to control all the chess pieces I guess I’d say I’d like my kids all to set up their respective families for some element of generational security, founded upon the firm base set up my me and my parents.
’m an 41 and my husband is 46. As we know pensions and extended employee benefits are of past. We plan to help with college but college costs have increased tremendously. We hope to provide support and do what we can. We hope to have a wonderful retirement and are working towards this. As we know we are not promised tomorrow. It will always be a balancing act and a little hope and luck on the way.
You honestly cannot think of many better ways to use your money when wonderful organizations like UNICEF and the World Food Program are doing God’s work around the world helping people who are suffering? We are so used to passing the money down in our society to our children that we so often overlook the children of others, especially in places where our dollars go much, much further than they ever would closer to home. Take off the blinders.
Bill- what makes you think that those whom are generous to their kids are not generous to strangers as well. I wasn’t aware it was a zero sum game.
Never said nor implied that. I was merely responding to what the author wrote: “But I can’t think of many better ways to use our money.”
My wife’s checking account is mostly used to write checks monthly to everything from St Jude’s to the Williamsburg Foundation and local food pantries, but what I have accumulated from a life’s work and risk taking will still go to my family.
My wife and I have been very cautious about undertaking financial obligations, and now at 79, we have none. No kids. Our savings are unencumbered. No one has any expectations of a legacy from us, and there is no one whose behavior I need to monitor.
I’m retired and only 20 years younger than my father, who is still alive. Many boomer children will inherit when they’re retired, but the grandchildren are the ones who can use the money, in many cases.
Dying broke is a nice fantasy, particularly if you have little or no defined benefit money coming during your 30-40 years of retirement. But making it happen is a daunting, if not impossible, undertaking.
How do you know whether you’re spending too much or too little, say 10 years into it? How do you know how long you’ll live? How do you know whether you’ll need extraordinary medical care at some point?
So the reality is, people who have saved enough in theory to make it will probably approach spending it with a similar eye toward frugality and conservative spending decisions. And as a result, they’ll end up dying with a large estate for their heirs, whether they want to or not.
In many ways, I’m thankful this is one part of financial planning I don’t need to think about. Money and families seems…complicated. I know one person who never saved a dime towards retirement because they assumed they’d be inheriting a large sum of money from a parent. I’m also currently privy to a family that’s essentially being ripped apart because of issues related to finances and inheritances. I think if I had children and was planning to leave some type of financial legacy to them, I would never let them know about it.
My children have no idea of what they may inherit, except their share of a vacation home which is kind of hard to hide. I can see what you mention being a concern and it certainly happens no matter how are we may try to avoid it.
More articles on this subject please @disqus_de9pQSMlr4:disqus
I would skip the kids and fund the grandkids education.
Loved the article Richard.
My wife and I decided a long time ago, before we had kids, that if we had children we would invest in them, and grandkids with one condition. We saw this investment at first more in terms of time required to seamlessly invest in them in all areas of life including values, faith, education, work ethic and service to others. So money is just one tool of many to contribute to our family capital that we’ve been trying to build up into a mini dynasty, so to speak, we visualized to have maximum influence in the world for good. So with this philosophy it’s a no brainier to add money to the equation to provided funding, as we are able to support them, if they are having growing impact on the world for good.
Thanks again for engaging article on a subject near and dear to those of us with children.
My parents decided to raise their children based on their current financial situation. They were doing much better by the time I came along. My upbringing was much more affluent than my brother and sister (another advantage to being the baby in the family…). They changed their will over the years, excluding one child completely at one point, but in the end they left everything to be split equally among the children. Bottom line: it wasn’t the percentage allocation, it was how well the kids got along after dust settled. We did just fine.
As the apocryphal child who started with nothing, I’m extremely hesitant to pass money down to our children. The Millionaire Next Door by Thomas Stanley made it clear that successful 1st generation millionaires typically had mediocre results funding their own children since it reduced their motivation to succeed.
One can argue about the relative work ethics of poor 25 year olds vs. inherited wealthy 25 year olds, but my personal experience has been the vast majority of the former work harder and take more personal responsibility than the latter. It’s often painful to see how very differently their children turned out from our self-made wealthy friends. Sometimes that’s simply because the parents demand bended knees and social compliance in return for the financial gifts (which are hardly gifts in such cases). More often, it’s because the children never experienced hardship and lack empathy for other people.
I don’t believe that opportunities were better in the past for young adults and today’s world is dire enough that middle age must be subsidized by a wealthy parent. There are far more ways to generate wealth than ever before, but the lessons we were taught as children decades ago just don’t apply for most Americans todays. Lifelong employment, raises and pensions are all long gone.
“Give a man a fish, and you’ll feed him for a day. Teach a man to fish, and you’ve fed him for a lifetime” rings true for me. We spend a considerable amount of time teaching our children about personal finance, entrepreneurship, creativity and independence. They’ll have a tremendous advantage with that knowledge along with tangible things like Roth IRAs funded at an early age from their own earnings. However, we’re far enough from retirement and our children are young enough that it’s still an open question about where the money ends up. Most likely, it will be like borrowing from the bank. You can have any amount you want after demonstrating you have no need for it at all. 😉
Loved the article and the comments. Would like to see more articles about this topic. Not sure what is best? Could use some wisdom.
I dunno. I have qualms about “leaving as much money as possible”. My first priority is to get open IRAs (and solo-401k for self-employed) that I’m committed to funding. Then when I’m gone they’ll have those habits, or at least knowledge of what those habits do to hopefully continue. Sure they’ll get some form of a lump sum too, but frankly I’m wary of the moral hazard of leaving them too much. I’ve seen the challenges facing people getting large lump sums and some of the unfortunate consequences. It’s a difficult problem, and frankly I’m glad I didn’t face that until I was older. My dad did well, but I’ve been lucky enough to do quite a bit better so a large sum of money (even split with my siblings) didn’t seem that large to and it was effortless for me to use it. I’m so thankful that it’s a small number for me. How to think about money is a deep existential question and for some reason we think only fools and wingnuts are corrupted by, or struggle to manage without regret, large lump sums. If only. The reality is quite different. I’ll leave a lump sum, but my kids will also know there is quite a bit they won’t be getting and why. They’ll know the real work is in building their own nest egg while I’m alive, and I’m going to be asking them about it constantly as a part of their education. Now if there is a special need or worthy project then all bets are off. Maybe it’s carte blanche. But I’m not leaving carte blanche in the form of a blank cheque after I die. I see that as problematic.