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How much financial help should parents give their children?

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AUTHOR: Jonathan Clements on 3/20/2021
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Tom Dee
1 year ago

I’m financially fortunate to fund my two kids Roth IRA’s each year since they turned 21. I have fun managing them through a brokerage account but they are not at all interested at this time in how they are being managed. I intend to educate them as they get older but it’s a hobby fior me now in retirement. I hope they never have to touch it until they turn 59 1/2 and I probably won’t live long enough for them to see the fruits of my labor but I feel it’s better giving it to them this way now as opposed to them getting it all after I die.

BenefitJack
1 year ago

I continue to assert that I had the best childhood of anyone I ever met. Most of the gifts I received were the result of parental supervision and love, coupled with learning from four wonderful siblings. That was my “privilege”.

However, the most memorable financial gift was from my mom, in August 1974. She had suffered with me when I flunked out of the college of engineering in 1971. After spending a couple of years wearing the green, it was time for me to return to school. I was in debt, and my student loan applications had not yet been approved.

Somehow, someway, my mom, with five children, two others in college, two minors, and after having been a widow and single mom for the past four years, scraped up $500 she did not have and loaned it to me to register for class.

Timing is everything – that $500 in 1974 was more valuable to me than any other financial gift I have ever received.

For my own children, I did set aside money at birth based on the “long term” investing decisions of Ben Franklin, the first American, through his gifts at death to the cities of Philadelphia and Boston. Learning from Ben, I decided to make that investment upon my children’s birth – a set aside, just in case history repeats itself.

I encourage you to read the book – Ben Franklin’s Last Bet, published in the last few months. However, Ben wasn’t as much focused on creating millionaires as he was in lifting up everyday folks into skilled tradespersons – what would someday become America’s future middle class.

Don’t limit your gift to children, reach out to grandchildren and, if you have the means, neices, nephews, and even unrelated children – ensure they learn about the time value of money and its potential to work wonders.

Be thoughtful AND educational with your gifts.

John Chapman
1 year ago

It is hard to know the answer to these questions. Presumably the writer accomplished what he did in large part because of the fear of the financial anvil hanging over his head. He has removed that fear from his children, which will probably make their lives more pleasant but less productive.

Dan Sturgis
1 year ago

We were fortunate enough to have helped our kids. We paid for college (although both worked) but not for graduate school. We helped with mortgages with low cost loans, but with contracts and mortgage agreements. This was designed to help them understand business. We have had very successful kids, who have always paid their bills and they have always had the security that we had their back. Some of our children’s same aged kids were surprised that we had written financial agreements. It wasn’t about trust but that we wanted them to understand the process, debt, and credit.

John Wood
1 year ago

There’s obviously no one answer to this question. For me, I’d much rather spend the money to help my kids successfully launch into adulthood when they could use the help, when that help carries so much more positive leverage in their life, and when I can witness them benefit from it, than to leave them a bunch of money when I’m dead, and they’re old and don’t need it.

Boomerst3
2 years ago

I grew up in a housing project. My mother was divorced and raised 3 young children. We received money from AFDC (Aid to Families with Dependent Children). I was able to get into college with the help of a program for poor kids. I had a very good career. Fast forward and I paid for my 4 kids college. None of them had college debt. They all have very good jobs, but in this current housing environment, I gave each a 20% deposit to buy their first homes. They and their spouses all work hard and are very appreciative that we helped them. I didn’t want them to have to struggle.

evan rayers
2 years ago

All the help in the world,… funds for subsistence & a few or no more than subsistence funding.
It creates incentives.
We all came up with our own plans, paths, schemes & devices. Ever hear of stevedoring?
You empty 1 freight car you get $X, you do 2, you get $2X, & so forth.

Many workers can do 2 per shift.Two shifts a day. Particularly combat veterans akin to Israeli upbringing on the other risky investments.
I’m no educator, never wanted to be. Mike Pompeo, Secretary of state & head of the CIA claimed the Teachers Union more formidable to the USA than Osama’s days.Look it up.The www helps many these days. In the 1960/70s arose a educational racket. (imo). 50% Of all applicants never graduated, but paid 50% according to John Stossel & Jordan Peterson, both Canadians. iirc,

Money will never be given to anyone for free as a allowance. Anywhere except at home.

ITT tech, was near 40k+
A friends loss not mine.
There are many unaccredited higher ed locations..
Good luck & Best wishes………

Last edited 1 year ago by evan rayers
evan rayers
1 year ago
Reply to  evan rayers

I find it ludicrous all the negative red scoring of truths.
I saw a environmentally driven individual attempt to interview “Fresh Whole Tuna” Non-profit charities, turns out they sell their stamped endorsement with little oversight to whomever will pay for it. NO Oversight nothing thing else.
SAD. Employees realize it also.

cmkopp
2 years ago

One solution for grandparents who want to pay grandchildrens tuition is to delay paying for college until the students senior year. The student uses whatever financial aid they are eligible for and makes up the difference with college loans. Then in the senior year, the Grandparents pay off the loan. Or continue through graduate school and do it then. Interest is deferred until after graduation, and the payments could be spread over a few years to minimize any tax hit for the student.

Last edited 2 years ago by cmkopp
Mike Drak
3 years ago

I wanted to give my kids a good start in life so I made the pricey decision to pay for their education and had to put a mortgage on my house to do it. I still view it as one of my better investments.

Jackie
3 years ago

I was an immature kid – I did a tour of state schools of Ohio before finally finding my footing. My middle class parents gave me no financial help; I worked part time at low-wage jobs through many years of undergrad and took out a few loans. For me, this turned out to be the best gift. The long tour through school (and unemployment – still with no help) allowed me to mature and focus. When I was finally done and landed a great job at a great company, my self esteem was sky high and I knew I could accomplish anything.

I have many friends who’s parent’s wealth derailed their personal lives because they lacked perspective. No job was ever good enough, no potential mate was ever good enough (for the wealthy family) and their spending was out of control – so even trust fund kids are hurting now.

Now school is impossible to pay for without help or huge loans.

Assuming my daughter is able to focus appropriately (not sure, she’s a little immature too), I plan to pay for undergrad, but expect her to earn some money during the summer.

We are much older parents and plan to leave her a meaningful inheritance. But despite our estate attorneys suggestion, she won’t get it until she’s much older; I do not want to derail her career or the self esteem that comes with it.

Roboticus Aquarius
3 years ago

It’s so much an individual choice, based on the parents, their financial status, their children, and their children’s choices. Beyond the emotional bonds, I feel a moral duty to help prepare them for the world they will face. Sometimes that means financial support. Many times it’s something else entirely.

We are giving far more to one child in the way of education; we’ll be giving far more to the other in terms of lifetime security (he has special needs.) I’m not sure there’s a way to treat them equally, but we can help them each get to where they can stand on their own.

Irene2468
3 years ago

My partner and I have one child who has chronic health issues. The level of financial help we aspire to provide for our child is lifetime financial security. Saving for our retirements has been our first priority for many years, with the hope that we can leave enough after we’re gone. We are now looking into an ABLE account and trusts.

I like your description of how you are supporting your two children in different ways, each according to their needs, R.A.! It is a different experience to provide financial help to a child with special needs, one that I have found to be a great source of anxiety. I’m glad you wrote about it here.

R Quinn
3 years ago

I never received any help from parents, never asked and they were not able to assist in any case.

Perhaps that’s why I feel the opposite. I see it as an obligation and in a way a privilege to be able help children if they truly need it from time to time. That’s especially true for college.

We are also helping to modestly fund 529 plans for 11 grandchildren. If I can help it, I don’t want anyone to get a degree going nine years at night while trying to raise a family as I did.

Edwin Belen
3 years ago
Reply to  R Quinn

Nine years for me too. Hence why I pushed hard for my son to have a good college experience, which included study abroad in Argentina, no debt and completion in 3 years. Very fortunate to be able to help.

Jim Wasserman
3 years ago

My parents helped me with college, but when I said I was thinking about taking a year off to see the world, my father said, “As long as you are preparing for life, I’ll help. Once you decide to have a life, you are on your own.” Not only did that encourage me to stay in school and finish, but I used the same outlook with my sons.

Tom Kubik
3 years ago

i helped our kids early. Taught them about money and credit beginning in junior high. By the time they had to make financial decisions they were armed with knowledge they hadn’t learned in school. If you young parents will do this you’ll likely find they need no help once the are on their own.

Jiab Wasserman
3 years ago

My general rule of thumb is to give help (both financial and non-financial) enough to help them be self-reliant. I go by this famous quote “If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.”

For my family, we have taught the two boys how to fish by supporting them through the highest levels of education they want to pursue. We paid for all their bachelor’s degrees’ expenses. If they want to pursue a graduate degree, we would be happy to support them as well. Although it turned out that either one didn’t want to pursue a graduate degree.

Jiab Wasserman
3 years ago
Reply to  Jiab Wasserman

I also want to add that this attitude is more common in Asian families like mine. My parents supported all their four children’s college education so obviously, I’ve inherited this culture and tradition. I also think that with the rising cost of college educations, it is much tougher and maybe even impossible to do so nowadays.

David Powell
3 years ago

Give what each uniquely needs, and only if you are able. Not having to support your parents late in life is an important form of financial help to children.

Ronnie Rawls
1 year ago
Reply to  David Powell

I agree with you wholeheartedly. My folks seem concerned with leaving an inheritance for the three of us, each of whom they’ve assisted over the years whenever we had need (with college costs, first cars, getting started in our first homes, etc.). They are naturally loving and generous individuals. However, I’ve told them many times that the greatest gifts they’ve ever given us is that they took care of themselves and each other, and they planned for their own futures. They are both healthy, and they’ve down-sized over the years (a sorting and purging task that will also save the three of us time and effort later), into a lovely home in a well-kept community near all of us. We don’t need an inheritance. We’ve already been richly blessed with everything we could ever have asked for.

Rick Connor
3 years ago

This is a very tough question, and very individual. I think it is important for parents to be financially secure. Otherwise they can become the ones who need the financial help. After that, it’s up to each parent to decide what they want to do. I would want to make sure the children were responsible, with a work ethic. I wouldn’t want to create dependence, or too great an incentive to not work. As with most things in life, it requires judgment.

Kristine Hayes
3 years ago

I can’t answer this from the standpoint of a parent-I don’t have any children-but I can say as a child, I certainly haven’t ever expected any financial help from my parents. My family didn’t have a lot of money so I grew up knowing I’d need to make it on my own, so to speak.
I paid for college with no financial help from my parents or any other relatives. My parents did allow me to live at home for the first couple of years of my college education so that helped me save some money. I didn’t own a car of my own until I was in my mid-twenties and holding down a full-time job. The first house I owned cost less than most luxury vehicles do today.
Ask me and I’ll tell you I think too many parents subsidize too much of the child’s lives. I’ll tell you I think grit and dogged determination are built from enduring struggle and making sacrifices. I’ll tell you I think children appreciate what they earn more than what they are given.

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