I read a few posts lately about generational wealth transfer, and now that I am in my late 30s, I still have friends around who think nothing of having their parents pay their rent (“but I HAVE to live in a 2 bed place, and I can’t afford it!”), cell phone plan (“but it’s cheaper because it is a family plan”), or any other splurge (“they paid for my ticket to Bali otherwise I couldn’t have gone”).
I read a few posts lately about generational wealth transfer, and now that I am in my mid 30s, I still have friends around who think nothing of having their parents pay their rent (“but I HAVE to live in a 2 bed place, and I can’t afford it!”), cell phone plan (“but it’s cheaper because it is a family plan”), or any other splurge (“they paid for my ticket to Bali otherwise I couldn’t have gone”).
My case is pretty different. I left home at 17, paid my way through college and have never received more than a little cash for birthdays from my parents. My mum paid for a one week holiday once, and when she came to Guatemala with my sister she also paid for our expenses. When I am in Paris I do stay with her and expect to be fed and pay no rent, which averages a couple of weeks per year over the past 15 years. She is a primary school teacher who gives a ton of private tutoring classes after school so she can save enough for retirement as she stopped working for 15 years to raise two daughters. So she has cash but doesn’t spend on herself much, and when she asks me if I need money, or if she would like me to pay for a treat I am talking about at the time (new laptop, flight ticket…), I always say thanks, but no way.
I couldn’t possibly accept her money as she works 60 hour weeks so I could go on holidays! Plus I don’t need it in the first place, but if I had a hard working parent and was in need, I’d try to hustle as they do before asking for help. She did lend me money several times so I could snatch an investment opportunity without having to go to the bank, and I repaid her every time, with a 4% interest that was favorable to both parties, as her savings account gave her 1.5%.
The only way I feel conflicted about accepting money from her is I know she will leave a lot of cash behind as she spends close to nothing, and that will be heavily taxed by the French government, so I’d rather enjoy her tax-free money today than give half to the state when she passes.
Does it change anything when your parents are loaded? I guess the guilt wears off as it “costs” them less effort and % of their net worth to pass on their wealth to you.
My opinion on that is often, the trade-off for giving you money monthly, when paying part of your rent or utility bills is that you have to see them once a week, or holiday with them in summer. Remember Gilmore Girls when they had to have dinner once a week with the grandparents or they would stop paying college tuition at Yale?
That puts you in a beggar’s position. I have seen parents give money to their adult kids every time they visit. So are you really going because you genuinely enjoy your parents’ company or you need cash?
Parents, you are not doing your kids any favors by doing that. You are maintaining them in an artificial lifestyle they could not afford on their own, only resulting in them never having the urge to earn enough to deserve such lifestyle and becoming lazy entitled adults.
We never received cash from my grandparents, but every year, they would take the whole family somewhere nice, for a week long holiday. All 20 of us in a 5 star hotel must have cost a pretty penny, but I would rather have the memories of those fabulous holidays, than an inheritance in the bank and no family memories. When we would visit, the table was always full of good food and expensive wines. Yet the only thing they paid for their adult children was an education. No downpayment, no car, they assumed that once you had a good set of skills, you were good to go.
So for me, it is a strong NO on financing splurges, or receiving monthly money to live an inflated lifestyle and pretend you earned it. However, looking at the tax benefit of passing on wealth to your kids as you are alive, I’d be willing to accept a downpayment, or parents funding my kids’ college fund, or a stock portfolio. Not money to blow up, but money that will otherwise be partially confiscated by the state, as a bitter thank you for all their years of hard work and diligent saving. I would like my mother to die penniless, having passed all her estate to her daughters, while we would cover her health expenses in her last years. I think it is also kind of nice that your parents help you buy your forever home while you are young, so you can have memories with them in the home, instead of having to move every time you add a child to the family.
I think it really depends on the situation. I know some people who still get help from their parents and it’s very obvious that it has contributed to their laziness. I think parents can help, but they need to be active in making sure that their children are still working hard.
That being said, I haven’t had any help since the day I turned 18. I’ve completely lived on my own, been paying my own bills, and everything else since then. I turned out fine! 🙂
Me too, but when I think about having kids, I want them to have it easy. That is a very fine line between helping and spoiling.
Anne @ Unique Gifter says
I am in a rather different spot. Both of our parent’s give us money, in different forms. Sometimes they are interest-free loans, because they are able to give us better rates than the bank, sometimes it is refusing to let me pay for groceries when they are visiting, other times it is trading an old car for a different old car. All of that said, it is money that our parents can afford to spare, and we absolutely do not need it, which they know. They want to give it to us. Thankfully there are no inheritance taxes in Canada.
Wow I might die in Canada then! inheritance taxes are barbaric, if you have already paid property taxes and capital gain taxes on the stocks, why pay more?
My parents never had any money, so it was never a problem i had!
I do work for a wealthy man, and i often wonder how he will motivate his children to work. they’re all adults now, and do work for the company, sort of!
They think nothing of him spending enormous amounts of money on them. However, he likes that position too, and since he’s worked consistently hard his entire life, and took the risks, who are we to say he shouldn’t do that if thats what he wants. It’ll be theirs when he dies anyway.
It will be the kids’ money, but it would hurt to imagine them blow in two months what he made in two generations. If he enjoys having them like puppets around, even worse. I would never condition giving money to kids.
Anton Ivanov says
It’s definitely a very touchy topic but based on everything I’ve read, when parents routinely give money to their kids, it doesn’t promote good financial habits. It’s all about phycology, really – why do I need to try hard, when my mom and dad can just help me live a lifestyle I can’t really afford.
It’s not easy, but it’s something parents need to understand. If they want their kids to be financially independent and successful, they need to stop subsidizing them.
It has to be tough to have money and not spoil the kids. You want the best for them and sometimes the best is nothing.
Stefanie @ The Broke and Beautiful Life says
I got my non-scholarship covered education costs funded by my parents and I couldn’t be more grateful. Not having to start my already cash strapped life deep in debt was a game changer.
That is really kind of them. I think I may do the same if I have kids, but just so they can survive, any luxury they’d have to pay for.
Kayla @ Femme Frugality says
Interesting article. I still receive some benefit from my parents, like my dad will pay for lunch out occasionally, but the rest of the time he eats lunches at my house on my dollar that I spent for groceries. We try to balance things out for the most part. But, I do owe my parents quite a bit of money. They helped me when things got tough after my divorce and they also helped with the down payment on my house. I’m trying to pay them back so they don’t feel like they’re being left to the last of my debts, but it’s hard to continue to pay over 20% interest on credit cards when my parents are charging 0% interest.
My mum gives me 4% loans when I need cash to invest, so I get what you mean and don’t consider it handouts, since those are loans. And lunches out, well that’s their job 🙂 there is a saying in Spanish “if you want to see your kids, invite them to eat”.
I don’t think it really has anything to do with whether the parents can afford it (except to say that parents who can’t afford it shouldn’t be giving their adult children money), but more about whether it will help the children succeed or be a detriment to their growing up and becoming adults (the tem “adult” here means self-sufficient). There is nothing wrong with parents giving gifts like taking care of meal when they are in town or helping to pay for grandchildrens’ college funds. I actually think that for adult children who are mature and self-sufficient it actually makes sense sometimes to give money early rather than save it all as an inheritance (I even wrote a post on this: http://smallivy.wordpress.com/2013/08/05/is-an-initial-nest-egg-better-than-an-inheritance/.)
The problem is when Mom and Dad are propping up their children in a lifestyle the children cannot afford on their own (for example, paying their mortgage or rent, paying their phone bill, and paying other bills because the children are choosing things they cannot afford and wouldn’t have been able to choose if Mom and Dad weren’t paying the bills). This means that if something happened where Mom and Dad could no longer pay their bills the child would be in for a world of hurt because he/she was in an unsustainable financial situation. It is also not good to pay for things like rent and phone bills if the children are putting other more frivolous purchases ahead of necessities (such as spending money on beer that could be used to pay for the cell phone). This is keeping the children from learning how to properly manage their money. Perhaps if the cell phone was turned off when they spent the money at the bars of they needed to make rent before going on a trip they would learn to think about money differently and get priorities in order.
The other time that giving money is not helpful, which particularly happens with the children of very wealthy children, is when doing so keeps the children from making anything of their lives. Children who are given anything never need to go out into the world and do anything for anyone else. Someone who needs to wait tables or sweep floors is doing something that helps other people, giving their lives purpose. Just because they get a paycheck for doing so doesn’t make the act any less important. Parents who don’t make their capable children earn a living enable them to live lives that are really empty and meaningless. That is truly tragic.