A blueprint to set your grands up for retirement.

[Snobdds]

Work ethic doesn't mean squat if you don't know how to spend it wisely. It also doesn't mean anything without learning how to keep others for taking credit for your work.

Sounds like you've been jaded about work, at least once in the past.

 

[EscapedSuburbia]

I think the idea of trying to set up your family for "help" with their future is an honorable thing to do. However, if it's done wrong, it could lead to the opposite intention. I think all "help" should be made with very little fanfare. They really shouldn't even know about it until your dead, this is called managing expectations.

I agree that giving to your kids needs to be done carefully but disagree with waiting until you're dead. Both my parents and my wife's died after we were well established and had no need of an inheritance. The money would have been much more helpful when we were buying our first home and raising our kids. The trick is to gift without taking away incentive to work. It's a balance that's going to be different for every child. We're helping our children with largish gifts because they've shown themselves to be responsible and are saving at a good rate on their own. Homes and daycare are a much larger percentage of income than they were when we were their age. I'd rather gift them money at an age when it can be most helpful and my wife and I are around to see it. In all likelihood we'll be dead when they're established enough that an inheritance won't matter as much.

 

[Fuddyduddy1952]

The problem with the government giving a grant to every newborn vs social security though is that's tax revenue vs paying ss as one works. Then what happens to the $1,000 if the child dies before payout time?

 

[California]

When I call up my Fidelity account there are actually seven different sub-accounts.... beneficiaries are the five grandchildren.

Thanks RSKY for the good advice! I'll consider this approach.

As for sharing one's good fortune while the next generation are just getting on their feet, I think that's important.

It took me a decade of dropping out of college to work, several times, before I earned my BA. With zero help, or gifts, from parents. Employed as a Carpenter, I finally started fixing and flipping rentals. This soon paid for my final semester, then my graduate degree. And was the basis of savings that let me retire from a professional career at 54.

Then - Dad died three years after I was retired. I, sister, and the IRS (estate tax on assets exceeding $500K back then), each inherited 33% of his savings. We sure could have used some that money, back in our college years.

 

[Snobdds]

Then - Dad died three years after I was retired. I, sister, and the IRS (estate tax on assets exceeding $500K back then), each inherited 33% of his savings. We sure could have used some that money, back in our college years.

But did you die?

If you didn't than I bet you learned some stuff through the struggles.

Why people feel like they need to deny struggles to their family is crazy to me. We all learn through tough circumstances far more than the easy path.

 

[Torvy]

Yup. There's a good reason why many people have age requirements on their gifts. You give $100k to most 18 year olds and it will be gone in no time. Heck, even the idea of social security made many in my parents generation assume retirement was 'covered' until it was too late to do much.

Better option is to match their retirement funds up to a certain point.

This modern idea that kids should get the cash when they are young is short-sighted at best.

 

[Snobdds]

Yup. There's a good reason why many people have age requirements on their gifts. You give $100k to most 18 year olds and it will be gone in no time. Heck, even the idea of social security made many in my parents generation assume retirement was 'covered' until it was too late to do much.

Better option is to match their retirement funds up to a certain point.

This modern idea that kids should get the cash when they are young is short-sighted at best.

I figure it's better they find out gradually about wealth transfer than suddenly later.

I started talking to my kid about my money when they were in junior high. I did three things. First, I connected it with what was happening in our lives: "Dad can purchase "X" because he saved up enough money for it, "You can go to college because Dad (and Mom) saved up for it since you were little." etc.

Second, I started with generalities and broad statements and got more specific over time.

Third, I increased limited information and have started sharing more information over time.

After the kid graduated college, I choose to gift appreciated stock from my taxable account because it defers the capital gains. It also gives them a bit of incentive to save the money rather than spend it. But I also give them the option to receive cash at a lesser amount if they want. It was a big clue to me how the personal responsibility thing is coming along. The big thing for me was an accomplishment unlocks a reward.

That is how I gift, an accomplishment unlocks an incentive gift to keep stacking those accomplishments.

 

[grsthegreat]

I know a lot of 50 yo people that can blow thru $100 k in no time at all….my brother is one

 

[Torvy]

That's what happens when they don't learn to earn it.

People tend to blow through other people's money. When they earn it with their own sweat, they tend to be a bit more careful. Every rule has an exception. You just can't fix stupid.

We see it here quite a bit. People love to tell others to buy bigger and fancier. You need 2. Get a cab. Buy a 75 HP for your 3 acre lot.

Our kids were cranky at first when they compared how other kids were showered with stuff. Now that they are grown, they understand the value of a dollar and thank us for how we taught by example.

 

[California]

Our kids were cranky at first when they compared how other kids were showered with stuff. Now that they are grown, they understand the value of a dollar and thank us for how we taught by example.

Yeah. Gong up to play in the snow? Better hit Goodwill and look for ski overalls!

All their top quality North Face, Columbia, REI etc goose down cold weather gear was from Goodwill and averaged under $10 each. For something the kids used a couple of times a year. More recently I've been selling those items on Ebay for at least double what they cost.

Nearing college graduation, each kid has commented on most of their friends starting life with overwhelming college debt. While they are debt-free. We lived modestly and put away college savings in advance. Now today, that makes sense to them.

 

[RSKY]

That's why I like something with strings attached or maintaining some level of control. I created a 529B when my grandson was born. If he decides to go to college or a trade school he can use it for that, otherwise it can be rolled into a Roth IRA but he won't be able to blow it on a car. My kids both graduated college with no debt due to 529Bs my wife and I created when they were born. I wish it was still possible to work your way through college like I did because I believe people value things more when they have skin in the game but it's just not realistic anymore.

For my kids, I opened brokerage accounts for them when they turned 18 with $2k in seed money and made regular monthly deposits into an S&P500 fund. The money was in joint accounts that they didn't know about. Once they had launched and I could assess their work ethics and saving habits I turned the money over to them. They both have a good head on their shoulders and will use it for their first house down payment. They were pleasantly surprised when they saw how much money it was and it was a good lesson in the power of regular investments and compounding.

All I can say is FANTASTIC!

RSKY

 

[RSKY]

The problem with the government giving a grant to every newborn vs social security though is that's tax revenue vs paying ss as one works. Then what happens to the $1,000 if the child dies before payout time?

I have this set up so that if one of my grands dies their portion is equally divided between their siblings and cousins. I may have to rethink this but that is how it's set up at the moment.

With the government accounts I have no idea.

RSKY

 

[ultrarunner]

Yeah. Gong up to play in the snow? Better hit Goodwill and look for ski overalls!

All their top quality North Face, Columbia, REI etc goose down cold weather gear was from Goodwill and averaged under $10 each. For something the kids used a couple of times a year. More recently I've been selling those items on Ebay for at least double what they cost.

Nearing college graduation, each kid has commented on most of their friends starting life with overwhelming college debt. While they are debt-free. We lived modestly and put away college savings in advance. Now today, that makes sense to them.

College debt can be a killer… siblings and myself all worked in high school and through college… some did fully transferable community college and straight into third year university…

Graduating debt free is a tremendous advantage…

As a property manager I meet many still paying student loans into their 40’s.

None of us did the dorm life/expense… also a big savings.

Brother UC Berkeley grad successfully appealed saying he was self supporting, had a manager job that provided housing and 15 minutes from campus… commuted year round on a motorcycle…

The next generation is smarter… several scholarships to UC Davis… both athletic and academic… made a huge difference even being they all started with dorm life.

 

[Torvy]

Kids all managed their own way through college. When the classes are on your own dime, you pay more attention and are less likely to fail.

Scholarships are tied to maintaining your GPA. Oldest had a full ride. MS in 4.5 years. No debt. Works in his field (ChemE).

2nd one did a BSN/RN. Had a small scholarship and took a few loans. Paid them off already. Works FT helping deliver babies.

3rd one learned the hard way. Didn't listen to the advice and went for the more prestigious sounding school. All he got out of it was a gf and debt. He's waiting tables and going to CC. To be fair, COVID started just as he was finishing his 1st semester.

4th packaged AP and scholarships and finished in 2.5 yrs with no debt. Working in her field and lives frugally since she's a teacher.

All but the oldest worked in a Cafe from 15. RN did all of the way through college. Youngest worked at the university, too.

Kids need me for opinions, or a shoulder, or to borrow the truck and driver when they move. They can all manage their own lives. All learned to do laundry, cook and manage money (and excel) from us. Earning it was up to them. Now they chuckle at their peers who are helpless without mommy.

 

[ultrarunner]

I’m amazed how coworkers will take their kid to university and outfit the dorm room and meet with the RA, etc.

The only time my parents set foot on campus was graduation day…

 

[California]

I’m amazed how coworkers will take their kid to university and outfit the dorm room and meet with the RA, etc.

The only time my parents set foot on campus was graduation day…

I was at the midpoint between those extremes. Drove each daughter down to UC-Berkeley from an hour east of there, for dorm move-in. Then the next time I was on campus was for their graduation.

However - Christmas break, etc I made the round trip to fetch them home, and returned them. Each of them invited friends to come along. I named this service 'The Princess Express' to their dismay. They soon learned to use the inter-campus bus to UC-Davis then Davis's MedCenter bus into Sacramento, or BART/Amtrac to the Sacramento station, for me to drive there and pick them up.

Not having cars in college was a substantial cost savings.

 

[Torvy]

I’m amazed how coworkers will take their kid to university and outfit the dorm room and meet with the RA, etc.

The only time my parents set foot on campus was graduation day…

We only functioned as the movers, as needed.

Once or twice we visited (with kid's OK) for a birthday meal. Two were in schools less than 30 minutes away. The other two were 3+ hours away.

The 3/4 sang in college choirs and asked that we attend some concerts. The youngest still sings in an adult choir and wants us to watch sometimes.

Like with most things with our adult kids, we try to adapt to what they want rather than impose our preferences on them. They seem to appreciate it and all still visit or ask us to come to them. I'll take it.

 

[RSKY]

Both mine were told they were to work hard and make good grades in school. Both got scholarships and with the money from the state for their high school grades college was basically paid for with no cost to us. Well, we bought both new cars as the university they attended was a fifty mile round trip from home. (Have had nightmares about what can happen to a teenage girl broke down on the side of the road. Long story that cannot be told here) They lived at home, neither wanted the college dorm experience, and even their gas for commuting was paid for by the state. We did pay for the youngest to get her MBA and for the oldest to get her National Boards Certification. Neither of those could be covered by scholarships. Anyway, their university education was paid for and that is one reason I was able to retire early.

RSKY

 

[Torvy]

I hear you. We almost forced the 2nd one to live on campus her freshman year. It helps to learn where things are on campus and to get involved in study groups, etc. She was only 20 minutes away. Came home every weekend to work her job. After freshman year, she lived at home to save money.

Wife co-signed on her car loan. She paid it off early because interest was high due to limited credit history. Just an old Kia she later sold to her younger brother for peanuts as she was employed and wanted a better car.

We got grief from a lot of people for having our kids pay their own way. They turned out pretty well.

 

[RSKY]

I've got to get something else going and quit posting on here. Having to stick around because my wife has a severe sinus infection and, worse, a possible kidney stone. The last time she had a stone it practically immobilized her. I had to basically carry and drag her to the car to go to Emergency Room. So I am afraid to leave her on her on.

But to change the subject a little bit. The most important thing in your child's future happiness in life is for them to pick a good person to spend their life with. Both of mine were sure and after more than fifteen years each it appears they were correct. I have acquaintances who are my age still working because after two divorces they don't have enough resources to retire.

We had friends of theirs spend a lot of time at our house because of their home situation. Daughters saw this and heard all the bad stories and really took it to heart.

RSKY