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Parent's letter to an 18-year-old leaving the nest
Old 11-27-2011, 11:12 PM   #1
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Parent's letter to an 18-year-old leaving the nest

TromboneAl asked a question in the gift thread (Less stuff more happiness ) about giving our daughter holiday gifts. We covered that subject (and a whole lot more) with her in the following e-mail that we sent for her 18th birthday. At the time she was in her first college semester and struggling with classes, NROTC workouts, and her personal spending habits. Now she's finishing fall semester of her sophomore year and things are going a lot better.

Ever since small-kid time she's been encouraged to only give us gift cards or hand-made presents. As she got older that expanded to home-cooked meals and car washes. When she left for college we said that she only needed to send us greetings & love for the holidays.

However my spouse and I spent our college years stumbling through the minefields of our own parents' expectations. That continued well beyond college to a number of other awkward family moments, so this time we decided to seize the initiative and set out the ground rules. Not that we're control freaks or anything-- we're just trying to do for the next generation what we wish had been done for us.


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Happy birthday!

Your 18th birthday also marks your independence from the family payroll and the end of our $$ gifts at birthdays & holidays. You'll continue to get the monthly iPhone funds from the college budget (on the first of the month) and reimbursement for college expenses (like textbooks that NROTC doesn't pay for) but both of those subsidies will expire when you get your diploma/commission.

The last transfer for your clothing/toiletries budget will happen next month. After that... well... you're a college engineering student now, so nobody will be surprised if you're ragged & stinky. You could always tell them that you're considering joining the submarine force. Or channeling Keith Richards (if you don't recognize that name then look him up!).

Your mother and I aren't sending a very consistent message yet, but you should attempt to live your life as if we're not giving you any more money ever. As you build up your personal property (like your collection of Navy uniforms) then you should consider insuring it with Armed Forces Insurance so that you won't have to call Mommy&Daddy to subsidize a recovery from fire/theft/natural disasters. You already know we're not planning to contribute to your first home, either, because you'll be saving for a down payment or using the special "first home purchase" feature of your Roth IRA. But someday when your kids are teenagers then we're willing to discuss using this home to send them to your ol' high school. Assuming you want your kids to have to deal with your old principal... or that the teachers want to have to deal with your kids.

Of course we'll buy you the plane tickets to visit here anytime. When we get together we'll still take you out for meals and we'll pick up the check, but there's a very good chance that in 50 or 60 years you'll be reciprocating this generosity by helping feed me MY food. As the parents of the bride I think we're paying a chunk of your wedding expenses, a subject to be discussed way later. We'll also spoil your kids with a trip to a Disney theme park once or twice a year, and we'll take them off your hands for an occasional sleepover or grandparents weekend... but we don't want to provide childcare so that you can go to work or stand weekend duty. We want to be "Navy Reserve Grandparents": one weekend a month and two weeks a year. We'd rather not care for the grandkids while you're on deployment, either, but we understand if that becomes necessary.

During this Christmas break (assuming you still want to come home!) we'll spend 20 minutes a day on the following independence tasks:
- transferring your funds over to Fidelity,
- setting up your NFCU CDs,
- splitting out your NFCU account from Dad's account,
- figuring out how to start your own credit history on your own credit card,
- getting an insurance quote from AFI and doing the paperwork,
- going over the college profit-sharing plan after you graduate, and
- your tax returns.

I have a separate lifetime offer for you, not as "Dad" but as "Coach". I've learned a lot of financial management skills over the years (many of them the hard way) and I can share the pros & cons of nearly every major financial decision (including marriage & kids). Your mother and I are more informed than most other adults of our age (with the possible exception of your uncle the CPA) and we're far ahead of anyone in the military. Please feel free to make your own independent decisions without consulting us. But before you sign any paperwork, please also feel free to tell whoever's offering you a good deal that you need to discuss it with your financial adviser-- and then give me a call. I'll show you where to educate yourself, what issues to consider, and what options you might want to choose. I promise not to criticize your lifestyle or your standards, although I may tease you a little.

We're glad the bike tools are helping! Some of my (old-school) ER friends suggested that if your bike needs work then you should just bat your eyelashes at a boy or two and see if they'd do it for you. I suggested that your new tools mean you can charge them $25/hour to show THEM how to keep THEIR bikes clean & maintained. When you come home for Christmas we should also cherry-pick a small starter-tool "home improvement" set. You don't need a packaged tool set-- you could buy a few select tools to someday mail ahead to your first ensign's apartment.

By the way, we don't intend to hurt your feelings or make you go "Aw, man!" with any of the preceding paragraphs. If we evoked those reactions then call us and we'll talk about it.

I've been wondering... do the other midshipmen call you "Nords" yet?
Noble parenting goals notwithstanding, I should point out that it's still a work in progress. So far so good. Zero drama or angst.

We don't exchange holiday gifts but I dump several books on her reading pile every year. (Now that I'm a hotshot blogger, I get review copies of new financial books and I hand them right on down the line.) We pass along freebies that come our way, like a Hawaiiana wall calendar that will make her roommates drool with envy. We send regular reloads of li hing mui mango and Kona coffee and other local cuisine not found in Houston stores.

Some things we do because we worry for safety. This year when our daughter wanted to visit her grandparents over fall break, she had a choice of a thousand-mile hypercaffeinated Cannonball-Run road trip in a car full of classmates, or of a round-trip plane ticket from Mom & Dad. I still have scars from the former so we were happy to contribute to the latter-- especially because we would've heard about it from her grandparents. When she comes home from college, the Hawaii flight boards at such an early hour that she'd be leaving the college campus at 4 AM. Instead of depending on the kindness of roommates or airport shuttles, we put her up in an airport hotel the night before.

Of course if she chooses to spend spring break wallowing drunkedly among the fleshpots of Padre Island, then she's on her own.

She's living in the middle of America's fourth-largest city, so she knows she doesn't need a car. She "makes do" with ZipCars and friends, and after a rocky start she's finally gotten that under control. When she was eight years old we put together David Owen's "Kid 401(k)" plan to have $5000 in her "My First Car" account when she turned 16 years old. Somewhat to my surprise (I know what I would have done with it at that age) she still has that $5000 laddered in PenFed CDs.

I've heard rumors that Grandma & Grandpa still drop checks on her for birthdays and Hanukkah. Her uncle & aunt may do something similar. She'll have to navigate those minefields on her own-- we still haven't figured them out.

I mentioned a "college profit-sharing plan". The deal is that she put her skin in the game for the NROTC scholarship (and the Navy service obligation) so after graduation we'll gift her some of the money that we otherwise would have had to spend on her tuition. Her side of the deal is that she has to use the windfall to max out her Thrift Savings Plan and her Roth IRA. Hopefully she'll appreciate the deferred gratification of a maxed TSP & Roth IRA contribution at age 22. I doubt I would have.

An unexpected bonus is that her NROTC unit requires her to apply for additional scholarships, and she's already won a couple. $250 here & there is a great self-motivational morale booster. She's also been leading $12/hour campus tours for the Admissions Office. (She's even "on call" for the Hawaii visitors.) What Admissions doesn't realize is that she'd pay them $12/hour for the privilege of bragging on her college to a bunch of high-school kids.

When she graduates, my spouse and I are keenly aware of what the military movers do to household goods. Our daughter's invited to pack anything she wants out of our house to her first ensign's apartment. Of course she's going to take all her bedroom furniture and she's welcome to take any of our other furniture. (If you saw our furniture, you'd understand why we're happy to give it away...) This promise has been a tremendous relief to her as she's watched graduating classmates struggle to furnish their first places. She thinks we're being extraordinarily generous but she hasn't yet realized that (1) there's a weight limit on military moves and (2) if she's going overseas then she'll barely have 400 sq ft to call her own.

Like I said, "work in progress". So far so good. What's worked for you with your young adults?
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Old 11-28-2011, 12:03 AM   #2
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You are great parents. I wish I was that good.
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Old 11-28-2011, 02:50 AM   #3
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Great parents for a great kid.
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Old 11-28-2011, 05:35 AM   #4
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Nords: I'm keeping this oneon file as my son will become a teenager next year! He's already amassed quite a fortune from a dog and kid sitting on base and I've played Rich Dad's Cashflow for Kids with him over the years.

Your e-mail is something I wish I had growing up instead of my old motto "a fool and his money are some party!"
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Old 11-28-2011, 08:43 PM   #5
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Quote:
Originally Posted by Nords View Post
Like I said, "work in progress". So far so good. What's worked for you with your young adults?
Not sure what part of "what worked" you are curious about, but a couple of things worked for us in instilling a need to for early retirement savings.
When our kids (2) turned 16 we were determined there would be no hangin at the mall all summer long. We challenged them to find something productive for those three months. Happily, they both chose to work.
In fact they both became lifeguards, which, besides rock star, was probably the best paying and responsibility building job they could hope to have. It was that jumpstart that lead them to both to become paramedics in college and eventually to their respective medical careers.
We told them both that we would fund an IRA for them and they could manage their earnings as they saw fit. They actually made some good choices. We did the IRA thing for four years each.
All four eyes glaze over when I talk retirement savings, but DD has resigned herself to 15% saving plan which I oversee for her. Off to a great start.
DS, on the other hand, is another story. He takes little interest in his finances. He is 5 months from finishing his residency and starting to earn some major bucks. My goal is to get him on the 15% plan and keep him from the leeches who haunt the hospital promising to take care of his future so he can concentrate on medicine.

I have addressed this by explaining to him that the first million is easy to simply plant in FIDO or Vanguard, keep balanced and go off to practice medicine. No so called "expert" help needed. We promised to talk at the million dollar point. Things are likely to become more complicated later.

The conversation I have with both every so often is pretty basic.
Me: If you retired to day, how much money would you like to have to sustain your desired lifestyle? $40,000? Not enough you say? How about $80,000? Sounds better? OK then, here's the challenge. Roughly speaking, you need one million bucks tucked away for every $40,000 you plan to spend. (eyes get big) Now you want $80,000 so you need 2 million. (eyes get bigger) Therein lies the need for at least 15% of every dollar you earn.
That's pretty basic stuff, but it seems to be effective in expressing the magnitude of the challenge.

I don't even know how that would work, but I figure if I can get them jump started on the 15% gig we can adjust later.

As far as the gift giving goes, we don't expect them to go overboard on us, but I have to confess, we really spoil them. I guess I'd blame that on the stupid rule that says "you can't take it with you."

You have some good teaching/action ideas, which I will likely copy.
Specifically--

transferring your funds over to Fidelity,
- setting up your NFCU CDs,
- splitting out your NFCU account from Dad's account,
- figuring out how to start your own credit history on your own credit card,
- getting an insurance quote from AFI and doing the paperwork,
- going over the college profit-sharing plan after you graduate, and
- your tax returns.
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Old 11-28-2011, 11:18 PM   #6
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I'm always looking for good ideas about raising kids. Maybe somebody should write a book about it.

I like your idea about offering to oversee their savings plan. If they're not hard-wired to tweak spreadsheets & retirement planners then the epiphany can take a long time.

Quote:
Originally Posted by JPatrick View Post
You have some good teaching/action ideas, which I will likely copy.
Specifically--

transferring your funds over to Fidelity,
- setting up your NFCU CDs,
- splitting out your NFCU account from Dad's account,
- figuring out how to start your own credit history on your own credit card,
- getting an insurance quote from AFI and doing the paperwork,
- going over the college profit-sharing plan after you graduate, and
- your tax returns.
Fidelity will not custody a Roth IRA for a minor. We had to set her up at a T. Rowe Price index fund (expense ratio: 0.82%) for the four years before she turned 18. Now that she's at Fidelity (ER: 0.10%) she's also "consolidated" with the family's three generations of accounts for whatever other privileges Fidelity hands out.

She thought there was a huge mystery to CD ladders. She just wanted someone to help walk her through the process of comparing NFCU, PenFed, and USAA's rates. Now she's teaching her roommates.

When she was nine years old we signed her up for a checking account at NFCU, and since she was a minor it was joint with my checking account. When she turned 18 then NFCU twiddled the computer bits to split it off from my account, and it's all hers now.

At age 13 we signed her up for a joint Citi card (on my account), but even after she turned 18 we could never get Citi to make her the primary cardholder. Then AMEX sent her a "Blue" card offer... out of the blue. She applied online and was accepted, unlike NFCU or USAA or PenFed. One advantage of AMEX is that they report her credit status monthly, so six months later she had enough history to be approved for a USAA card. Then we tried one more time with Citi and ceremoniously cut up that card.

AFI quoted her a personal-property premium around $180/year. Her midshipman stipend is $300/month. She owns about $1000 in uniforms plus a Macbook and an epoxy surfboard. We haven't figured out a good answer to this one yet. She'll probably sign up with AFI in a year or two, and definitely before she leaves college for her first military household goods move.

She's excited about using the college profit-sharing to max her TSP and her Roth IRA contributions when she's an officer, but she's also frightened of the responsibility of handling that much money. It'll probably take her a year or two to settle down and start grabbing for the reins. Or she'll get busy with her submarine career and leave the investing in autopilot. Either way she wins.

She complains happily about her tax returns, just like dear ol' Dad, but I have not for the life of me been able to convince her of the financial wisdom of switching her state residency from Hawaii to Texas before she finishes college. (She's sentimental about being a kama'aina keiki o ka aina'la.) Maybe she's afraid if she gives up her Hawaii driver's license they won't let her back onto the island. Maybe this year we'll compare side-by-side state tax returns on an ensign payscale so that she can truly appreciate the Price of Paradise...
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Old 11-28-2011, 11:36 PM   #7
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I have not for the life of me been able to convince her of the financial wisdom of switching her state residency from Hawaii to Texas before she finishes college. ...
Oh yeah, that's a biggie!
I hope you win that one. She will thank you in the future.
Maybe you can appease her by doing what we do. Every Christmas we give our kids (jokingly) a "heritage gift" reflecting where they were born.
DD has tons of Native Texan stuff (easy to find,) and DS has a similar amount of Hawaiian stuff. That sets off the same argument each and every year. She's a native Texan cause she was born there, but he can't be a native Hawaiian cause he isn't Hawaiian even though he was born there and on and on until I blow a whistle.
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Old 11-29-2011, 07:15 AM   #8
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Nords- thanks for sharing. I'm saving this as a reminder to do the same for my kids (who are now 14 and 11). I'm hoping that our ongoing financial lessons will make the transition to adulthood easier and they won't be surprised when they get this message. I still remember having a conversation with my parents about 20 years ago after graduating from college... although instead of a well thought out letter, it amounted to "you know you're not getting any more help from us after you graduate, right?" I remember feeling kind of angry that they would even think I would ask for money after graduation. Money wasn't something we talked about in our house growing up but responsibility and independence were traits that were greatly impressed upon me and my brother. In hindsight, it's good that they put the "you're officially cut off" message out there so there was no misunderstanding. That's a good motivation to get out and make your own way knowing you can't fall back on mommy and daddy. Anyway, we've been talking to our kids about money, saving and financial expectations for as long as I can remember and I really like the idea of marking adulthood by presenting a letter as a reminder and to sum it all up.
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Old 11-29-2011, 08:06 AM   #9
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Wow......you're nice with teeth.........You've earned my respect...........the very best to you and your family.
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Old 11-29-2011, 08:39 AM   #10
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To each their own, but the idea of me writing a letter like that to any of my kids is, well, just not something I'd do, or feel the need to do.

Through regular interactions, they know what to expect in terms of support going forward. They all held jobs all through high school (at least summer jobs). We talk to them about whatever is appropriate at every 'life step'. When they take career jobs (two down, one to go!), we talk about the investment options. It all happens pretty naturally, a step at a time. One example, I go through filing out their tax forms side by side (some of it over the web) the first year or two they are on their own.

I hardly see how birthday/Holiday checks from relatives constitutes a 'minefield' that needs to be 'navigated'? It's pretty traditional in a lot of families, and makes the sender feel good. Where's the problem?

We continue to gift our grown kids for various Holidays/Birthdays/Anniversaries. These gifts aren't large enough to cause any 'dependency' issues (hah! far from it!). I fail to see a 'problem' or any 'need' to change this, or any 'life lesson' associated with it or without it. DW enjoys finding things she thinks they will like. That's a personal decision, if you don't want to do gifts, don't. But a little too much drama?

-ERD50
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Old 11-29-2011, 10:30 AM   #11
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She complains happily about her tax returns, just like dear ol' Dad, but I have not for the life of me been able to convince her of the financial wisdom of switching her state residency from Hawaii to Texas before she finishes college. (She's sentimental about being a kama'aina keiki o ka aina'la.) Maybe she's afraid if she gives up her Hawaii driver's license they won't let her back onto the island. Maybe this year we'll compare side-by-side state tax returns on an ensign payscale so that she can truly appreciate the Price of Paradise...
That will be kinda one sided since you will not have anything to show her from Texas.... just sayin....
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Old 11-29-2011, 03:55 PM   #12
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Our daughter is even more cheap/frugal than I am. My work is done.
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Old 11-29-2011, 07:51 PM   #13
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Oh yeah, that's a biggie!
I hope you win that one. She will thank you in the future.
Maybe you can appease her by doing what we do. Every Christmas we give our kids (jokingly) a "heritage gift" reflecting where they were born.
DD has tons of Native Texan stuff (easy to find,) and DS has a similar amount of Hawaiian stuff. That sets off the same argument each and every year. She's a native Texan cause she was born there, but he can't be a native Hawaiian cause he isn't Hawaiian even though he was born there and on and on until I blow a whistle.
Well, I've been a parent (and a spouse) long enough to know that if I "win" this one then I lose. I'll help her do the data entry for the side-by-side comparison of the tax returns and then she can make her own decision.

Part of the residency issue is that she'll have to get a Texas driver's license. REWahoo and the other Texans can weigh in on this one, but I doubt that they would regard even $1000 of tax savings as worth the DMV hassle. She's also a bit concerned about taking another road test. Considering how her last road test went, and the fact that she's been practicing in Texas for another couple years, I share her concern.

You can tell your DS that our daughter uses the phrase "Hawaiian on the inside"...

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I still remember having a conversation with my parents about 20 years ago after graduating from college... although instead of a well thought out letter, it amounted to "you know you're not getting any more help from us after you graduate, right?" I remember feeling kind of angry that they would even think I would ask for money after graduation. Money wasn't something we talked about in our house growing up but responsibility and independence were traits that were greatly impressed upon me and my brother. In hindsight, it's good that they put the "you're officially cut off" message out there so there was no misunderstanding. That's a good motivation to get out and make your own way knowing you can't fall back on mommy and daddy. Anyway, we've been talking to our kids about money, saving and financial expectations for as long as I can remember and I really like the idea of marking adulthood by presenting a letter as a reminder and to sum it all up.
In my case it was being freshly married and about to buy a house, so we asked my Dad (over the phone) for a loan on the down payment. You know how you can tell from the awkward conversational pause that you've crossed a line? Luckily my Dad had the presence of mind to claim that their funds were all tied up in the stock market and couldn't be liquidated right then. I'm pretty sure Mom would've used a different vocabulary.

Same on my spouse's side of the family. Our daughter has a pretty friendly relationship with her maternal grandparents, but even after five decades her dear ol' Grandpa & Grandma can reduce my spouse to tears with their thoughtless comments. I suspect that their generous gifts of $$ to their granddaughter will carry a similar implied reciprocal psychological obligation that one day will cause them to lash out at her too. But maybe this time it's different.

I really like using a letter or e-mail for these life-event situations. If any of that "You're 18 now..." e-mail was going to make her feel bad or even angry then we didn't want to force her to have to react in real time-- as she'd have to do on the phone or in person. It also gives her a reference that she can, um, refer to, whether or not we're available to discuss it at a particular funding crisis moment. Even after all our conversations on the subject, our daughter would finely parse the intentions of our vocabulary & phrasing just like a George Carlin comedy routine.
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Old 12-02-2011, 06:53 AM   #14
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I wish my parents had gave me something like this when I got out of their house when I turned 18.
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