Economic Outpatient Care

[Milton]

Oh, those wacky boomers!

An article from today's Globe & Mail: Financed by the Bank of Ma and Pa.

Parents today are very focused on setting their kids up so that they're in a good financial situation.... For many, real estate is the preferred way to say "I love you."

 

[Meadbh]

Based on my experience in several countries, I believe this is a very normal thing for wealthy boomers to do. I've seen some pretty substantial gifts, including land, $0.5m property, subsidized travel to see grandparents, etc.

OTOH, I got no handouts, and am the better off for it. I would have felt very guilty if my parents sacrificed again during their retirement years. After all, they did that when we were kids, right?

 

[macdaddy]

My parents send me money every month to invest...I call it their "Long Term Care Insurance". They are already above the estate tax limit so it's either their kids or the Government. But it's no sacrifice for them and I wouldn't feel comfortable taking it if it were a sacrifice.

 

[ladelfina]

This is pretty common in Italy, and not just among 'wealthy boomers'. Investment alternatives like banks and annuities and (the most rare choice) stocks are expensive and unreliable, so wealth = RE. You can also frequently see houses 1/2 built, with the expectation to finish it for a son or daughter's family, who will then be tied to the apron strings and provide a different version of "long-term care insurance". Also I have seen many apts., inherited from some dead relative, kept empty for years waiting for someone in the younger generation to set up house. (Official rental contracts are for 4+ years.. and even at the end of that, you don't want the risk of an eviction proceeding that may last untold years beyond that.)

It doesn't always work out in the most felicitous of ways, though. A lot of stress is caused by living in a house your parents or in-laws own, even if it's not next door to them. Rather than saying "I love you", it says "I control you".

I follow some ex-pat boards, and the constraints of this living situation has broken up more than one "mixed" marriage.

 

[Milton]

It doesn't always work out in the most felicitous of ways, though. A lot of stress is caused by living in a house your parents or in-laws own, even if it's not next door to them. Rather than saying "I love you", it says "I control you".

Yes, I agree. Even with the best of original motives, it could easily develop into an unhealthy co-dependency.

 

[haha]

Yes, I agree. Even with the best of original motives, it could easily develop into an unhealthy co-dependency.

What Americans tend to see as co-dependency is often seen by others as healthy social reciprocity. We tend toward extrme individualism by world standards.

Ha

 

[W2R]

What Americans tend to see as co-dependency is often seen by others as healthy social reciprocity. We tend toward extrme individualism by world standards.

That's one of the things I love about this country, as corny as that may sound. Personally I want to spend the rest of my life in the U.S.A. (imperfect though it may be).

 

[dex]

Yes, I agree. Even with the best of original motives, it could easily develop into an unhealthy co-dependency.

I think this is a misunderstanding of the concept of the extended family and helping others in the family.

All my grandparents came from Italy and helped their relatives move to the USA. On my mother's side they built a small apartment building to house them all and helped them find jobs.

My grandparents knew the world to be a difficult place to make your way and they wanted a better life for their children. So they attempted to give their children the best life they could.

Remember the old saying "Charity begins at home."

Why wait until your children are old before giving them money?

 

[FIREd]

In Europe, it is very common for parents to help their kids purchase a first home. My parents did not help me at all, but they are building a home for my sister. Some of my cousins were gifted houses, some received substantial down payments. Most of my cousins now live in paid for houses (they are all 25-35 years old). My dad and his brother each received a house and a large piece of land from their parents when they got married.

 

[Zoocat]

I think this is a misunderstanding of the concept of the extended family and helping others in the family.

All my grandparents came from Italy and helped their relatives move to the USA. On my mother's side they built a small apartment building to house them all and helped them find jobs.

My grandparents knew the world to be a difficult place to make your way and they wanted a better life for their children. So they attempted to give their children the best life they could.

Remember the old saying "Charity begins at home."

Why wait until your children are old before giving them money?

When in Tanzania last summer I was talking to the safari driver about his family, and he said that now that he has a good job he is helping his older brother finish high school (this is a man in his mid-thirties). Granted this is a poor country. But the idea is that family helps family. It's in everyone's best interest.

With difficult economic times ahead IMHO, I plan to give my children money this year, something I haven't done much in the past, to make sure each has an emergency fund. I call it my "peace of mind" insurance.

 

[Moemg]

I see nothing wrong with helping your children or your parents if you can afford it . To me it's the rhythm of life . My parents helped me now I help them and my child . My daughter has helped me soo much already anything else is a plus.

 

[FIREd]

Plus in many countries, it is often advantageous tax-wise to give some of your estate to your kids while you are still alive rather than wait for them to inherit from you (estate taxes can be pretty hefty in some countries).

 

[dmpi]

For me, it's the other way around. We are helping my parents and my in-laws.
We give the money with no strings attached. If it was the other way around, my parents would be telling us to do this and do that. They would hold the money over our heads to make sure we do as they say. No way would I put up with that! That's the trouble with getting handouts from your parents, is they end up owning you in a way.

 

[Telly]

...and rich relations may give you, a crust of bread and such
You can help yourself, but don't take too much
Mama may have, and papa may have
but God bless the child who can stand up and say...
"I've got my own"
Every child's got to have his own, yeah!


Thanks to Billie Holliday, and David Clayton Thomas for this excellent path-to-ER advice. From many decades ago!

 

[FIREd]

If it was the other way around, my parents would be telling us to do this and do that. They would hold the money over our heads to make sure we do as they say. No way would I put up with that!

I can totally relate to that. The reason my parents are helping my sister and not me is because I defied their parental authority. When I decided to leave Europe to go spend 2 years in America to get my MS degree, they forbade me to go. They threatened to cut me off, using my inheritance as leverage. I went anyway and since then I have clearly been paying for my "disobedience", especially since I never came back (I had not planned on staying in America, but even the best plans have hickups; I didn't plan on finding the woman of my life right here in America). Now don't get me wrong, I love my parents to death and we have remained very very close, even after my moving away (I am closer to my parents than my wife is close to her mom living down the street from us). But, nonetheless, they are far more generous with my sister and, as I mentioned earlier, they are in the process of building her a house. But I am not envious of my sister. They use that leverage to get her to do everything they require, often trampling all over her private life. She often gets upset and angry, but she realizes that the relationship with my parents is a complex one based on mutual dependency. On the other hand, they have no leverage over me. I do as I please. I actually think that, on some level, my sister is envious of the freedom I have. My cousins who have received large sums of money from their parents are also very "tied" to their parents, some willingly, some not so willingly.

 

[outtarentals]

As soon as I started working I had to pay my parents a third of my paycheck for room and board. Years later, they produced a savings passbook in my name with all the money plus interest and they had added to it as well - there was enough to put a downpayment on my first piece of property. What a wonderful surprise - and what wonderful, wise parents I had!

(BTW, I'm trying to figure out - is this really about "Economic Outpatient Care"?......now there's a good subject!)

 

[ladelfina]

Ooo FIREdreamer.. sorry your family is that way.. but congratulations on your freedom! I'm glad you still have love amongst you despite it all.

I think there are two different, sort-of-parallel arguments:
One is financial assistance, period (whether given freely or with "strings").. and the other is dealing in real estate. Cash is liquid. Even if your parents buy you the house next door and sign over the deed to you.. are you really "free" to sell it and move, if you want to? Not a situation I would want to be in.

I think it's naive to imagine "healthy social reciprocity" when you haven't live in a duplex owned or "given" to you by your in-laws, and your MIL doesn't have a key to your apt., letting herself in whenever she feels like it (perhaps catching you "in the bedroom" or "in the bathroom", or eating cheetos on the couch scratching yourself through your boxers). When she decides how to decorate or who's going to make repairs. Maybe you haven't come home to find your car keys missing because niece has let herself in with her key to your place and taken your car (which she will return w/o refilling the tank).

In poorer countries, privacy is a luxury and thus not assumed. A few families can make the above work if they are diligent about respecting privacy and possessions.. I've just heard (and witnessed first-hand) a lot to the contrary. About 3/4 the adults I know here are in some kind of parental/property situation that I would find untenable and they do suffer. They're Catholic, though!

 

[UncleHoney]

As soon as I started working I had to pay my parents a third of my paycheck for room and board. Years later, they produced a savings passbook in my name with all the money plus interest and they had added to it as well - there was enough to put a downpayment on my first piece of property. What a wonderful surprise - and what wonderful, wise parents I had!

(BTW, I'm trying to figure out - is this really about "Economic Outpatient Care"?......now there's a good subject!)

I had a similar experience years ago. We bought my grandmother's house in 1975 and she covered the mortgage too. Every month I filled out a deposit slip to the bank and had the return receipt mailed to my dad who was taking care of her finances. After she died the money went to my dad's account at the same bank.

Thirteen years later, one night when I came home from work DW said we were going out to dinner with my mom and dad. I said What for? and she said she didn't know.

After dinner my dad produced a small gift wrapped package and gave it to us. The contents were a little strange, a stack of all the old deposit slips from the bank, all 152 of them. In the bottom of the box was an envelope and inside was the promissory note we signed for the mortgage. It was marked, "PAID IN FULL".

After thirteen years we had paid off the full principal of the loan and since we had never missed a payment and were always on time with the checks, the interest was a gift to us. My dad said it was never their intention to charge us interest but we never knew that.

I guess we passed the test.

 

[dex]

My dad said it was never their intention to charge us interest but we never knew that.

I guess we passed the test.

That''s the way to do it - congrats.

 

[Milton]

I see nothing wrong with helping your children or your parents if you can afford it.

Well, there is a possible downside. According to Chapter Five of The Millionaire Next Door, adult children who receive substantial economic gifts generally accumulate less wealth than those who do not.

Why? For one thing, normal ambitions may be stunted. For another, houses or similar gifts (private school tuition for the grandkids, etc.) may inadvertantly pressure the children to elevate their lifestyles to keep up with the Jones, which of course is incompatable with LBYM.

I don't say that such problems are inevitable, or that The Millionaire Next Door is a meticulously-documented, infallible source (it's not). But these points are worth bearing in mind.

 

[Nords]

I see nothing wrong with helping your children or your parents if you can afford it . To me it's the rhythm of life . My parents helped me now I help them and my child .

I used to be with you in the "Gotta know your parents" camp, but we've had a bad experience with my parents-in-law. I no longer believe in sharing family money. It'll be interesting to see whether PILs feel the same way when a new tax year rolls around. It's only money but you can't just go buy a new set of PILs.

Of course the money issue may have merely hastened the conclusion of an inevitable & irreversible process. So perhaps we should be grateful for the experience.

Of the money that will probably drop into our kid's lap, we're trying to couple the experience to her hard work. We've given her enough money (when she was younger) for her to learn how to manage it, and now it's up to her to learn how to make it and invest it with as little gifting as possible. For example her W-2 for her part-time job gives her a chance to start up a Roth IRA, and we've made sure that it's funded to the full extent. (She hasn't really been spending it anyway.) If she goes to college on scholarships (instead of just relying on the college fund) then there'll be profit-sharing.

When I was a teen/20-something, I remember how frustrated I'd feel when I made money/budget mistakes. But I'd be even more frustrated when my parents swooped down with a "There, there, we'll make it all better" attitude ad a check in the mail. A few years later I apparently hadn't learned my lesson when we asked for a bit of down-payment help from my father for our first house, but he was smart enough to say "Gee, sorry, my money's all tied up in the stock market right now and the taxes would kill me." Spouse & I really relished the feeling we got when we went back to the seller/bank and worked it out on our own.

We haven't made that mistake with my parents since, and I wouldn't deprive our kid of that experience or feeling of accomplishment.

 

[Moemg]

Well, there is a possible downside. According to Chapter Five of The Millionaire Next Door, adult children who receive substantial economic gifts generally accumulate less wealth than those who do not.

Why? For one thing, normal ambitions may be stunted. For another, houses or similar gifts (private school tuition for the grandkids, etc.) may inadvertantly pressure the children to elevate their lifestyles to keep up with the Jones, which of course is incompatable with LBYM.

I don't say that such problems are inevitable, or that The Millionaire Next Door is a meticulously-documented, infallible source (it's not). But these points are worth bearing in mind.

I'm not talking about giving substantial gifts to my child or my mother but there is no way I can stand by and see them struggle . I pay for my mother's home health aide and I'm happy to do it .I occasionally ( Okay most times I visit ) I buy my daughter something for their house . I'm not forking over thousands of dollars ( except for the wedding ).I'm much too thrifty for that plus I also believe the kids have to find there own way . I've gotten good at saying "You'll work it out ".I'm probably more protective and worry morry about my daughter since her brother died but that's just natural.

 

[armor99]

I can totally relate to that. The reason my parents are helping my sister and not me is because I defied their parental authority. When I decided to leave Europe to go spend 2 years in America to get my MS degree, they forbade me to go. They threatened to cut me off, using my inheritance as leverage. I went anyway and since then I have clearly been paying for my "disobedience", especially since I never came back (I had not planned on staying in America, but even the best plans have hickups; I didn't plan on finding the woman of my life right here in America). Now don't get me wrong, I love my parents to death and we have remained very very close, even after my moving away (I am closer to my parents than my wife is close to her mom living down the street from us). But, nonetheless, they are far more generous with my sister and, as I mentioned earlier, they are in the process of building her a house. But I am not envious of my sister. They use that leverage to get her to do everything they require, often trampling all over her private life. She often gets upset and angry, but she realizes that the relationship with my parents is a complex one based on mutual dependency. On the other hand, they have no leverage over me. I do as I please. I actually think that, on some level, my sister is envious of the freedom I have. My cousins who have received large sums of money from their parents are also very "tied" to their parents, some willingly, some not so willingly.

As strange as it may sound to some people..... yes.... there are some things in life that ARE more important than money. And your freedom is certainly one of them. I am beholdant to no one.... and I would never choose to live my life any other way. I choose to do things for others because I care about them, not because of a sense of obligation or fear of loosing something they can provide me with. In any relationship between parents and their children thinking of the word "leverage" should not happen. That is not going to be a heathy relationship.

 

[Milton]

I pay for my mother's home health aide and I'm happy to do it. I occasionally (okay, most times I visit) buy my daughter something for their house. I'm not forking over thousands of dollars.

Sounds reasonable to me.

 

[hellodeli1]

Bank of Mom and Dad

I never grew up with the opportunity to make any withdrawals from the Bank of Mom and Dad, but as a new parent, I don't think that giving your kid some money to help them get started is in itself a bad idea. BUT, you have to have raised them right with proper understanding on the value of money, how to manage it, and how to build wealth, otherwise your just throwing your money away.

musings on personal finance