Young Adult Children & Money

[HI Bill]

I'd see how the $40K plays out. I had a college dorm mate that won $25K in a lawsuit. Six months later, he had a six-month old Camaro, and $0 left.

I would not give either daughter additional funds, regardless of the outcome of the use of the $40K. Let them build a life, work ethic, and a career. Then, when they've landed on their own two feet, help them out with the down payment on a place, or wedding.

Don't gift them $ at this point, IMHO, they will either lose motivation, or the $, or both.

 

[pj.mask]

Here is a thought... when your older daughter gets her $40k, use that as an opportunity for her to move out and get her life started. You can try giving her lump sum or setting up some budget ($40k/24mo = $1,666/mo, 18mo = $2,222) with an account transfer or something. I fully expect the money will be spent but because this is not an irreplaceable amount of money for you, I think it is worth the life lesson cost.

How can you use this money to push your daughter to be independent (while not pushing her away from you emotionally) and hopefully get her to realize her responsibilities in life and do something about it.

A meeting with a psychiatrist might be helpful on advice for how to proceed/discuss in a delicate way. It is oftentimes hard to see things from another’s perspective - especially family (people we have known forever but who have grown and changed significantly over that time)


(I’m not a fan of pushing people to risk their lives for a job in military)

 

[The Cosmic Avenger]

Here is a thought... when your older daughter gets her $40k, use that as an opportunity for her to move out and get her life started. You can try giving her lump sum or setting up some budget ($40k/24mo = $1,666/mo, 18mo = $2,222) with an account transfer or something. I fully expect the money will be spent but because this is not an irreplaceable amount of money for you, I think it is worth the life lesson cost.

The $40K is an inheritance from the daughter's grandfather, so Aus_E_Expat may not have any control over the distribution, but if this is a case of the grandfather giving money to his adult children with an understanding that it's to be distributed to the grandkids, then I like the idea of making it conditional. Personally, if I controlled it I would offer to release it for needs like rent or tuition, with little to no discretionary allowance, which I'm imagining similarly to the usual limitations of a special needs trust.

 

[pj.mask]

I was thinking more like ‘your grandpa left you $40k and this money should enable you to start living on your own. The money should arrive in month N, we expect you to be out on month N+1.’ Followed by a discussion on how they plan to budged this money to bridge the gap between now an when they finish school with earned job income.

I heard in the break room some older person talking about how their adult kids don’t talk to them unless it’s asking for money. Blew my mind, never felt entitled to money from my parents (beyond small change but that’s give and take, ‘do you have $20 cash’ vs ‘can you order this item online for me’).

My planned budget allows about $1k/mo per kid as a gift and I don’t have any issue gifting that to add to their retirement savings so they can reach FI sooner. If they don’t live a sustainable lifestyle with goals, I’d rather enjoy that money myself.

 

[wolf]

In similar situation. Anyone out there figure out a simple plan. Assume, 2 daughters,
will not be able to handle large inheritance. ie. IRA, rental real estate, CD's.

Goal. Be sure what they do not become homeless. Due to divorce, bad business decisions, not being able to budget, etc.

Thanks.

 

[Cayman]

Your kids are not mature enough to deal with significant sums. Reconsider in 5 or more years.

Agreed. Give them at least 5 more years.
I'll add that treating them equally would be a priority for me. When it comes to loved ones, it's too easy to play games and favorites with money.

 

[Retch The Grate]

I feel like how my parents have handled things worked fine, but I'm Gen X. When we graduated from college it was expected we were moving to wherever we had a job. While our rooms and support were available if we needed them, we were planning on not living at home and had no thought of asking for support. When my parents started gift transferring money so they could feel they were making an impact on our lives while they were still around to enjoy it we were already well established adults with careers, and money of our own. At this point, I totally appreciate the money transfer, but it didn't de-rail me growing into a responsible adult on my own. I had always gone with the assumption of no inheritance, still do for my retirement modeling. I think it is really important to be responsible for your own existence if you want to grow up. Living at home and being provided for by parents stunts gaining the necessary life experience to actually live independently.

 

[jasg]

I don't know what sorts of investment accounts are available in Aus, but in the US, I would open a Roth IRA for each of them and encourage them to contribute by matching their contributions. Start at a high match, say 10:1 the first year and step it down to 1:1 over som appropriate period.

- teaches them to save, without being too hard at the beginning
- teaches the value of employer matching in 401k's
- do something similar to encourage 401k is they have them. Do something like a match to double the employer match
- stress the importance of compounding - e.g. investing 10 years from 25-35 beats 30 years from 35-65
- start in a simple VG target fund
- get them used to maxing out the retirement accounts
- if you still have funds to give them, help them establish an emergency fund

Finally, after all of that give them outright gifts to spend - if they have taken advantage of the rest.

 

[DougJohnson]

I was thinking more like ‘your grandpa left you $40k and this money should enable you to start living on your own. The money should arrive in month N, we expect you to be out on month N+1.’ Followed by a discussion on how they plan to budged this money to bridge the gap between now an when they finish school with earned job income.

This.

To be rude: you are enabling DD1. All three of my daughters got a talk to the effect of "Congratulations on your pending graduation. The gravy train is coming to a screeching halt." All three became fully self supporting. -- Doug

 

[steveark]

Needs to be equal barring a life or death situation, but limit it to 10k, or 20k at most with the conditions you get to see where it goes. If they are responsible for a couple of years then maybe give then some more. My kid will all get 7 figure amounts, but only after we have passed. We'r have then 10k each once, might do that again a time or two. They are pretty responsible engineers, professor and a medical doctor.

 

[morriss003]

Rather than giving them money to invest, consider sending them overseas to experience other cultures, perhaps living in another country for a month. Neither sounds like they are ready to have control of significant amounts of money. This time of their lives could be spent in exploration. There is plenty of time later.

 

[jjuneau]

I would challenge daughter 25 to show how responsible she can be with the inheritance she is about to receive. If she spends a modest amount on herself, puts a good chunk in a retirement account, and either completes her education or gets a good job, then in a year or two gift her a portion (maybe $50,000). Follow up with future amounts if and when it feels right. For daughter 19, let her know that when she completes her education, you will be gifting some to her also.

 

[Carple Tunnal]

What is the best way to divide to avoid resentment? If equal amounts to each daughter, the elder may consider it unfair since she had to wait 6 more years than her sister.

 

[VFK57]

Your kids are not mature enough to deal with significant sums. Reconsider in 5 or more years.

Agree. Also from my experience, watching many relatives and friends kids as well as our only son growing, I came to conclusion: spoiled kids are very seldom able to earn their living and support a family. On the other hand when parents do not give their kids anything they want, kids try to earn it themselves as early as age 15 - 16. When our son wanted a car or a new, fancy video game, we offered him 1/2 price of it while encouraging to earn the rest (from age 16). He is now married with 2 kids and own their house.

 

[Time2]

We have fully funded our kids Roth anytime they are eligible. They are both still in school so sometimes work and sometimes don't.
I also expect that neither will spend any of that money.

 

[JDARNELL]

We fund Roth IRAs also through college graduation. Beginning to think what we will after that.

 

[indiajust]

If you are looking to round out your family, I could be a very responsible son and positive role model. I am currently available for adoption.

 

[SpinDoctorTX]

And the 25 year old is far from a lost cause. That was me, minus the handouts part. I had a good job by then, but had dropped out of college and was juggling lots of debt from stupid credit card spending. But if you had given me even a hint that $200k was coming soon back then I'd have been an even bigger twit.

Me too... I was too busy partying and "winning" my now ex . I didn't really become a good money manager until I was 30 (after we'd bought a house).

Help your daughters the best way you can and sort out “equality” later. More important to love them equally than to worry about rounding errors in financial treatment. All that can be trued up later or in your will. Focus on helping them now in the way the need it now.

+1

However I’m not a big fan of giving money to young people directly because the risk of divorce - you never know.

I agree with the enabler comments and economic outpatient care.

Exactly. DH gave his oldest son and now ex the downpayment for their home, which ultimately went back to the bank during a messy bankrupt inducing divorce.

I would have dropped off Daughter A at our local mall years ago.

(the local mall is where all the armed forces recruiters are located)

Well, my parents didn't drop me at the mall, however it was made clear that after HS grad you were either living at home/ going to college (or on a full ride like my genium bro) or making plans to get a job and leave the nest- pronto. As I had no interest in further education at that time, I was out (and I wanted to be).

If you are looking to round out your family, I could be a very responsible son and positive role model. I am currently available for adoption.

Add me to the list. No inheritance is coming my way! My DH, cat & DM however, might object!

 

[yakers]

'Interesting' situation for me, older son is very responsible, decent job, wife, 2 kids, 2 dogs and good path in life although DIL has serious medical issue. Younger son is a subsistence musician. Now he has been independent of me for 7 years after getting his degree in music. He hustles all the time, plays whenever he can, gives lessons, lives cheap (rented room). All the boys know is DW and I plan to leave them our Roth IRAs (last thing we will spend if we need to). When I go to 'console' him about road trips sleeping on floors and poverty living--he has an ear to ear grin and says he loves the road trips and thinks about not coming back 'home'. Fortunately he has a girl friend who he misses to much to not come back. And she is fully employed so maybe something will work out there. By my back of the envelope DW & I are likely to leave enough assets that his dividend would exceed his current income.

 

[dirtbiker]

What is the best way to divide to avoid resentment? If equal amounts to each daughter, the elder may consider it unfair since she had to wait 6 more years than her sister.

I couldn't imagine the level of disappointment I would feel if one of my children felt slighted for getting an even cut of an inheritance at an older age. Good lord.

 

[Mmm Rrr]

I couldn't imagine the level of disappointment I would feel if one of my children felt slighted for getting an even cut of an inheritance at an older age. Good lord.

I guess it depends on how you look at your family. My initial thought when I read this was that the older daughter would have had the good fortune to have spent 6 more years with her parent(s).

 

[teachme]

Discipline Equals Freedom

My opinion is similar to others, they need to take care of themselves first and show fiscal responsibility by providing for themselves. With the one finishing college it might be harder but you could apply the below once she is done with her schooling.

Test their responsibility and tell them you'll match in a separate account whatever they invest via their work 401 or outside of work in an investment account. They provide a yearly 401K/IRA statement and you match in an account earmarked for them each year and you turn it over to them at some defined point ...maybe 35? Then if they do not save anything they do not get anything but it was their decision.

Note I have 4 kids, 3 of which are legal adults so I do not say the above lightly but if I laid out how we raised our kids on the financial side some would argue I'm an arsehole (which is probably accurate) but since 2 of my adult kids got full ride academic scholarships for their STEM undergrad degrees and IMHO are pretty cool people to hang out with I'll live with the consequences