I think we can all agree that there's nothing worse on the Internet than one of those posts where someone quotes chunks from six other posts and replies to them - indeed, tries to rebut many of them - point by point. Right? Well, with that in mind, here goes...
You should know your kids better than anyone else, but one very common personality trait of children is to look at this type of "investment" by parents is as a gift under an assumed name, regardless of the attached strings. If you felt the need to exercise your rights regarding your investment at some point in the future, there is a real possibility it will cause problems between you and your son.
Reading your last post... that makes a difference... as long as you charge interest etc. That is what my mother did... she loaned for downpayments on house or other things.... but charged interest at a higher rate than she was getting on her CDs....
You are setting yourself up for conflict and resentment. Loaning money to friends or family is invariably a bad idea. Either keep your money, or give it with no strings attached.
For all of the above: that's why we would want to structure it as an "investment". It would be extra money that we don't need in the portfolio. So if it went on a house down payment, our (financial) return would be any progression in the value of the house, and if it went into a business, we would be a shareholder.
From my point of view, that's neither a gift or a loan. I agree that loaning money to your family is a dreadful idea - you can't exactly send round the repo man, or Big Vinny. When I borrowed a small amount from my parents to furnish my first apartment, no repayment schedule was mentioned and I presumed they'd waved bye-bye to the money, but I was determined to send it back to them in a single payment within a year, and managed it. See also
this wonderful book, where repayment of a family loan becomes a central point in the relationship between the main character and his mother, with, as they say, "hilarious consequences", only because it's Anne Tyler, the consequences are both genuinely funny and moving.
it is natural and desirable that you want to protect and assist your children. However, part of parenting involves cultivating their independence, so that they may develop into full human beings who are capable of looking after themselves when you are no longer around.
You make it sound like they're some kind of cocooned Beverly Hills kids... they're most assuredly not. DS is working, this week, in a vacation camp with kids from modest backgrounds, some of whom are mentally handicapped. DD travels every opportunity she gets, camping wherever possible.
I am unsure exactly what you mean when you say that you would “feel uneasy about being nicely off if our kids were having to struggle”.
If by "struggle" you mean coping with events entirely beyond their control (e.g., a serious illness), that is one thing.
If you mean that they may have less disposable income than they might wish because they will be in entry-level jobs, I respectfully suggest that the latter is a normal phase of life and does not warrant your unsolicited assistance;
I suspect that one of the things I mean is that I don't want them moving back in.
More seriously, DS has a stress-related medical condition which we suspect means that he will never have a substantial career in a "risky" environment. We hope he will go into academia, but he will probably never have the full earnings potential which someone of his background, education, and (frankly) good looks (we don't know what happened there...) would aspire to.
In fact, DS reminds me very much of my Dad, who was the brainier of two brothers. His brother was a doctor and Dad was tipped for great things, until a piece of shrapnel hit him very hard in Italy in 1943. He never finished his studies and ended up working for our town's highways department. Kind of a waste. (I'm very glad I started this thread, if only because it has allowed me to make this connection between Dad and DS. DS is so much like his mother in most ways - 80%, I'd say - that I have never looked at the grandfather-father-son line. DD is 80% like me.)
Sometimes I wonder if the money to the kids isn't just a way to keep control. I have observed this dynamic.
I also agree that a lot of parents give their kids money to maintain control.
I don't think that this is about control - partly because I don't think we've been "in control" since each of them discovered travel, alcohol, and the opposite sex - but I agree that your own motives need to be checked when making any decision which will "help" your kids.
Still, for DD's possible business project, depending on the area, I might be interested in it as my ESR job...
Weddings are the classic example. My DW used to do wedding planning. She saw so many unhappy brides because mom and dad were paying and they were in control. They picked the place, the food, the music, the church and invited all their friends to show off to. It wasn't pretty.
Weddings? Ha. They're on their own for that.
We paid for our own wedding for exactly the reasons you outline (and also because we had more money available than DW's parents, even back then). It was quite a nice affair, by our standards, but having been to other people's weddings I can see that we were practising LBYM even then. I think that a wedding should cost less than a new automobile, but some people seem to be able to spend a large BMW on it.
I think the bottom line is you do what you can to help while trying to avoid undermining them by making things too easy.
That's it in a nutshell. I want any help which we give them to be close to investment-grade, but I'd rather have DD's business or DS's home financed at least partially on the basis of us taking the risk rather than some bank getting rich off it, and expecting monthly payments whatever else happens.
