Advice Please Regarding Young Adult Childen Finances

[sheehs1]

We set up a Roth and Investment accounts for our two with our financial company and have my name on the accounts. The deal with them is we will contribute what we can every year but this is for their retirement. If they withdraw any money with out discussing it with us from these accounts, we will stop the contributions.

We also try to be generous to them through out the year, might not be cash but items they need or want.

Right now it works for us.

This is what I did several years ago (6 or 7) for my now 30 year old married daughter with 2 small children. I set up a Roth and Investment account. My name is currently not on the account but I have "trading authority". Why? She is intimidated by the investment process....for now. She also never liked Math. The investment account was money she inherited from my father so it isn't pennies. She also agreed to my involvement (trading authority) when she agreed to allow me to take it out of "Trust", otherwise it would still be in Trust. She knows she can walk in and get the cash at any time.

I have nothing to do with their daily, monthly or yearly W2 earnings or expenditures. But, I gifted her a percentage of my stock in the generational family business that generates K1 income with "verbal conditions" for saving a part of it. It is from that source of money, I route money to her Roth and some to her investment account...and she gets the rest without question.

There are reasons I do this I am not going to mention here.....just call them extenuating circumstances. However, it is becoming time for me to hand this piece over. She still is intimidated though.

 

[GravitySucks]

thank you Ally,

Wow you guys where good at 20.

lol, op when I graduated college I also lived beyond my means.
I was a single gal in NYC!! I had no kids, no husband and no parents. And sorry I was not interesting in hearing what an old fart at 55, 60 wanted to tell me. two of my best friends and myself got an apartment together and then it was "sex in the city" before HBO. I don't regret it one second, yep I shopped, drank, went to night clubs, I didn't go into debt but I darn sure did not save much.

I really do feel bad for the "youngins" nowadays. It;s like the nanosecond you hit 18 you have to start worrying about whether or not you will have enough for retirement.
Seriously. I went to a neighbors kid bar mitzvah and in lieu of gifts they asked for donations into his retirement account AT 16!! damn, whatever happened to wanting to blow it on a ski trip with friends. jeez.

look, making financial mistakes at 21 does not mean a life of living under a bridge when you're old.

I help my kids occasionally. when my oldest moved out of the house I threw 1500 at the security deposit. when they were both in college I paid for their car insurance. my youngest graduates in May, so he knows, next year car insurance will be on him.

I am on my youngest 22 bank account because he went to school out of state so It was easy getting money to him.

Personally I want my kids to enjoy their 20's. I want them to go to an Eagles game and buy a beer without having to stress whether their Roth IRA is funded. no they will not have 40K by the time they are 30. who comes up with these numbers anyway.

let your kids make mistakes, they will be ok.

What's the point of living to an old age without having memories of fun and foolishness to look back on?
I never saved a dime towards retirement until I turned 31. I had fun as a single and as a married dad. Now I have some good memories but a few less dollars.

 

[ivinsfan]

I'm with you there, grew up in a low income army family, married at 18, moved to my DH family farm where we squeezed every penny hard. I love the life we ended up having but feel like I never had the carefree young adult lifestyle..

 

[Independent]

Both are working in good jobs, and could easily live on what they make and indeed save a little.

It's time to get out of their financial lives. Close the joint accounts, don't ask about money, don't give them money with any strings attached.

The kids are past the point where you can, or should, control them.

 

[Sojourner]

You may want to read the parts in The Millionaire Next Door about adult children economic outpatient care. TLDR version: Don't do it. It encourages adult children to live above their means.

I think you are upset over a problem you may unintentionally be helping to create. I agree with the majority of posters - take your name off their accounts and don't give gifts with strings attached.

+1

Chapter 5 of The Millionaire Next Door should be required reading for all wealthy parents of adult children, IMHO. Here are four key takeaways from that chapter.

1. Giving cash gifts to adult children leads to more consumption and less saving and investing by those children.
2. Gift receivers, in general, never fully distinguish between their wealth and the wealth of their gift-giving parents.
3. Gift receivers are significantly more dependent on credit than are nonreceivers.
4. Receivers of gifts invest much less money than do nonreceivers.

 

[AS2019]

I agree with most of the comments here, but I'll give you my perspective. If you've done everything you can to teach them good financial habits and they still aren't behaving in a way that you feel is responsible, then it's time to let them go. They will either fail financially or they won't. Chances are, they will be just fine - they sound like intelligent adults.

And if they do fail or make some big financial mistakes, it's better that they do it now at a relatively young age when they have a lot of life years left to recover. Give them their financial independence now. Don't keep kicking the can down the road for 10 more years trying to help them, only to be in this same situation when they are in their 30s.

 

[Badger]

Do you remember when you were learning how to ride a bicycle? Your Dad/Mom would run along behind with their hand on the back of the seat making sure you had your balance. Then there was the great feeling of accomplishment when your dad finally took his hand off.

Maybe it is time to let them have that kind of experience with their finances and learn how to "ride" on their own. The teaching should be over by now. Time for them (and you) to see what they learned.

Cheers!

 

[daylatedollarshort]

45th birthday, if you wait until they ask for help or only provide positive reinforcement they may voluntarily come to you for financial and career advice more. If they both have good jobs, are saving in retirement accounts and have no debt they are way ahead of many other young adults their age.

 

[haha]

Maybe our generation should stop thinking that those after us are "young adults". Maybe we are in fact "old adults".

Reality is that we are all adults, but some of us like our real or imaginary power over other adults who we can try to corrupt with bribes.

One should concentrate on doing his/her life well, and let others concentrate on their performances. These younger people will still be on the stage after most of us will have been planted.

Ha

 

[45th Birthday]

+1

Chapter 5 of The Millionaire Next Door should be required reading for all wealthy parents of adult children, IMHO. Here are four key takeaways from that chapter.

1. Giving cash gifts to adult children leads to more consumption and less saving and investing by those children.
2. Gift receivers, in general, never fully distinguish between their wealth and the wealth of their gift-giving parents.
3. Gift receivers are significantly more dependent on credit than are nonreceivers.
4. Receivers of gifts invest much less money than do nonreceivers.

Wow, that's scary. You just sold a copy of that book. Thanks again for all the comments. Having a conversation with daughter tonight. I'm getting off the account, and further gifts are not likely and if they come will be in the form of retirement funds they can't touch.

 

[pb4uski]

+1

Chapter 5 of The Millionaire Next Door should be required reading for all wealthy parents of adult children, IMHO. Here are four key takeaways from that chapter.

1. Giving cash gifts to adult children leads to more consumption and less saving and investing by those children.
2. Gift receivers, in general, never fully distinguish between their wealth and the wealth of their gift-giving parents.
3. Gift receivers are significantly more dependent on credit than are nonreceivers.
4. Receivers of gifts invest much less money than do nonreceivers.

Wow, that's scary. You just sold a copy of that book. Thanks again for all the comments. Having a conversation with daughter tonight. I'm getting off the account, and further gifts are not likely and if they come will be in the form of retirement funds they can't touch.

Don't think that they "can't touch" them... plenty of people cash out retirement savings early for cars, boats, vacations etc and just pay the tax and the 10% penalty.... I'm not saying that your kids would do that but just that it happens all the time.

With respect to the first part... I'll have to bookmark that for when my kids are thinking that we are just cheap we can claim that we are not spoiling them for their own good.

 

[Bestwifeever]

My two kids are ten years older than yours but have been off the payroll since they graduated from college (our dime and most appreciated by them). Since then, we have no idea what they make or what they spend. They now have families and in the past few years we have started giving them a few $ thousand at the holidays and randomly at other times (we just gave each of them a thousand “toward spring vacation”). They really need to be in charge of their own savings; we’re giving them fun unexpected and appreciated money instead.

The OP sounds really lucky to have children who are independent and employed and self-supporting and who seem to love their parents very much. Forget finances and count those blessings.

 

[copyright1997reloaded]

I'm late to this party, hopefully your conversation will go well with your daughter.

The thought of my parents thinking it would be OK to be reviewing my bank statement for purchases in my twenties is just astounding to me. Your children are not children, they are adults and need to act as such, and you need to treat them as such.

When I was in college, my parents helped me as much as they could towards college expenses. I also worked summers and part time during the school year. Once I was done and had full time job, that was it - I was expected to be able to provide for myself.

When I read these kinds of threads, it really makes me anxious because I have a teen age child. Growing up with little money, then seeing the children of co-workers who made good money, I saw over and over again how the children didn't appreciate what they had, didn't understand the need to save and live within their means, and were living only for today.

It's already been stated by others, but your children need to understand that they, not their parents, not the government, not their employer or any one else is responsible for their well being and their ability to retire comfortably.

It is natural that we want to help our children have a good life, and if possible a better life than we have. But we are mere mortal beings, and I constantly have to remind myself that the best way of doing that is to prepare my child for when I am not here to help anymore. That means that they need to be allowed to be the captain of their own ship, and I can't keep steering. [I wish I were better at letting that happen.]

 

[Sunset]

+1

Chapter 5 of The Millionaire Next Door should be required reading for all wealthy parents of adult children, IMHO. Here are four key takeaways from that chapter.

1. Giving cash gifts to adult children leads to more consumption and less saving and investing by those children.
2. Gift receivers, in general, never fully distinguish between their wealth and the wealth of their gift-giving parents.
3. Gift receivers are significantly more dependent on credit than are nonreceivers.
4. Receivers of gifts invest much less money than do nonreceivers.

I have to agree, I saw this exact same thing with my Cousin, for the past 60 years his parents shared their wealth with him, and he had zero drive to succeed, just took crappy jobs so he'd have money for smokes and booze, and his parents would buy him cars, house, a business so his wife would have a job, etc etc.

As his parents got old, he told me once his father died, he was going to break the trust fund because it was his money !!

 

[Scuba]

If you want to "premove" funds for estate management, suggest you contribute to their ROTHS--they have one right? To keep "skin in the game", our approach was always on a matching basis once she had her own income. While in college, she would contribute her earned income and we would repay dollar for dollar. Perhaps, the lure of fee money might prove of interest and Roth withdrawals take a bit more effort to spend.

I think the matching idea is great. My best friend’s stepdaughter started college with no part-time job and no savings. She just expected her parents to pay for everything. Her dad told her he would give her $X towards her college expenses, but only on a matching basis. Lo and behold, she got a job, really worked hard at both her studies and her job, and graduated with honors. She also moved from the dorm back home to improve her financial situation. If the matching program hadn’t been put in place, it’s doubtful she would have worked at all and probably wouldn’t have taken her studies as seriously either.

 

[ncbill]

I match my oldest's Roth so they can max it while still in undergrad.

 

[audreyh1]

I'm always amazed at the variety of different views, and the fresh ideas, I read on here regarding just about everything. So, I'm asking for thoughts on a situation that has been bothering me.

We have two mid-20's children, boy and girl. Both are working in good jobs, and could easily live on what they make and indeed save a little. Both, however, are living beyond their means, and consistently spending more than they make. Neither has student loan debt, we paid for college. Both had small jobs during college and full time work during the summers.

Daughter who was a business major lives in a HCOL place (with a salary to match). While she certainly has better financial skills, she has actually drained her savings quicker than her brother, who was a liberal arts major and lives in a LCOL place (also with a salary to match). They both contribute to retirement plans through work, but at modest levels.

I know many details of their financial lives because I have joint accounts with both of them (established when they were in college to allow for transfer of spending money) and can see their pay being deposited and their credit card payments (and other expenses) going out. Luckily, I have drilled it into them that they have to pay their credit card balances off every month and they have done that. However, they both are charging more on their credit cards than they should, causing their savings to decline consistently over time.

I have had at least two conversations with both of them, and even compiled spreadsheets showing them how they are spending more than they make. I have gone over budgets with them, and know that they both created budgets. They say they periodically monitor their spending and budgets, but I have no way of knowing whether this is true.

Their most recent credit card payments hit their accounts, and their overspending continues unabated. What should I do? Speak with them again? Send them an email discussing the issue? Ignore the problem and let them learn for themselves? They have been defensive in the past when this issue was raised.

This is getting long, but there is a bit of a compounding issue. Last year, we gave them both a meaningful amount of money with the understanding that they would save it. The purpose of the gift was to start reducing the size of our estate without setting up more trusts. Instead of saving the money, they are on track to spend it. I have dropped hints that I will not continue gifting money unless they can turn their spending around, but I'm wondering if I should explicitly tell them that future gifts are dependent on that.

Remove yourself from their accounts. It’s out of your hands now.

 

[iloveyoga]

I almost think it is better (in the long run) if kids are raised as if the parents don't have a lot of money.

 

[braumeister]

I almost think it is better (in the long run) if kids are raised as if the parents don't have a lot of money.

That's what my folks did. It came naturally to them.

 

[iloveyoga]

That's what my folks did. It came naturally to them.

Yes, believe me I understand!

 

[daylatedollarshort]

I have to agree, I saw this exact same thing with my Cousin, for the past 60 years his parents shared their wealth with him, and he had zero drive to succeed, just took crappy jobs so he'd have money for smokes and booze, and his parents would buy him cars, house, a business so his wife would have a job, etc etc.

As his parents got old, he told me once his father died, he was going to break the trust fund because it was his money !!

One of my close friends growing up had wealthy parents in an otherwise fairly blue collar area and ended up pretty much exactly like this. Which was kind of ironic because many of the kids from the blue collar families had more ambition and had more success in terms of degrees and careers. She told me once every one's dream is to own their own house but I'm going to have lots of houses some day.

 

[45th Birthday]

By way of an update, we have spoken with both children, telling them that I will be removed from their accounts. That process is underway. Neither seemed concerned one way or another. Son asked more questions about why. We added some context telling them that we have been concerned about their spending but that they needed to become fully independent and are responsible for their financial success of failure.

The discussion about gifts of money going into some form of IRA will follow; last year's gift didn't happen until the third quarter.

 

[ivinsfan]

By way of an update, we have spoken with both children, telling them that I will be removed from their accounts. That process is underway. Neither seemed concerned one way or another. Son asked more questions about why. We added some context telling them that we have been concerned about their spending but that they needed to become fully independent and are responsible for their financial success of failure.

The discussion about gifts of money going into some form of IRA will follow; last year's gift didn't happen until the third quarter.

Good Progress at the very least you won't be stressed out about their CC charges..

 

[Luck_Club]

One of the many benefits of acquiring wealth in your life time is you can help your children to acquire more wealth and make it easier on them then it was on you. How we do this is really a personal choice, but it is the earners choice. Your seeking advice is not wrong, but prudent. Because as others have pointed out helping our children too much can have the unintended consequences of diminishing their personal drive leading to a life of sloth.

Below is the outline of the restrictive covenant on my next revision of my living trust, hope it helps the OP.

Restrictive Covenants:


Prior to age 50 the beneficiaries shall be provided with income only, with the exception of the following 4 capital access scenarios:
1) Medical expenses exceeding their ability to pay
2) Education of Children of the beneficiaries exceeding the income generated for Catholic schools through high school, and in state college tuition.
3) Purchase of their first house, when they have saved an equal amount of funds towards a down payment.
To start or purchase a business after obtaining the age of 30 but prior to 40, with matching saved funds at a ratio of 1 saved 2 from trust

After obtaining the age of 50 Beneficiaries shall have unfettered access to principle and income subject to spendthrift provisions, drug abuse or other self destructive behaviors. The beneficiaries shall reduce their percentage of benefit in direct proportion to the capital distribution out of the trust as it relates to a co-beneficiary.

 

[splitwdw]

By way of an update, we have spoken with both children, telling them that I will be removed from their accounts. That process is underway. Neither seemed concerned one way or another. Son asked more questions about why. We added some context telling them that we have been concerned about their spending but that they needed to become fully independent and are responsible for their financial success of failure.

The discussion about gifts of money going into some form of IRA will follow; last year's gift didn't happen until the third quarter.

45th, Maybe they are too young if they don't understand why they should be independent. Are they immature for their ages? My one cousin is in his 30's and still runs home to mom and dad for everything. His parents think this is wonderful. It's really a shame because he never grew up.