Would you contribute to your kid's 401K ?

[targatom2019]

Thanks you everyone and I will reconsider some of the good advice given. I do not consider my self rich but very blessed and thanks God that I made some some good investing decisions the last 23 working years. I do not want my daughter to miss out on the power of compounding interest because it had worked for me the last 23 years. I just don't see a problem giving her $300 per month if and only if she maxes out her 401K so basically giving her $3,600 per year if she contribute $18,500 per year on her own.

yes, my daughter is a very responsible young adult,she actually saved $6,000 during her 4 years of college working at a coffee shop on campus. Everything in West LA where she works is very expensive. A cheap gym she could find was $120 per month.

What I heard 23 years ago that still stuck my head until to day and I am trying to pass down this thinking to my daughter " stay out of debt, don't work hard for your money but let your money work hard for you"

 

[Danmar]

Thanks you everyone and I will reconsider some of the good advice given. I do not consider my self rich but very blessed and thanks God that I made some some good investing decisions the last 23 working years. I do not want my daughter to miss out on the power of compounding interest because it had worked for me the last 23 years. I just don't see a problem giving her $300 per month if and only if she maxes out her 401K so basically giving her $3,600 per year if she contribute $18,500 per year on her own.

yes, my daughter is a very responsible young adult,she actually saved $6,000 during her 4 years of college working at a coffee shop on campus.

What I heard 23 years ago that still stuck my head until to day and I am trying to pass down this thinking to my daughter " stay out of debt, don't work hard for your money but let your money work hard for you"

Sounds very reasonable to me. Why did you think anonymous advice from an internet chat room would be useful for a decision like this? Maybe you have reservations?

 

[Meadbh]

Thanks you everyone and I will reconsider some of the good advice given. I do not consider my self rich but very blessed and thanks God that I made some some good investing decisions the last 23 working years. I do not want my daughter to miss out on the power of compounding interest because it had worked for me the last 23 years. I just don't see a problem giving her $300 per month if and only if she maxes out her 401K so basically giving her $3,600 per year if she contribute $18,500 per year on her own.

yes, my daughter is a very responsible young adult,she actually saved $6,000 during her 4 years of college working at a coffee shop on campus. Everything in West LA where she works is very expensive. A cheap gym she could find was $120 per month.

What I heard 23 years ago that still stuck my head until to day and I am trying to pass down this thinking to my daughter " stay out of debt, don't work hard for your money but let your money work hard for you"

Clearly your mind was already made up before you posted your inquiry. I’m not sure what you hoped to achieve by soliciting our input.

Your daughter is a fortunate young woman to graduate from Nursing school to a great career, free of debt, with additional financial support from generous parents. I wish her success in her career.

 

[targatom2019]

Clearly your mind was already made up before you posted your inquiry. I’m not sure what you hoped to achieve by soliciting our input.

Your daughter is a fortunate young woman to graduate from Nursing school to a great career, free of debt, with additional financial support from generous parents. I wish her success in her career.

I just asked my wife couple minus ago and so far My daughter only got her first bi-weekly check but some how they took so much out which left her nothing. I am hoping to see her next 3 checks to see if I even have to help her.

 

[Calico]

I just asked my wife couple minus ago and so far My daughter only got her first bi-weekly check but some how they took so much out which left her nothing. I am hoping to see her next 3 checks to see if I even have to help her.

So she received a check for $0.00? Seems quite odd.

 

[targatom2019]

So she received a check for $0.00? Seems quite odd.

Sorry, English is not my first language and I did not explain correctly. What she took home on her very first check minus the monthly necessities left her with $230 at the end. This is without 401k contribution.

 

[Jerry1]

Lot's of good advice and I saw it mentioned in a post or two. Fund a ROTH. Good to teach her about savings and compounding, but a ROTH can also teach her about taxes and how to keep the Government out of her pocket (at least a bit). I'm not sure her work and financial situation will allow, but if it does, I would get some money in a ROTH. I'm sitting here at 56 and realizing that I'd have more options if I would have saved more in after tax vehicles. Most of my money is in 401K/IRA and I'm working on learning how best to spend that money with the minimum tax bit.

 

[bw5972]

"The worst thing you can do for those you love is the things they could and should do themselves."

Abraham Lincoln

 

[Bamaman]

You are very wealthy, but I would still let her do it on her own, I agree with many of the reasons listed here. IMO.

I agree about kids starting life to stand on their own two feet. I was just thinking about my 47 year old niece working in her father's business in a menial $10 an hour job. Her father pays for her $600k hojse, she drives a new Lexus and she takes lavish trips to Europe twice yearly. My BIL pays for 2 private school tuitions @$20k each. My Sister gave her a 5 carat diamond ring she was no longer wearing. My niece doubts remarrying is in her future.

My BIL is 70 years old and has had one bout of cancer (caught quick.). He has seen three of his closest die in the last 18 months and mortality has to be on his mind. My sister is showing signs of memory loss.

I just wonder how my niece is going to perform since she is completely unprepared for the real world.

It is great to have financial security in your family's future, but the kids must know how to handle money. The school of slightly hard knocks never hurt anyone.

 

[MarieIG]

I started Roths for my kiddos. It took some longer than others, but it got them excited to see their money grow and they have added to it. Two of my kiddos who both work for the Federal Government have gotten extremely disciplined with their savings. (All have turned out to be pretty financially responsible except for the eldest, and even he eventually got the Roth on autopilot.)

There have been a lot of speeches from their DM about budgeting, and a lot of explanations about index funds and the fact that the stock market is going to have some significant drops and not to panic.

Oh, and my parents gave me some nice gifts over the years, gave me a downpayment for the house and it did not make me a spendthrift or overly dependant. My father certainly instilled in me fiscal responsibility and a work ethic.


Have I ever said no. Absolutely.

 

[Elbata]

Sounds to me like you're a great dad, and daughter is most responsible.

To fully fund 401K, being that young, is quite an achievement. Congratulations to you both.

 

[enginerd]

Sorry, English is not my first language and I did not explain correctly. What she took home on her very first check minus the monthly necessities left her with $230 at the end. This is without 401k contribution.

This happens sometimes at my Megacorp with new employees. They start half way thru a pay period and so the first check is already small. Then several of the benefit payments are pulled out as a full pay period. It can also be confusing because the new employee might work a full 2 weeks but the pay period is delayed a week, so they only receive a half check.

As a rule, always double check your first paycheck to make sure all your benefits and deductions are being applied correctly. Call Human Resources even if you’re unsure.

 

[Aiming_4_55]

Congrats ViperTom - you have many great accomplishments. We are very similar in a few ways, i.e. English is my 2nd or 3rd language, CA resident, sense of loyalty to employer, net worth, own rental properties, kids, started with about zero $$$, targeted ER around 50 or 55, etc.

Further providing to your child is a personal choice. It can be assistance with 401k, first car, first condo/house, vacation, wedding, etc. As long as she values the funds like you and wise with it's application, I say go for it as long as you are not needing those funds to support the life you want. If the child is not responsible, does not appreciate it, seems spoiled, etc, I would not assist. If she ever withdraw funds from the 401k, I would not fund in the future.

My kids are much younger than your daughter, but when the time comes, I may pay them as a teenager for helping me with a rental, so I can pay them/contribute to a Roth or 401k. With the Roth comes an opportunity to teach them more about money, taxes, investing, compounding, etc. When they work for someone else, I will encourage them to leverage all investment options available, i.e. Roth, 401k, FSA, HSA, etc.

As a side note, she may want to look for discounts via her employer on the gym membership. $120/month may or may not be high, depends on the gym. We belong to the YMCA and family membership is under $100/month, but it's only an YMCA and meets our needs for the time being.

As for the paycheck, try the online ADP payroll calculator. There is one for salary and another for hourly.

https://www.adp.com/tools-and-resou...l-calculators/salary-paycheck-calculator.aspx

With a salary of $82k, semi-monthly paycheck, filing single, 1 withholding allowance, I receive the below numbers. Deductions for benefits, FSA, HSA, pension, 401k, etc. are not included yet. Some employers pay every 2 weeks vs. semi-monthly, so that will adjust the numbers.

Gross Pay 3416.67
Federal 610.47
Fica 211.83
Medicare 49.54
State 214.84
SDI 30.75

Net Pay $2,299.24

 

[bclover]

Would you contribute to your kid's 401K ?

We made sure they were debt-free the day they got their undergraduate degree. To my way of thinking that's a huge contribution to their 401k.

That's what I remind the minions of all the time. My youngest is graduating and I gave him the suggestion to ask his classmates how much they have in student loans.

anyhoo, my oldest also got a financial incentive to move out (gift of first and last months rent)

Basically imo there are no set hard rules. you know your kids. Now what I'm thinking about doing is "matching" my kids 401K contributions. neither has a great job yet but I don't want them feeling that I'm going to payroll their savings.

 

[donheff]

I see nothing wrong with contributing a bit to your daughter's future if you have covered yourself first. My daughter is a teacher. She maxes out her 401K and I fund some of her Roth. I match the amount I dump in my son's kids' 526 accounts. When she has her first kid I will start contributing to him or her with the difference going to DD. My parents' "even Stephen" philosophy rubbed off on me.

 

[Cayman]

Congrats on providing your daughter with a good education and foundation for earning.

Will it be financial assistance or hinderance? We have a financially responsible 20 year old and are mindful that financial "help" can easily have unintended consequences. As others here have said, you know your kid.

 

[bloom2708]

If you have open/honest discussions with your daughter about finances, then talk about having her put in a percentage that would max her pre-tax 401k. Let's say that is 23%/check. If she gets any match, make sure the amount per check maximizes the match.

You and your wife could each give her $14k per year without tax consequences. If she proves that she maxes out her 401k and Roth ($5,500) per year, you will give her $28k. Does she have an HSA she can also max?

She saves tax (bigger check) and comes out a bit ahead salary/wage wise. She comes out WAY ahead if she picks an 80/20 asset allocation with broad based index funds with low costs. $5,500 would come from the $28k in January (example).

You can certainly afford it. Doing something like this would help your daughter down the road. Save more early and let it grow over 30 years.

I have 3 daughters and plan to do some "matching" discussions, help them picking 401k funds, open Roth IRAs, etc.

 

[Elbata]

Looking long term for yourself, within 10-20 years, your $5MM will become $10MM. And if she's your only daughter, who else would you leave your money to?

HSA, 401K, here's something I read this AM:
https://thefinancebuff.com/401a-plan-contribution-limit.html

 

[Dog]

You are a very generous parent and I understand your wanting to help her get started on financial success. However, why not let her do it on her own for a year and see how she manages her finances including 401k and other savings plans. Why the need to rush in to subsidize before she has a chance to figure it out on her own? It should be doable based on her salary and having a roommate (even in LA). Give her a chance to do this on her own. That too is a gift.

 

[targatom2019]

You are a very generous parent and I understand your wanting to help her get started on financial success. However, why not let her do it on her own for a year and see how she manages her finances including 401k and other savings plans. Why the need to rush in to subsidize before she has a chance to figure it out on her own? It should be doable based on her salary and having a roommate (even in LA). Give her a chance to do this on her own. That too is a gift.

I am waiting for her next two paychecks to get a more accurate take-home $$$ and from my calculation I don't think she will not need my help. I am already happy that she even agreed to put money in her 401k at this early age.

 

[ncbill]

I match my kid's Roth & they're still in undergrad.

I'll do the same while they're in med school, G_d & Uncle Sam willing.

Happy to help since I'm not paying tuition/room & board.

 

[rdy2go]

A physician friend had both of his kids on his office payroll as employees doing clerical and yard work while they were college students. He funded their 401K's to the max every year also and they graduated from college debt free and with a good start on retirement funds. One is in medical residency and the other owns her own business making $150K per year, both doing quite well. Some kids are self-reliant and some aren't but only the parents know that.

In the Op's case, if the employer matches contributions it really helps the daughter with the free match money on top of the great start on financial independence.

 

[Lawrencewendall]

Not 401(k) but i funded their IRAs (2 DS) when they first started working. The first year was 100% to get them started. Then I realized they had no skin in the game and only went 50% and they had to match the other 50%. This was after maxing out my own 401(k), maxing out my catch-up, maxing out my DW's IRA and maxing out my ROTH. One DS has his own 401(k) with a good MegaCorp now and am not sure what's going on with the other this year. It will go to them eventually. When not let it start compounding now?

 

[Sanstar]

It will go to them eventually. When not let it start compounding now?

I have been very interested in all the various posts on the topic of funding adult kids' activities, including retirement preparation, as it is a topic DH and I often ponder. We have grown kids, early in their careers. All did well in school, college and grad school and all work hard in their chosen fields (including military service and a combat tour in Iraq).

DH and I agree with Lawrencewendall and his comment above and have funded Roth IRA's for a couple years for all. This year we cut it to 50%. Next year will likely be zero as I think they will be able to do this without us.

We don't loan money to family. If we can afford it, we just give it. I don't want to be the family loan shark. If we can't afford it we let them know how confident we are in their ability to manage whatever it is.

We stick to funding bad luck...not bad decisions. For example, we did recently cover expenses associated with IVF for DS/DIL. Not doing so would put them in debt for years and time was not on DS's/DIL's side. It's just bad luck they have to go through this.

DH and I agree that we'd rather give with a warm hand than a cold one; plus, our kids never expect money from us and are very appreciative. Fairness is one of my core values so I do keep a log to assure equal distribution to each kid, only logging $1k or more. When they get their share varies according to when it is needed.

I was so surprised by Buffett's history/story of how he handled sharing assets with his adult kids. Clearly, every family's history and parental values determines how assets are shared, or not, with kids.

Thanks again for many the thoughtful posts on this topic. They have clarified our own "guidelines" for transferring funds to our adult kids.

 

[Lawrencewendall]

I do dictate where my 50% goes. I'll give them suggestions on their 50% but in the end, it's up to them. It forces them to do a little research.