Are you finding yourself in a difficult financial position? This post discusses how to accept financial help from your parents without feeling like a loser.
Ever since high school, I've felt I've been a burden to my parents. I got in a lot of trouble as a kid and therefore felt extremely guilty accepting their financial support.
Guilt is one of the main reasons I decided to go to a public university, for $2,800 a year in tuition rather than attend some private school for $25,000 a year in tuition back in 1995.
I promised myself that as soon as I got done with college, I would never ask for their financial assistance ever again. There was no way I'd graduate and move back in with them. This fear of failure is what ignited me to burn the midnight oil at work. I had to start paying my parents back in adulthood.
Through Spartan living the first few years out of college, I was finally able to accumulate enough funds for a down payment to buy a small condo at 26. From that day forward, I had a belief that if I had been willing to share a studio with another dude for a couple years, eat $1 cheeseburgers for dinner, and shun partying like a broke rockstar, so could others.
I was sure my way was the only right way to be a responsible adult. I was WRONG. Since becoming a parent, I now realize how my stubbornness got in the way of achieving financial freedom sooner. Let me explain.
Financial Help: Seeing The Truth As A Parent
At a recent open house, I overheard a 63-year-old Cantonese mother tell the listing agent in Mandarin that she was house hunting for her son. As the house's asking price was $2.2M, I couldn't help but join the conversation.
I asked the listing agent in Mandarin, “What percentage of buyers receive parental assistance?” It was an open-ended question asked so that I could ultimately assert my opinion that adult children should buy their own houses.
The listing agent said, “About 75% of my buyers last year had parental help.“
I was shocked. But not really. I responded, “Isn't it bad for the adult child's self-esteem and work ethic to have their parents come up with the downpayment or pay cash for their house outright? Can you imagine how indebted the son-in-law or daughter-in-law must feel as well?“
A fireball formed in the 63-year-old mother's mouth and she spat, “Of course not! I love my son. Why shouldn't I use my money to help him while I'm alive to help his life? It's all about respecting your elders anyway!“
Fair enough. Then the real estate chimed in, “How are my kids supposed to afford a house right after college?“
I responded, “By working hard, saving aggressively, and investing wisely for the next 10 years like most people. Why do kids who have just graduated from college deserve to own a home right away? Lives change. Why lock them down before they know what they want to do?“
Inheriting Everything
With that, the 63-year-old mom started getting personal! She responded, “You must be an only son. You are inheriting everything anyway, so you're not thinking of how difficult it is for multiple siblings to get ahead.”
“This isn't true,” I replied. “I've talked to my dad who said everything would be split equally between my sister and myself. But regardless, I don't expect a penny from them.”
Then the realtor responded, “By the time the kid buys 10 years from now, the house price will be even more unaffordable.“
The listing agent's last response made the most sense. I told them both I saw their points and thanked them for the discussion.
Extend The Time Line
Today, buying a home in an expensive coastal city is a suboptimal move. But I attend open houses and submit lowball offers anyway because it's a fun hobby that I get to write about. However, if I extend my holding time period to 25 years, I can envision my son asking me in the year 2043 why I didn't buy more property between 2018 – 2021 when I had the chance.
To me, it doesn't make sense to let him graduate college at age 22, work and save for another 10 years, and then buy a property when he is 32 if I can afford a property for him right now. Yet, I still struggle with the idea of giving a house to my son like 75% of homebuyers do in San Francisco because I also believe you can never fully appreciate what you have if you don't EARN IT.
I would hate to take away my son's pride by buying everything for him. It's incredibly gratifying to buy something or build something on your own. Yet at the same time, it's likely a better move to invest today than wait 30 years from now.
Therefore, the optimal solution as FIRE parents who are afraid of screwing up their children is to continue investing as much as possible today in order to maximize wealth. Your wealth will then provide OPTIONS for your children in the future.
If your children are kind, thoughtful, hard-working, grateful human beings, then you can surprise them with some financial assistance. If they are ungrateful, spoiled brats who never give you a ring, then you can leave them fending for themselves against the White Walkers.
How To Not Feel Like A Deadbeat Loser
For those adult children who have a lot of pride, here are some ways to overcome feeling like a deadbeat loser in order to accept financial help from your parents.
1) If you don't accept reality, you will fall behind.
If the majority of people in expensive cities are buying a home with the help of their parents, you will never be able to afford a home at an earlier age at a price you can afford without them. If the majority of people use family connections to get a job, then you'd be a fool not to ask for an intro from a connected family member. Swallow your pride!
2) Your parents would rather use their money to help you while they're alive.
Helping your kids while you are alive is much more rewarding than helping them after you're dead. Because your parents love you, they want you to have at least everything they had growing up. If they can help you establish roots, get a job, find a partner, they will. They feel a tremendous sense of pride when they can help you have an easier life.
For 2023, parents can give $17,000 a year per child and reduce their estate. This is the gift tax exclusion amount. Dying with lots of money leftover is a waste of time and energy.
3) You are their most prized investment.
You can either pay them back with interest, or you can pay them back by being an incredible son or daughter who always calls, always visits, and takes care of them when they need help.
Another way to pay them back is to do incredible things with your life that help other people. A final way to pay them back is to be happy. Your parents see the money they put into you as their greatest investment. They want to see some fantastic results. Providing financial help increases the chances their greatest investment will be a success.
4) You will pay it forward.
Not only do parents want their children to live their best lives, they would also love to have their grandchildren live their best lives. A grandparent helping fund their grandchild's 529 college savings plan is one common way of helping.
By paying it forward, you honor your parents by helping your kids. You also extend the dividend payment of their investment for potentially another century. There's no reason why you can't provide financial help for your children and others as well.
5) You can always give it all away.
If you start feeling tremendously guilty for all the financial assistance your parents have given you, you can always give all the money away to those less fortunate.
Or, you can stop working at a soulless job for money and prestige, and start working at an organization that is entirely focused on helping the less fortunate e.g. foster home, homeless shelter, food bank, etc. Providing financial help to the less fortunate is a great blessing.
6) A greater chance of becoming a net positive to society.
The more assistance you get from your parents, the higher the chance you will be a regular tax-paying citizen. Given massive budget deficits, your country could use as many stable taxpayers as possible for the greater good. We have a ever-growing population to support who does not have enough food, shelter, or opportunities.
Post-pandemic, America and Americans need all the financial help they can get! We've got huge budget deficits to fill and millions of people who have lost their life savings.
Podcast Episode About The Provider's Clock
Here's an episode on why some men are more willing to make their own money and be independent than other men.
If I Could Grow My Wealth Over Again
My blindness and pride for independence after college made me miss out on a two bedroom, two bathroom, double balcony NYC condo with a view of the Chrysler Building near Madison Square Park for $785,000. It was the year 2000 and I had just gotten my bonus for four months of work in 1999 and a raise to $55,000 from $40,000.
If I hadn't been too proud to beg, I would have discussed with my parents why it would be wise to help me come up with a $157,000 downpayment to buy this condo. I'd get my existing roommate to come live with me for $1,200 a month.
If that wasn't enough, I'd find an additional roommate to live in the living room for another $1,200 a month. I'd carry the rest of the condo payment myself and work my butt off to ensure I remained employed.
This 1,300 sqft condo would probably be paid off by now and today be worth at least $2,100,000. In other words, due to my pride, I missed out on more than $1,300,000 in gains.
Not buying that Manhattan condo is one of my biggest regrets as NYC, for six months out of the year, is my favorite city in the world. To have pied-à-terres in NYC, SF, Honolulu, and Lake Tahoe would be sweet! Alas, I missed out on NYC.
Swallow Your Pride
Just like how the woman's liberation movement created the need for two paychecks to afford property, we now have the Bank of Dad moment, which requires triple income statements and balance sheets to afford property. As we continue to live longer, it's likely we'll need QUADRUPLE income statements and balance sheets to afford property as grandparents start getting aggressively involved.
Pretty soon, you won't have to do a thing for your money because it'll all be given to you. Accept your parent's financial assistance with humility and make them proud of you. The days of making it on your own are long gone.
Related:
How To Convince Your Parents To Buy You Everything As An Adult
The Power Of Losing To Help You Eventually Win
Be Responsible With Your Money
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Definitely run your numbers to see how you’re doing. The more you stay on top of your finances, the less financial help you will need in the future.
Diversify Your Investments Into Real Estate
In addition to investing as much as possible in your 401(k) for as long as possible, also consider diversifying into real estate. You can buy your primary residence and you can also invest in private real estate funds for further diversification.
Fundrise runs private real estate funds that predominantly invests in the Sunbelt region where valuations are lower and yields are higher. Its focus is on residential and industrial commercial real estate to help investors diversify and earn passive returns.
Fundrise currently manages over $3.2 billion for over 380,000 investors. I've invested $954,000 in private real estate funds since 2016 to diversify my investments and make more money passively. After I had children, I no longer wanted to manage as many rental properties.
Another private real estate platform to consider is CrowdStreet. Crowdstreet is a marketplace that mainly sources individual commercial real estate deals from various sponsors around the country. This way, you have more customization to build your own select private real estate portfolio.
Make sure you diversify your portfolio and do your due diligence on all the sponsors. Look up their track record, their management, and whether they have had any blowups before. Although CrowdStreet screens the deals, you have to do your screening as well.
Both are sponsors of Financial Samurai and Financial Samurai is an investor in Fundrise.
3 kids and I won’t have much social security because I was out of work very often. Afraid my kids will be in same position.
I’m glad there are other people who experience this. I’m 23, australian, and in my last 6 months of university. For years I’ve dreamed about moving out on my own, having my own place, working and providing for myself as an independent adult. But suddenly with COVID19 and the housing prices and australias unemployment, I’ve suddenly realised just how hard it is. My parents are persistent that they can assist in buying my first home and I’ve fought them tooth and nail for my pride and independence. It feels so much like a failure to give up and let my parents buy things for me. But I dont think I’ve ever looked at it from this point of view. As long as I’m a hard worker, pay it forward, look after my parents in their old age, what does it matter if they help me with a down payment. I’m 1 of 4 kids and we are all in a similar boat. This has helped me look at the arguement from a different angle. So thank you :)
Call me old school even though I’m barely 38 – but I bought my first home (condo) my self at 28. How? I saved for it.
My parents offered to help but I believed that paying for college (no loans) was more than enough to prepare me to make my own way into the real word. Plus, they were nearing retirement with my youngest brother to look after.
10 years later, my wife and i bought a new home, selling my condo and saving for 2 years for the dreaded 20% downpayment in CA. Bottom line, we worked hard for it without our parents support.
Sam brings up an interesting point re “If I had to Do It All Over Again” – but I say that’s rearview mirror bias, looking back too, I could have swallowed my pride and made the case to my parents to help or maybe even outline the terms of a private family loan with reasonable interest. Nonetheless, you can’t teach self-reliance and there is something inherently valuable as an independent individual.
Maybe I’m bitter with regard to ADULT CHILDREN WITH CHILDREN WHO CONTINUE TO GET HELP FROM THEIR ADULT RETIRED PARENTS. That must be nice… but, I could never do that and would rather take on debt than come back to my parents. Perhaps it’s a bit stubborn on my part… but I can live with that knowing that “I DID THIS ON MY OWN.”
Sam,
A good idea for a post would be the slowing of growth in the US. I too am concerned about the number takers vs. makers in today’s society.
Interesting post overall, Sam, although I’m struggling to understand to what extent you’ve fully changed your position, versus how much may be tongue-in-cheek?
My wife and I come at the notion of financial help for the kids from very different viewpoints based on backgrounds. She got a new car and full cost of attendance at university provided by her parents. So she thinks that’s the way to go for our kids.
I was a foster kid who didn’t know what he wanted to do after high school. So I worked for several years and when I eventually went for my BS, I used savings and worked around 30 hours a week to pay for it and got through without resorting to debt. So my position on our kids’ going to college through the years has been more like, “Heck, let them bootstrap themselves through college”.
Fast forward to now with two of our 4 kids currently in college and guess whose model prevailed? To the extent their scholarships don’t cover costs, we are providing the rest. And plan to do so for the next two kids also.(*)
The “model” that I argued for (working to save a bit and working through college) worked fine when I could make $25K a year part-time and cost of attendance at a very good public university was just under $10K a year. It works much less well when the cost of attendance at that same public university is well over $30K a year, and the jobs my daughters could get today would net maybe $15K at 30 hpw.
But I’m holding firm that once they’re through college, Bank of Dad is going out of business. E.g., not buying them any homes or giving them any down payments.
They will get some small help starting off after college via savings accounts we’ve been doing payroll deposits in since each one’s birth (they are not aware of these accounts). And I’ve opened the older two each a Vanguard Roth account and gifted them a deposit in the amount of their W2 wages (from summer jobs, internships, etc.) and plan to continue gift/matching their W2 wages through college, on condition that they contribute for at least the first 5 years out of college, and then just let them sit and grow forever. I got a spreadsheet and showed them as an example what a few thousand deposited per year in the early years would look like at age 65 with 6-10% average return rates. (Their eyes got big.)
(*) Since the first 2 are in engineering programs which want them to do at least 3 semesters of co-op tours, the REAL fun will be the year our 4th kid starts college with the oldest still in college, too. Ah, good times.
I think it is an inevitability that if a parent has the means, the parent will help their children whether they are adults or not. And because this is human nature, I really believe in the future it will take for income statements and balance sheets to buy a home.
Therefore structurally, the trend is the friend of the asset owner. Wealth is going to continue to get concentrated to those who care the most.
If you really want to help them out then just add incentives to their “gifts”. Tell them to send you the receipt for professional development courses they take after college. Or say you will match 2x the amount they pay extra towards their student loans in year one and 1.5x in year two, etc. That is stuff that will help them get out of debt sooner and they will learn to save more than spend. Then when they take on “good” debt like a mortgage they educated/ready to handle it.
Hi Sam-
This is an interesting topic. My parents are happy to provide financial assistance as long as their kids are working hard and contributing to society. My parents paid for my brother’s college and medical school tuition, along with living expenses throughout his 20s. He worked like crazy during this time but they didn’t want financial stress to be part of his life. If he was a bum, it’d be a different story. They also were in a position to pay all of those expenses without it really impacting them. They basically will “match” that for me by helping with a downpayment on a house. Does this make me a deadbeat loser or bum? No – because I still have to work hard, move up in my career, and make a lot more $$ if I want to live a financially stable life. It does take some of the financial stress out of my life, but I don’t see why they should wait till they pass to provide me with some $. Now, if parents aren’t financially set themselves, it gets much more complicated about what they should help with. I have a few wealthy friends and all of their parents help them out in various ways except for 1. The 1 person who doesn’t get help resents his parents because he is hard working but struggling financially and is missing out on a fair amount of things because lack of $$.
Would you feel pissed off if you didn’t get a down payment for a house? Do you feel like you have to pay back your parents want to start making more money? I’m assuming you’re in your 20s, and I’d like to get some more perspective of younger folks who have such expectations from the parents.
What career do you plan to pursue?
Hey Sam-
Pissed off – no. Pay back – not at all – because they don’t need the $. I’m trying to figure out what I really want to do, but I work at a large tech company in Sales.
So say you have two individuals, equal in education, salary, and age. Except one willingly takes the help from their parents re a downpayment for a home, the other doesn’t.
For measurements sake, assume both work equally hard at their job; save the same; and maintain equal living expenses and spending habits.
Nonetheless, the individual with help from their parents gets to buy their first home “faster” given the velocity of money saved is sped up with a check from mom and dad.
Does that still mean the fortunate son/daughter didn’t have it any easier?
Can’t help but feel the (more) independent individual WORKED harder – not just in terms of his/her job but worked harder as a by product of character development. Maybe it’s a mute point, but if I’m hiring, I’m choosing the one who did away with the handout every time.
I think accepting money from parents is tricky. Although I am in agreement with your logics, the following assumptions have to be true in order for it to work:
– Your parents are comfortable with moderate risk
– You get along with your parents. You have good relationship with them
– You okay with receviving unsolicted advices from them (telling you what to do occasionally)
– The money you invested has a positive return. Imagine if you have accepted your parents’ financial assistance to buy that condo in NY, instead of getting than $1,300,000 in gains, the housing market tanked and you lost their money?
Fascinating. Made me wonder about 2 things – 1. what would a home cost in the Bay Area if 75 percent of parents did not help? 2. Would you really be the same person if your parents helped you buy the first place? I too am an immigrant/child of immigrants and feel awful asking my parents for things. While I see the mathematical upside in your NYC condo example in hindsight, I think the drive to not be a burden to parents is deeper than the short term financial gain that was given up. In any case, a really wonderful read! Thank you for the food for thought.
“what would a home cost in the Bay Area if 75 percent of parents did not help? ”
Interesting point there. Would the market stagnate at least to a certain extent for lack of buyers?
Having rich parents and working at McDonalds seems like a very dumb choice to me.
I do not see the obviousness in self righteous successful individuals who preach that everybody should start from square one.
If that is the case then why work past a certain age when you have enough to cover your own lifetime. Why leave anything to your offspring if they “have to learn the hard way” (most of them will not and just become mediocre by settling to low expectations due to a hard early life).
Assuming your offspring needs to work at McDonalds “to learn” is insulting and largely a waste of time and energy at a very precious formative age. Do you consider your offspring that dumb that the only way to “teach” them responsibility is to have them go through three-four years of mindless flipping of burgers, wasting a unique time when the brain is active, adaptable, and especially capable of fast learning?
As an adult your mind closes and becomes unable to learn a lot of new things (in spite of what self help books and adults in denial may tell you). As an adult the primary thing you add is experience. But that is a lot less valuable than the actual learning that can only happen in the short formative years of your youth. Virtually all great scientists and other successful people had already formed their pivotal ideas by the age of thirty. Are you going to waste that precious short time “learning” the lessons of burger flipping?
There are a lot of people who make 300k a year having started their careers with mindless work in their youth. But perhaps those people could have been earning 3M a year had they not wasted all that time and precious young grey matter.
One of the main reasons that attracts parents to letting their children struggle through life on their own is that parents (getting old themselves) no longer have the energy and mental capacity to deal with the issue. So they make an ethical heroic lifestyle narrative out of it, with cliches like “My parents did not leave me anything. Why should I? A child must learn oh his/her own”. The graves are full of heroes folks.
Now, about those offspring needing parental help to buy their first house in the San Francisco Bay Area:
It is because the parents themselves in their youth grabbed their pitchforks and headed to city hall every time something new was to be built.
So now the heroic parents have essentially priced their children out of the area through their instigated housing supply restrictions. So now the heroic green parents either fork out 2M for a starter house for each child, or their children have to live in “green” apoartments by the railroad tracks, or they move out of the area in adulthood.
For the Cantonese mom you met putting down 2M is still an option, but for most of the ex hippie parents such sums are not an option. They sleep in the bed they made: In an 800sqf apartment by the railroad tracks. I have seen this happen almost everywhere in Europe where most young people cannot afford a house unless they inherit one. And since according to Sam Europe is the paradise we are headed towards (the slowest growth continent on earth is our goal — for heavens sake — Americans are displaying their world renowned naïveté) brace yourself for that future. It will be a future of our very very own making.
Sorry to say, but the Cantonese mom is decades ahead of you Sam. You, Sam, live in the free capitalist America of the past, where being self made was possible, not the big Euro-like welfare state America you and most other Americans aspire to, where ascent is difficult and thus people (rationally in that environment) have settled for mediocre aspirations.
The housing price inflation in coastal cities is not the result of an oversupply of funds from working women and rich parents. It is the unique making of a restricted housing supply brought upon by an enviro-nimby coalition. The children of that coalition are now begging for housing hat in hand. What goes around comes around folks.
Remember that Detroit was the hot place to be a few decades ago. The place where all the industry, sophistication and hip was. Things change fast. And as humanity moves ever faster in this early twenty first century things will change ever faster. So are the fortunes of different localities likely to change ever faster too.
I’m not sure the Cantonese mom is decades ahead of me if she is looking to buy property for her 35-year-old son today. She has taught me that I should buy property for my 14-month-old son today – maybe two or three for good measure.
I’m not sure where working at McDonald’s came from, but I worked at McDonald’s and I thought it taught me a lot about working with people, working on your feet, working with different cultures, and providing service to others at a lower wage. The difficulty of the job made me want to never get that job again. It made me want to study hard and explore different type of careers.
Working at aminimum wage service job didn’t limit me to working at different jobs. It encouraged me.
I’m hoping to teach my son all about building an online business.
What kind of jobs have you encouraged your children to do?
Related: https://www.financialsamurai.com/rich-spoiled-clueless-work-minimum-wage-job-at-least-twice/
https://www.financialsamurai.com/how-to-stop-worrying-about-childs-future/
I guess there was some ambiguity in my comment. What I meant Sam is not that the Cantonese mom is decades ahead of you in raising her son, but rather that she is acting more consistently with the way American culture will be in a few decades (whether she’s doing it out of rational thought or simply adherence to more traditional culture).
Because, as Americans seem to desire, the US is moving towards a European style welfare state where the effort reward curve is much flatter, motivation is low, growth is slow, and thus opportunities to be self made are limited, and you cannot own a house unless you inherit one, or your patents buy you one, and in many cases even your parents never buy a house unless they too inherited one. Just like it already is today in Europe. Two thirds of homes in Germany are apartments — and that is not because Germans like to share walls.
Look to Europe, its economic stagnation, and American convergence to that model if you want to make good long term and intergenerational financial decisions. By seeing the future you might as well make the most out of decline. Take your cut out of the wallets of the enviro-nimbys and then when things decline you will always have enough money to be desirable and emigrate to the next place in the world that offers you the economic freedom necessary to continue to flourish.
One main reason I read your blog is to feel the general pulse of the American population and help me either verify or disprove this narrative, because the narrative is very important to my even bigger success. So far I keep gaining more and more confidence in my predictions based on yours and other people’s comments.
These comments will still be here in a few decades and we’ll see if they materialize.
Growth is overrated. In 100 years, homogeneous and tight knit countries like Japan and Iceland will be much better off than diverse, multicultural dystopias like the US.
Indeed growth is overrated ?
You don’t even have to wait 100 years. What about 50 years:
1.015 ^ 50 = x2.1 (European growth trendline)
1.06^50 = x18.4
You decide if it is overrated.
Ignoring the mathematical reality of compounding does not bode well for FI.
Actually, I am already FI. What I am referring to is the fracturing of society such as we are witnessing now in the US and as we have seen historically down through the ages. Doing basic elementary school math in a vacuum without considering the socio-political-cultural fault lines is a poor crystal ball indeed. As wise Singaporean prime minster Lee Kwan Yew once said, “In multiracial societies, you don’t vote in accordance with your economic interests and social interests, you vote in accordance with race and religion.” Democracy is unworkable when a large enough segment of the population doesn’t pay in significantly and realizes they can vote themselves free goodies via forced wealth redistribution. That is the beginning of what we are seeing today and is compounded by growing inequality due to the impacts of globalization, unequal distributions of cognitive skills and other economically valuable capabilities among the native US and even more so the growing 3rd world immigrant population, and increasing share of US population from countries with no cultural familiarity with democracy/republican forms of governments. So the US is becoming less and less stable, and each ethnic group is starting to identify not as Americans but solely as that ethnic group thanks to the leftists, and so the inevitable result will be bloody as it has in the past….so go ahead and do simple math in a vacuum if you like and put your head in the sand mate.
Got it. I admit I never considered tightness of knitting an important factor in growth, and thus long term societal prosperity. But it may be important after all. Not something that has preoccupied me much, perhaps erroneously so.
Another thing to consider is that with technology dramatically increasing geographical mobility humans may be self-grouping according to ideology rather than race and ethnicity. I feel a lot closer to traditional Americans with their mentality of self sufficiency and individual freedom than I feel to my own welfare state folk back in Europe. I also happen to think that the traditional American system (not the Euro-like mentality we seem to be morphing into) provides more motivation on both the low and high end, thus higher growth, and thus inevitably (through compounding) higher overall prosperity. But that was before. Before the European Trojan horse of big government welfare floated this side of the Atlantic and Americans enthusiastically pulled it onshore.
The practical lesson relating to FI:
My advice to my kids: “Look at the top ten most economically free countries in the world once a decade — and emigrate there. Your trajectory to success will be much more rapid”. I’m personally middle aged now and not as mobile to emigrate yet another (fourth) time in my life. I’ll wait until our convergence to the lowest growth European continent gets closer to completion before I bail out of the US. My worry is that the end will not come gradually but implosively.
Great point / I agree completely on evaluating potential candidates for relocation based on measures of economic freedom and relative homogeneity. I also agree that like the fall of the Berlin Wall and the end of the USSR, another empire based on wishful thinking, the US collapse may come much quicker than we expect. Although way before my time, President Eisenhower sure was correct when he warned us about the dangers of the military industrial complex. I have the means to buy my way to New Zealand/Australia/Japan but worry what happens to them when the US goes and China asserts itself more broadly in the Pacific…Eastern Europe may be the answer for European-Americans as they acknowledge their people’s primacy as the indigenous people of Europe, no different than the Tibetans in Tibet, the Africans in Africa, the Chinese in China, the Jews in Israel, etc., and are not surrendering their lands unlike the Western Europeans who seem to have a death wish these days…being a hated minority everywhere in the world is a recipe for disaster, consider what is happening now to whites in South Africa! Every people has a right to self determination or at least to fight for it!
Curious, are you over 70 and alone? I don’t know how to ask nicely without making it seem like it’s offensive. But it seems like there’s a lot of psychological issues going on with you where you need some companionship or simply love.
None of the above. FIRED in my early 40s. Three children. Expert in ideological arbitrage. The children of enviro-nimbys are now my renters. There’s a certain amount of joy in it beyond the financial.
I’m in my 20s/30s and live in Manhattan. My husband and I both have too many siblings to make it realistic or desirable for our parents to help us if/when we buy, so it’s hard not to resent those of our peers who get downpayment help from their families. I try to tell myself smugly that saving up our own downpayment builds character, but the reality is our friends who own are generous, contributing members of society.
That being said, both our parents were extremely generous with helping with college costs, and did help us get started with other things (like a zero interest loan for a used car to commute to my first suburban post-college job) so I can’t really justify getting too smug.
Why not just buy the house in an LLC with you and son as members? He has 50% equity now but you keep 100% of rent income until he moves in. Then he can make rent-to-own payments to LLC as capital contributions that buy down your equity share to zero. That way he builds equity instead of throwing money away on rent to a landlord. Much better way to “earn” the house and he will praise you for the foresight.
It’s not a bad idea at all.
With LLCs being considered pass through, isn’t that a gift that would need to be declared and possibly taxed if over 12K and not properly considered in the pre-estate?
I think you did just fine without your parent’s help. My Dad wanted me to get a job at his firm and I refused because I wanted to make it on own. That decision probably cost me $500K to a $1M over a lifetime but getting what I have on my own is priceless. It builds responsibility and controls the want syndrome.
It depends on the kid and perhaps the culture of the family. If I loaned money for my kids to buy a house, I would want to be on the deed or as lender depending on the kid.
As for money, who you marry is just as important if not more than how much you have. Marry a saver and you are a saver, you will do very well. Marry a spender and you are a saver, and you have a chance. Two spenders…not a good outcome.
You touched a sore point with me. I married a spender (at a very young age) and I was a super saver with a lot of goals and dreams. I assumed he was the same because I had never met anybody like that before. He had credit card debt, had been laid off, and had moved in with mother, but I was blind. So I built the dream, which he bought into or said he did, and I made it happen. He cooperated but struggled a lot with it, and in revenge was abusive. He just wasn’t the type who could see how much more we had than our friends (house, property, 2 cars, vacations, year long trip to Europe by age 25, plus a great social circle) with just a bit of sacrificing here and there. And he also wanted all the credit and to be centre of attention. Then, even he surprized me by dumping me and claiming 100% of our property (before the laws requiring a 50/50 split). That’s when I finally recognized his true character, willingness to lie, cheat, etc. Eventually I settled with him, and left him to find a series of wives whom he could dominate and live his preferred lower middle class life. I went on to get a professional degree, have an amazing carreer and volunteer life, fulfil my dreams, make amazing friends, own a home in a very good area, retire early, and spend most of my time travelling. My lesson in life was not to be blind to or tolerate lack of character in anybody as they will try to drag you down emotionally and financially to make you more like them.
Dunny,
His bad habits certainly show his character. Moral flaws I would call them. Glad you got rid of him.
The school of hard knocks is often a great teacher but it extracts a high price. Sometimes, that is the only way you learn…yeah I’ve been there.
Congrats on reaching your dreams and recovering from the set back. It shows a lot about your character, determination and willingness to make tough decisions.
Best of luck in the future.
In the research done by Dr. Thomas Stanley, he had a term for parental monetary help that I cannot come up with right now. But the gist of his analysis was that helping your grown kids buy a house they couldn’t afford on their own caused a domino effect of issues: Now surrounded by nice homes the kids notice that their cars don’t fit in the neighborhood- in swoop the parents to fix it OR Most of the children in the neighborhood go to a private school that is not affordable for this family – in swoops grandma and grandpa to pay. Then the children want to go on a ski trip with their private school friends – again Gma and Gpa, and on and on it goes. The grown ups never achieve financial autonomy and the example they set for their children is that you never stand on your own. Very undermining.
Hmmm, very interesting! I can see this happening, as I do believe it will require 4 people to buy a home one day in the future.
The desire for money and prestige is ruining a lot of people’s lives.
You need to do a post about that “money and prestige are ruining people’s lives” as I agree with you! So much greed in this country it’s beyond unhealthy. Everyone out for themselves and trying to get what they can out of one another- not good.
You mean another post in addition to: The Unhealthy Desire For Prestige Is Ruining Your Life
Like a part II?
Hi Nichole, I think the term you mention from Thomas Stanley is “Economic Outpatient Care”.
Yes! That’s it!
When I was 25, I nearly bankrupted myself by over-leveraging my credit. I had to sell everything, work three jobs and live in an attic with a space heater while I cleaned up my mess.
In retro-spec, If I had made the option available to move back in with my parents I would have taken it. But I was too prideful to move back in with them. Sadly, the US has a weird stigma with young adults living with their parents. Honestly, I don’t really care what others think about me. But the symbolic act of moving back in with my parents was a scene I just couldn’t be part of. I know many people from India and Latin America and it is common practice to have someone in their late 20s and even 30s living with mom and dad if they are single. I have no clue if these individuals are living rent free. In retrospect, unlike an apartment, my parents wouldn’t have made me sign a contract, I wouldn’t have had to put a down payment on utilities, nor would I have had to pay first months rent upfront. I am sure the rent my parents would require from me would have been reasonable. Most importantly, I would have saved more money which means I could pay off my debts sooner. Lesson learned.
Wow, Sam. Totally changed my perspective on this topic. Great freakin’ analysis. Oh, by the way, I’m currently a deadbeat loser. Mrs. Groovy and I are living with my parents while Groovy Ranch is being built. We offered to pay rent and half the bills but they refused. They do let us pick up the grocery bills, though. So I still have a semblance of pride. Cheers.
Very timely post Sam. My wife and I were just discussing over the weekend how we can help our 2 boys buy their first home when the time comes.
How funny, while they were growing up, I’ve always instilled on both boys they’re going to have to be “self made” men to make it in this dog eat dog world and we’re not leaving them a single cent when we depart.
But, deep down they were all white lies! If they can really be “self made” so much the better, but we’re already on Standby Mode ready to help.
Same here Dick,
I’ve told my daughter do it on your own! Mom and I are spending every penny! All lies. I’d help her with anything. Just praying she believes my BS and makes it on her own. Fingers crossed she does.
Thanks, Bill
I don’t want my children to think they can’t come to me for anything within reason I’d give them the whole world just like any parent can. :) Even if that NYC condo in an alternative universe was a mistake its a great money lesson to learn young. I’m sure with the increasing wealth gap this help from parents thing will only become more and more prevalent.
We get a number of advantages out of our parents that manifest as financial benefit.
– cheaper rent in a parent-owned home
– extended family vacations where we don’t have to pay for lodging
– ability to invest our own money as fractional owners in properties we otherwise couldn’t get into (and which are identified/purchased/managed for us)
– gifts of a major asset
– wife works for family business
– a backstop – we stand to inherit millions in (God willing) quite a few years (25+)
Thanks in part to these benefits, we are virtually assured of great wealth. However, that has not stopped us from working toward that goal on our own. I’ve developed my career to a high level. We have been frugal, saving and investing hundreds of thousands of dollars. We have purchased and manage rental properties on our own. We have built up passive income streams (most through investing our own money – a small amount through the asset gift). In our mid-30s we have a 7-figure net worth without counting the gifted asset.
While we know we are tremendously fortunate, there are a few primary reasons we don’t feel like deadbeat losers. First, we donate to charity in amounts that greatly exceed any income/savings benefits from the list above (the asset is a different story, but to this point it’s not generated much cash flow). Second, we’ve demonstrated ourselves to be responsible stewards of wealth. Given that latter point especially, the parents have determined it makes sense to transfer assets to my generation in a tax-advantaged manner.
I do worry a little about my own children…my 4-year old has been on at least 6 vacations nicer than anything I ever went on in my entire adolescence.
My sister is a doctor and she got major financial assistance from her husband’s parents, around ~$250K. At the time that the in-laws made their offer, my sister and her husband were both 33 years old. Sister was working full time as a doctor and her husband had just graduated with a PhD from Harvard and landed a fellowship in L.A. It looked like they were going to settle in L.A. so the in-laws thought that it might be a good idea for them to purchase a home. Since fellows don’t make that much, the loan approval would weigh more heavily on my sister’s income to debt ratio. The in-laws paid off her student loans and she started paying them back at a lower interest rate. Ok, so it wasn’t like they gifted her the money but it was still a great benefit because she no longer had that huge debt on her credit reports which allowed them to get better mortgage rates, setting them up for a better financial future. I found the move that the in-laws made to be quite smart in that they were helping the kids out but the kids were still responsible for the mortgage. Though, my sister also confided that the in-laws had also helped with the down payment but they weren’t supposed to let her husband’s sister know because they didn’t help her out as much. Husband’s sister completed college and has a good job but I think that they wanted to reward their son for all the hard work he’s done and maybe also because L.A. is a high cost of living area compared to Tennessee where his sister lives. My sister and her husband are both down to earth people and very appreciative of everything they have so I don’t think the monetary help from the in-laws is stunting them in any way, however, this financial assistance was provided after/close to each of them achieving their professional goals.
Long time lurker, first time poster.
This blog speaks a lot to me. I’m similar where grew up in Asia for 12 years, and moved to the States. My parents helped me with downpayment to a townhome in the Bay area in ’09.
I didn’t think of a big deal back then, but it became a big deal when I got married since drawing the boundary is a bit harder when the wife is moving in a property that feels like having strings attached. But fortunately, my parents decide to buy a retirement home and I’m able to take on the mortgage for them in return, so it works out as I’m able to pay them back.
But I did have struggles with accepting the home since it felt like having strings attached to it, especially before they needed my help with their mortgage. The Asian culture of inheriting some help from them vs being self-made is real, such as when I’m with my American friends who are struggling to buy homes now. It made me a lot more thankful for my parents and even though I didn’t completely earn it, I still became thankful and learned through it all. At the same time, I know for a fact that my family’s decision probably doesn’t sit with them all that well. It takes time for people to get past that fact and become friends once they realized that we are people who work, and not just take handouts.
Sam’s point #1 on pride is right on the money for me. It’s something that took me years to figure out, and is still something that comes up here and there.
My kids will be helped with education. Beyond that the rest will depend on what’s left at my demise. I’m a strong believer in providing the tools to succeed and letting their actions drive their success. They’ll appreciate it more that way.
Great podcast pairing with this post Sam! I laughed when you reenacted the scene with the realtor and the 60 yo mom. Money is a delicate subject when it comes to family! All a parent wants is for their children to grow up to be independent and have a happy life. But it’s not always that simple. I hope to teach my child how to be independent, have a strong work ethic, be creative and appreciate the rewards of earning money from hard work. It’s hard to know how involved I’ll want to be financially if I have the means when he’s an adult. I can picture myself wanting to spoil his kids though if I become a grandma someday! :)
This makes a ton of sense.
Those in their 20’s and even 30’s would be set back big time trying to purchase a million dollar plus home on their own.
If I was in the position to help my kids out I would do it. Hopefully at that point though they had already learned a lot of life lessons about money while you raise them.
I have a friend who comes from a lot of wealth and is down to earth about it. When he is ready he will take money from his trust and purchase a beautiful home…just the way it is.
I do feel a really big sense of pride though for coming up with my own down payment to buy my first place. My parents helped out by purchasing a refrigerator and washer/dryer when we moved in.
All very helpful.
Cheers.
I am always worried that my daughter may grow up expecting an easy life/being entitled because her dad is now considered wealthy.
I 100% agree that if you don’t actually earn it you will never fully appreciate the item you received.
When kids get everything handed to them, I feel they lose the drive to go out and make a successful life themselves (I mean why would you work/struggle when the easiest thing is just to be given it?)
I am especially impressed with the ultra-wealthy such as Bill Gates who is giving his kids a very small % of his net worth for inheritance to his kids (it is still millions of dollars but it could have easily been billions).
Generational wealth is quickly lost by 2nd, 3rd generation because this generation does not earn the money rightfully themselves and thus mismanages it.
Totally agree! Read my comment above.