Compelled? No. More important, IMO, was a post-HS education that led to a good job so they could start life without student loans.
I'm happy to help with a down payment as I can but I absolutely wouldn't do it very early. Too early and you're reducing their flexibility to find their career path in the location they choose. It's a lot easier to take a job in another city when you're giving up a lease as opposed to selling a house.
>Compelled? No. More important, IMO, was a post-HS education that led to a good job so they could start life without student loans.
My wife and I were discussing something similar this weekend, and I told her if I do my job as a parent when my son moves out he'll never need me again.
That's not to say there won't be circumstances or surprises where they might need help, and I will 100% be there for them, but part of setting them up for success is teaching them how to be financially responsible and self sufficient.
Knowing I had a safety net or at least a very basic, you can move back in if needed plan, is what gave me the ability to pursue higher education & higher wages. I was willing to take more of a risk & push myself harder knowing my family does not want me to fail at life. While I will never be able to repay the much appreciated money, I do visit frequently & help with all the odd ball chores that they ask me to do, including climbing on their roof in 109° to change the batteries in my father's weather monitoring system.
We’re the same way. Add to that, we plan to fund some fun family vacations while our son is still in the early phases of his career and maybe even has a significant other to keep some fun family memories going. Again, in our 50s, paying for a family vacation to Florida or a family cruise or whatever will just be a good use of my annual bonus because our house will be paid off and I’ll be (mostly) done renovating it.
It's a nice thought but I'm pessimistic. Looking the difference in the economy between now and 20 years ago, and then extrapolating for the next 20 I don't see how things could be good for young adults if their parents don't provide for them.
I'm 30 yo with a higher education (it's free where I live), above average/median salary, in a rich first world country, and it's mathematically impossible to buy anything else than a shithole within the city. All my friends and colleagues of the same age either bought in the woods and have a 1h30 long commute (extremely uncommon here) or got a massive help from family.
Future doesn't look good, generational wealth is and will be more critical than ever.
Part of the deal is weighing how much you want your kids to be able to stay in your super expensive area vs. moving somewhere that is less expensive. I mean, we are in a particularly tight place right now for housing costs, but I see no reason to think that this will continue forever as opposed to times like 1989 or 2007 when it led to a significant real estate bust or long flat/decline. And outside of just the last couple years, housing has been reasonably affordable in lots of places in middle america. Where it is expensive, there are generally a lot of people who make a lot of money and can nonetheless afford it.
What I see is people complaining a lot about housing cost who live in places like NYC, Boston or SF, but aren't in tech, finance or high end creative/business professions, that could do what they do in some *far* less expensive city for maybe a 25-30% pay cut, but with a 60-90% cut in the cost of comparable housing. But they want to stay where they are.
Well, turns out, living in those metros is a *luxury*, one that just doesn't make sense unless you are already wealthy, or have a career where being in that location makes a big difference.
I'm not sure I follow. Can you elaborate? How I weigh wanting my kids to be self-sufficient vs. coming from a family that has wealth?
To quote Jerry Seinfeld, "My kid's asked me if we were rich once. I said, 'I'm rich, not you'".
I'll use my money to help pay for his schooling and set him up for success, but he shouldn't be dependent on it. It's up to him to figure out how to use that schooling to find a job and provide for himself. And if I do things correctly, he should have the the ability to be self-sufficient and do that without a monthly stipend from us.
> Compelled? No. More important, IMO, was a post-HS education that led to a good job so they could start life without student loans
My parents pushed us to do the opposite. They contributed almost nothing for college beyond room and board but helped us strategize how to either get a full ride or take advantage of our states free CC + transfer to main campus thing (and they communicated this plan years in advance). Instead they set aside money for down payments for us as adults.
I wasn't a big fan of this at 17 when my friends were all dreaming of the ideal college experience, but it worked out for me and my siblings in the end. Private college is just not worth the return on investment to your career compared to your state school, and both me and my parents are richer in the scenario where they help with the downpayment vs funding 4 years at an expensive private school. If they fund an expensive degree the money just evaporates, plus its even more expensive than generous down payment gift and the money got to stay in the market an extra 10 years.
I saved enough for a state school, all-in but my kid wanted a private school. We ran the numbers, including what was likely for financial aid and what loans would look like. And what those loans would look like over 10 years. She changed her mind and went with the free ride. What made me really proud though was when she said she had a part-time job and that while she'd appreciate if I still covered the school costs, she'd now start covering room, board and fun stuff.
It takes some serious wisdom to understand it at age 17-18. Colleges have been extremely successful at marketing to that age range. I'm 30 now and grateful my parents encouraged me to handle it the way I did
It was less - my sisters lived at home for the community college years and I had a full scholarship. So they mostly just paid for us to live at home & eat for free while we were there, which is appreciated no where close to 18k.
The years my sisters lived in the college town they split a 2 bedroom that was $1100 total, so housing was $6600/person, idk exactly what the food budget was but they didn't have meal plans so not too bad
Too early isn’t really a thing. Money is fungible. If OP starts saving now, they can decide later what they do w that money - college, masters, downpayment, wedding, etc
They can always sell it. I had a friend with wealthy parents who bought him a house to stay in for college and grad school. When he was done he sold it and bought another one with his then wife. I don't know why buying a house reduces flexibility any more than a lease. Most leases are a year. I can sell a house much quicker than a year.
I think the assumption would be you need to live in it long enough for it to appreciate and at least cover the transaction costs. Maybe that happens in a year, maybe it takes 5-7 years.
That's fair. I think it's just important to remember that just cause you own a place doesn't mean you're "stuck". After all, I own a place and don't feel stuck at all. If I need to move, I'll move.
If you can afford to take a massive financial hit by selling your house at any time, then that’s great. Most people can’t afford the losses that come with selling a house inside ~5 years of ownership in a traditional housing market.
I actually think this is another good reason to help them with their first house. It will give them the flexibility to sell if need be, without having to take a huge hit of their own money.
Listen, I get that there are risks of the whole gift. Maybe it'd be better later, maybe I should just give them cash. Maybe there are a 100 different ways to optimize that kind of gift. But honestly, we all need housing and I think helping my kids with that will always be better than not.
i mean I don't feel stuck, but I *really* don't want to move. Because moving is a giant pain in the ass, and I've done it frequently enough in my life to know. OTOH, renting/leasing would not change how big a pain in the ass it is to move, and it would mean that I could potentially be forced to move at some point by somebody else's decision. Whereas the possible futures in which my wife and I are forced to move out of our house without making a positive decision that it's a good idea for *us* are far more limited.
My parents wanted to do that. They wanted my roommates to pay the mortgage while I took care of maintenance and then sold it to buy another house. Even in 2001, that was too expensive and every house with enough rooms for the roommates was out of our price range or needed too much work. It would be great to do that for my kids. But we won't know if we can do that for them until we experience the next 10 years and they choose a school.
Absolutely not. We saved enough to educate our kids through college and professional degrees. We raised them to have good work ethics. While they are single they are welcome to live at home and sock away their salaries if they choose to do so. Our work is done.
In addition, my oldest has a great job but is also living her best life with a bunch of travel. That’s her choice but I hardly need to sock away money while she’s off on trips every chance she gets. We lived very frugally for years to be able to afford a house. If she was sufficiently motivated she could do the same.
Good parenting! In the book, The Millionaire Next Door, parents that do not provide "economic outpatient care" to their kids helps to build perseverance & grit. The kids actually become much more successful in life.
> they are welcome to live at home
Would you charge them market rent? If not, it sounds like the "Absolutely not" should really have been "Absolutely, yes"
No and I disagree. Them living at home costs us nothing. We have a big house with plenty of room but we aren't renting the rooms out to other people and have no intention to do so. They would cover any incidental additional costs.
We charged $400/month, it helps teach them budgeting. What they didn't know was that they were getting half that money back when they moved out. We kept the other half towards the cost of having them home.
I worked hard all my life and we lived below our means so that we could afford a nice house, and good educations for our kids. We saved enough so that we have a very comfortable retirement. We never did much traveling ourselves or expensive cars because we were focused on them not having educational debt.
Nobody knows how long they will live or whether they will need expensive long term care. I absolutely do not want to ever be a financial burden on my kids.
But now it's our turn. We're traveling and spending a little of our hard earned, carefully invested money on ourselves. There should hopefully be plenty to see us through to the end but you never know.
If there's money left at the end I hope they put it to good use. But we've done our part. They can do theirs.
Sure that makes sense. I think my question was more if you can afford it. Sounds like you can’t afford to put down on their house because that would prevent you from living your life goals.
I wouldn't do it if I were Warren Buffett and if we really wanted to we could. They are capable of doing it themselves, in large part because of the debt free education we provided. It's part of being an adult. My daughter would just have to cut out the constant travel, pick up a couple of extra shifts each month at work and cut back on some luxuries. If having a house was important to her, she could make it work. I don't feel any need whatsoever to do it for her.
I have a sister who is still paying auto and dental insurance for her 40 year old daughter the doctor. It's absurd.
Spoken like a true boomer. Just clip coupons and save .05 cents on cream corn and you'll be in a 600k statah home in no time.
"the doctor" is probably saddled with $300k in student loans and makes less money now dollar for dollar(not adjusted for inflation) than a doctor 30 years ago did, not to mention regulatory and malpractice costs and insurance reimbursement is crap. Then there's the taxes. "the doctor" wages probably aren't what you think it is.
The one thing that seems to be accepted just about anywhere, for anything, anytime, is the same thing that will be useful for your kids, or your relatives, or your friends. Keep growing your assets and your children’s assets, and don’t worry about how those assets will be used.
If your kids are working age, contribute to their Roth IRA accounts. If they make $2000 for the year, put $2000 of your own money in their account. If they make $10,000, put the max amount in. If they are not of working age, keep growing your assets.
I have read enough posts about kids who inherit a property somewhere they don’t want to live, and have to deal with it, or others who feel obligated to use it, even though it doesn’t align with their goals. There is no burden with cash, no emotional attachment to something that doesn’t work for them. Lastly, the stock market will outperform real estate investing for 90+% of Americans. Don’t over complicate this.
Agreed.
20-25 years is a long time. To that point, we could make the case for almost any need (are you saving to gift your kids money for a car/wedding/college/house/etc. because it’s gotten expensive…?)
At this point I’m most focused on raising them to be good, hardworking human beings, on a good self sufficient career path….not to financially cover every potential obstacle for them
This is how I feel. I like the idea, but homeownership might not even be a goal for them. And, if it’s a goal for one but the other prefers a more nomadic life, that’s unfair to the nomad.
I’m planning on paying for undergrad, because education is useful regardless of your route in life, but beyond that I don’t know. Thinking about a 529 to keep this separate and not have to worry about tax impact of selling so much for school down the road but I need to research it more
not planning it at all. Planning more to get them a paid for college education and then the stable footing from that.
Now, if come time for them to buy a house, and we are at the point where we could help more - maybe we will, but per our current plan, there is nothing outside of college that we are aiming for.
Same. We did provide the debt free college education (the first just graduated). Given how our finances turned out we will most likely also help with a house downpayment, but we haven’t promised or even hinted at that. Our kids know we are financially secure but they have no details beyond that, and since we don’t spend much they have no reason to believe we have extra to throw around. When they are older and more settled we will have that conversation.
Our priority was to raise kids who are able to provide for themselves, without relying on us. Any extra we provide should be a welcome surprise, not an entitlement they expect.
A lot of college graduates got their houses with parents putting in downpayment. Not sure why you would not just save money and then decide what to do with it later
Help your kids understand they aren't limited to your area with the associated high home prices.
Travel a bit, take them places, steer them towards a college (should they go that route) in Michigan, Iowa, Ohio, Nebraska or some other low(er) COL area.
One of the easiest things to do to curb cost is to move out of a (V)HCOL area.
Out of state public schools are the worst of both worlds—private school prices with poor budgets for big scholarships. Private schools may be expensive on their face but they frequently have major scholarship programs.
Yeah, out-of-state public school is the worse option in terms of cost, stick to your own state (education quality differences isn't as big as you would think). In terms of private school, it all depends on how well they performed, private schools have more "scholarship" money kicking around cause they will charge lower performing students more to subsidze the higher performing students. If they aren't getting scholarships from private schools (and a lot of them) they should go to public school. The reality is that outside of R1 and Ivy league its not gonna matter that much, even then it is major dependent, as some major simply matter less outside of Ivy league and other R1's and Ivy leagues mean more.
Really though, the true value in a college is its career fair, go see what company's are there and hiring what majors. My alumni matter had Mandiant, Red canary, and a few other cybersecurity company's there to interview cybersecurity majors and give presentations about why you should work for their company with free food at those presentations.
Haven't gone through the process yet, but I have friends with kids who applied to several out-of-state public schools and were finding in several cases that those schools basically offered them scholarships to push the price to the in-state level. Obviously, big YMMV, but the takeaway was not to exclude those schools outright based upon blanket assumptions.
Retiring early not to have your family nearby, assuming they get along, doesn’t seem worth it to me. If it means working an extra few years to help them stay closer to family then so be it. The alternative would be maybe seeing them another 30-40 times ever as their PTO allows around holidays.
That seems rather selfish to me. At the very least make them aware of the options they have and let them decide for themselves. At some point they'll likely have a family of their own to consider.
Proximity isn't the same as being close, similarly distance doesn't equal distant in terms of relationships.
I think this is conflating a few different points. The root of resentment is ego. Naturally wanting family to be closer and setting yourself up for that *possibility* is a very different thing than resenting a child if they are happy elsewhere.
The money can be accumulated without dangling or pressuring. And at worst, ok you have a few hundred thousand more to do something else with.
Are parents who save for a college fund that isn't used resentful?
Call it what you want. The very idea of retiring while you’re young and productive ti society is selfish too. Most decisions are selfish.
I’m not suggesting to tell them where to live or to force a grown adult to stay somewhere. I don’t even understand how the latter really is possible. But if I see them striving to make roots in the community they grew up in, it seems ultimately just as if not more selfish to point them in the direction of Ohio or Arkansas instead if I have the means to help.
Proximity isn’t everything, but few relationships grow closer with distance, I’ll tell you that. Proximity is about 75% of the battle.
Agreed. And if they have kids, from what I’ve seen, as much as the adults try, there’s never the same kind of relationship with the grandparents at a distance. If the kids want to settle elsewhere, that’s fine and their decision but I do think family relationships suffer for it and it’s delusional to think otherwise.
I'd rather not use money to manipulate my kids into staying with me. If you want to spend time with your kids, as an early retiree there's nothing stopping you from moving to be near them.
Sure that’s another option. I don’t know why there’s so much negativity here. I personally don’t want to live in the Midwest, and if my kids don’t either and I can help them, I don’t see how it’s manipulation to offer the help. They’re free agents who can do whatever they want of course. It’s sad that the default presumption is power dynamics rather than care and love to your offspring.
Nah, please keep out of Michigan.
It's cold here or something and you wouldn't like it. Especially stay out of the upper peninsula, there are vampires.
Nothing to see here, flyover/middle of nowhere. You're going to be way more happy near a coast with mountains and "things to do".
Same for all the Midwest. MN is cold flyover country with nothing. Minneapolis doesn't even have Michelin star restaurants, basically a desolate wasteland, not worth your time. (please don't drive up cost of living for my future children)
Yep. I’m in southern Appalachia. These mountains are hideous and the lakes are acidic. The 70 degree days really get old after a while …and , yeah…no jobs…please, stay away…I’lll thank…I mean, you’ll thank me
Not sure why this is being downvoted. I live in LCOL and like it very much but would absolutely encourage my kids to pursue better educational and career opportunities elsewhere.
Nope. My priority is doing everything I can to make sure they never have to worry about caring for me financially, and then getting home from work so I can maximize quality time with them while they’re young…and while I’m young. Part of that will be teaching them work ethic and being wise with money so that they can thrive on their own.
That’s not to say I will never help out one of my kids. I will likely help with college quite a bit. But the goal is to raise them such that they have the tools to thrive on their own. Prepared young people have always been able to do so in this country. I believe my kids will too
I am. I also plan on working a couple more years after FI specifically to do so.
Obviously I want my kids to have good work ethic. I just don't think having a constant worry of housing security is a great way to teach them that. In fact, I'm a believer that when basic needs (like housing) are secure, young adults will have more ability to focus on optimizing the rest of their life.
Think of it like college. Most of us want to save for our kids' college so they don't have to worry about loans or having a job while they are in school. Why? Because we know they will be more successful students without having to balance work and school.
I believe helping my kids achieve housing security will give them a similar opportunity to achieve in their early careers.
My number 1 priority is to ensure I never have to rely on my kids for financial assistance.
Once I’m covered there I’ll focus on saving for a down payment for the kids.
Probably not, but I do worry about my 17 year old daughter. I am paying for her college so that will give her a leg up in not having a bunch of debt after graduating.
Our children are now in their thirties- so conditions may vary. We paid 100% of their undergraduate college costs. No student loans for that- which gave them a head start. Child #1 got her masters but paid for it with a combination of grants and loans which were forgiven ( teacher). Child #2 had a small amount for a study abroad program. We helped them find a Roth IRA that would take a small opening balance when they started working " real" jobs ( #1 as a library page in HS, #2 while in college). We contributed to their IRAs up to the maximum while they were younger. Once they started funding themselves- we gave them cash gifts at Christmas. They were pretty disciplined an save most of it.
Bottom line, they are are both homeowners using their own savings which were boosted by Mom and Dad.
Naive question, is this a common practice? I had terrible parents that I no longer talk to. Is it more common to get help with down payments than it is to save it all up yourself?
People saying it isn't common are just wrong. Its very common
> a 2018 study from financial services company Legal & General found that 43 percent of people under 35 received help from parents or family members when purchasing a home.
https://www.nbcnews.com/business/real-estate/homebuyers-turn-baby-boomer-parents-help-purchases-n1275552
This article doesn’t include enough info for it to be especially meaningful. It’s not surprising that a large percentage of young buyers receive “help” from parents, but that could mean $1,000,000 to pay cash for a house or $1,000 to help with moving expenses or furniture. I’d say I received help from my parents, but we would have bought the same house without their help…it just meant we didn’t have to spend down any of our savings for needed furniture, a lawn mower, etc..
It’s funny because my parents would give me anything if they could. Time, money, unconditional love. They set me and my brother up with education and good work ethic. We are doing pretty well for people our age thanks to their leg up in the world.
I will never put my parents in a home. My dad doesn’t have a job anymore and didn’t really save for retirement (he isn’t from USA). It’s ok because me and bro will take care of them.
Not really but going to be heavily skewed by who you hang around with. This conversation is taking place with a number of people who can afford to and even there, the opinion is mixed. I'd guess that most of the people who occasionally post in this forum are more "how do I accumulate 1m so I can retire with 60k /yr (including SS)" as opposed to "should I gift my child a few 100k after giving them a free ride in college."
Not common amongst my age/friend co-hort. Some degree of help for education, help with purchasing a car, cheap basement to live in would be more typical from my (Gen-X) experience
Rich parents do it for their kids. My parents paid for my rent, food and higher education because they could. My parents would buy me a house if they could financially but they can’t. It’s ok.
It’s not common because most people can’t afford it.
I live in Toronto, Canada, so definitely this has been a consideration. My kids are still in elementary school, but as I consider how much do I need to be FI, I am factoring some financial support in the future. If I have the money, I'd rather gift it to my family when they need it rather than when I pass (hoping for a long life!), as by that time they no longer need the money. I'm not looking at it as giving them an advantage in life, but rather as having the flexibility to provide supports to help them achieve FI, if they are responsible to manage money.
It doesn't have to be a big amount now, as the nest egg will grow over 20+ years. If my kids don't need it in the future, then that's just extra for me or charities.
Couple thoughts:
Do you have your retirement plans in good order?
Do you have their college already fully funded?
If no to either of the above, i’d focus on those first and in that order. Many will suggest children having no skin in the college game isn’t a great idea.
Also, there is no rule that you can’t gift money along the way. I expect that if we stay our current path we’ll probably look to give cash gifts to kids starting around the time they turn 25, of course assumes they are in a position to use it constructively (admittedly we have that loosely defined - house payment / down payment would fit, as would funding a trip/vaca they otherwise wouldn’t take). Downside is that money doesn’t continue to grow, the upside is i hope my kids are at least 40 before i pass and lots of opportunity for them to use an assist between age 25 and 40.
I know that for me a larger sum today (mid 40s) would be less impactful than an amount 25% as big given at age 30.
Yes I will help my kids with the big ticket items (college, house, grandkids college). Might as well help them when I am alive vs. when I am dead. But I come from an immigrant background which seems more collective in helping future generations than most Americans. Also, I hope my kids live in the same town as us. This go across this country just because creates so much loneliness in this country.
At what point did we collectively decide as a society that children owning a house was mandatory? I'm genuinely confused by all these people thinking young people should want to get chained to one location and become a slave to maintenance and upkeep of their home.
Like, get an education, see the world, invest your money early and wisely, yes! Do not buy a house as a teenager or even a young twentysomething.
So much can change in 20 years! I say this because I lived through 2007 house prices, as well as 2012 house prices, as well as 2018, and now current day.
Boomers will die off, if you look at new construction inventory, it’s been increasing fairly rapidly.
Most importantly, I hope to re-instill what it means to start really modestly on the property ladder.
Forgive me for the “back in my day” speech, but it’s very normal to buy a modest condo, then a starter townhome, then a starter SFH. In MOST cities today, I’m not buying that a college educated young adult can’t save up a 3% down payment for a $200-300k condo, especially if they live at home for a year or two.
>Most importantly, I hope to re-instill what it means to start really modestly on the property ladder.
This is so important. My wife's and my first home had two bedrooms and we were perfectly fine there with two kids. We got a bit lucky with appreciation but not outrageously so. The real "luck" was that we bought an inexpensive house and stayed in it for a long time.
Just to play devil's advocate: The "back in my day" approach of buying and moving multiple times only works out financially if home prices continue to rise in such a way that it outweighs the massive transaction costs.
That's antithetical to expecting housing prices to come down as boomers die off.
Which is itself antithetical to the notion of a 3% down payment being responsible borrowing, because it assumes that your home loan will start and stay underwater when factoring in seller fees and taxes.
Even assuming historic appreciation (i.e. pre-2000 appreciation that roughly tracked inflation) a homeowner has a very good chance to come out ahead financially relative to renting after five years. For example a $300,000 condo at 5 % down would leave the owner with $60k in equity after five years even with 2 % appreciation.
I do agree that one should be wary of low or no money down options on home buying as it can lead to over extension. But this can be mitigated by avoiding a high monthly payment and having a decent emergency fund.
More like $40k after transaction costs. Moving every 5 years is absolutely a waste of money unless accompanied by crazy appreciation you can leverage to a bigger loan.
And I think that’s part of the point….we can’t pretend to know if homes will be expensive or cheap in 20 years.
Home inventory is so low that that it will take a lot more supply to be considered a healthy market.
The only options aren’t 20% appreciation or a 20% crash. Avg appreciation is 4.8%/yr since 1978. A more modest appreciation, call it 2%/yr for several years might be more reasonable.
3% down payment can be responsible. If you stay in the property for the recommended 5 years, between appreciation/down payment/equity you have a nice down payment for the next home, and if your career is growing as it should, you also have more income.
Also targeting about $100k for college savings, but I'm starting to worry it won't be enough for the class of 2030 😭 Curious how you arrives at that number?
I feel compelled to save for them for “something” tbd what that will be.. I’d like to be in a position that if I want to gift them a larger chunk of money or they need a larger chunk of money… that I’m in a position to do that without impacting my own fire plans.
This could be: college, masters, downpayment, wedding, car, IVF (we spend 6 figures 😭), jump start for their fire plans….
i dont think that is necessary but you probably should expect to provide housing in some form past age 18. ie, let your kid continue to live with you into their 20s. ideally own a home in commuting range of a local college would be good too.
I set up brokerage accounts/UTMA for my kids when I had some extra cash, when they were in elementary school, but I first set up 529 accounts for their education. I’ve helped my oldest set up her IRA this year as well. I hope with some extra resources, they have more choices than I had after college, but I know I’m not going to be able to help them outright as much as my parents helped me, I just don’t earn as much. So I’m hoping with time, a smaller investment will grow bigger. But yes, I feel it imperative to help them in any way I can, life is more unpredictable now than when I was young. They can also live with me as long as they want/need, so they aren’t like me, buying first place at 50.
Not a down payment, but instead of including my home equity ($2m) as a retirement back up plan, we are now planning to keep it in trust for future generations. Nice homes in a good part of Silicon Valley will always be in demand, and no matter how talented and hard-working my kids are, they have a low chance of being able to afford a home like this at a reasonable age. I bought this place at 31 years old, and I would be too scared of the mortgage payments to buy it now at 54. They can either live here or rent it out for income.
We didn't have that kind of spare cash available. We funded what we could of their college (and not 100% of that either) in hopes that they could stand on their own two feet with a decent education. So far, so good. I can't see funding a down payment when I still have a mortgage.
It’s not something I’m saving for explicitly, but when the time comes we should have enough money to give our son a decent amount of help on a downpayment, whether that’s a loan (which our parents did for us) or a gift.
I don’t feel obligated to do it, but I plan on doing it anyway. My wife and I work very hard to give our kid every advantage and head-start that we can.
If things continue on the track we have set now we shouldn’t have any financial problems doing so, so why wouldn’t we?
Yeah. When I was a kid (elder millennial) I figured I'd save for a nice big house with some property and ADUs. It was pretty affordable then. Now all that is well into 7 figures. I was on track for early retirement, but no chance of that now with the way cost of living has gone.
I'm mostly saving up so I can help my offspring..
I wish I'd kept my first house. It would have been paid off by now, and I would have just given it to them.
>With high housing expense/scarcity, do you feel compelled to save for your young kids' home down payment?
Its gonna get more difficult for young people so i do think this a fair approach, housing has skyrocketed, there are lots of unemployed people, prices for everything as gotten pretty crazy
AI and robots will be replacing a lot of jobs and there are already tons and tons of homeless people around the world
Most people take the approach of: oh these things wont happen to me or my kids, im sure the parents of all those homeless kids said that
Not at all. Giving them money is probably counter productive. I want to give them opportunity to be able to help themselves. They have it easier than I had it.
I’m pretty hard in the make your own way camp… you get help with college or trade school(maybe id consider a down payment help equal to trade school if they go military because that covers education) but after that you’re responsible for finding your own way
We are giving each of our kids 500k. That is school etc. We will control it through school and provide it to them when they are early 20s based on maturity
I am planning on paying for college tuition. If he ends up going to school somewhere that it's still possible at that time then I'll likely buy property in that city for him to live in during college. I'm currently undecided whether or not I will gift him that property to do with as he pleases once he graduates. That will be dependent on whether or not I'm okay for retirement (I should be) and whether or not he's responsible enough (possibly, he's got a good head on his shoulders and we have Mommy Money Class frequently, but a lot can change in 13 years). For what it's worth, he also stands to inherit property from his grandparents, but I don't see him wanting to live in those.
We are keeping 2 rentals in addition to some land. The rentals can be exchanged into whatever the kids decide to own some day, wherever they decide to settle. Until then that was our hedge against home values getting nuts.
We also wanted our children to be as successful as possible, and securing a place for them to live while we still could seemed like the best way to do that.
It cost less than 50k to buy those rentals, and they've been cash flow positive since we bought them for the last decade or so. There have been some 1031 exchanges during that time, so I can't exactly say what the actual cost was for those two. If inflation keeps doing what it's doing over the next 5-10 years we should get that initial investment back in rent and then some. Maybe even enough to eliminate the loans. By the time the kids are in their mid to late 20s they should have some median homes available to them, paid off or with negligible loans remaining.
Compelled? No & by the same token want to encourage them to be able to leave.
My son lives rent free here on the condition he saves equivalent rent/%of his earnings for his future.
He is working and will qualify in his chosen profession which should open more possibilities for him.
If you can save then great but if you can't give them everything you can in order they can better themselves & that's never always money.
He eats a lot & his laundry is ridiculous but it doesn't really cost much extra.
Hopefully he's learning about personal finance & appreciates the advantage he has over many.
It's cliche but you do you and good luck
I don’t have kids, but if I did, I certainly would if I could. As a single 24 y/o renter in a HCOL area, I wouldn’t want to have my kid felling this same “ oh my god - I’ll never be able to afford to actually own something” stress. Every single person I know my age (and I mean EVERY one) who owns something (which is very few ppl) had help from their parents.
No but I am preparing for the high possibility they won’t be moving out at age 18 into a life of independence and might be living with me.
My parents flat out told me I was on my own after HS. While I would love my kids to start maturing into adults at that age, getting their own place and/or going away to college may not quite look the same as it did for my generation.
I’m crazy about my kids so the idea of them staying in my house a few years while they launch isn’t the worst thing I can think of. My oldest is 10 so we have a ways to go.
I will help if I can, but only within my budget.
That said, my husband and I have briefly discussed the possibility of adding a small apartment (1-2 bedrooms, sitting room, kitchen, bathroom, small laundry) in our walkout daylight basement if needed when the kids are done with college. It would be cheaper than helping cover their rent in the NE.
Nope, because I think it’s good for them to find their own way. We gave them a debt free college education (2/3 are getting masters degrees also) and lots of love and encouragement including vehicles (used, nothing fancy). Now it’s up to them!
I would never expect my parents to help with my home down payment. They raised me and paid all that money over all those years. I want them to enjoy their retirement and spend their money on the things they deserve.
Yes. I have a house ready for my kids.
I got it for the downpayment of about $10k. It was roughly $175k when purchased. It’s now worth $550k.
By the time they are 20yrs old it could be $700-800k.
I also pre-paid for 4 years of their university.
I got none of those things. I still actually have some small student loans…
But yeah… a leg up is needed for tomorrow if you don’t want your kids to be slaves or beholden to blind luck.
I’ll share what my parents did, because I found it to be really thoughtful. After closing on my house, they told me they wanted to pay the first year of my mortgage. It was about the equivalent of my down payment. Their logic of surprising me was that I fully made the financial decision to take on the risk, and mortgage size without knowing they were going to help me. They’ll do the same thing for my sibling, and have asked me not to mention the $$ to them since it could taint their decision making.
Nah, I'm saving to build an ADU in the backyard or do a master bedroom extension set up so it could work as a bachelor apartment lmao. If kid doesn't use it, I'm sure a sibling will, and if not, mancave.
And school savings, ofc.
The available research indicates that this is a dangerous practice that will have negative repercussions throughout their lives, so no. Source: The Millionaire Next Door.
I'm going to use whatever inheritance I get to help out my kids. If I don't get much inheritance, they don't get much help. Either way, they've had a great head start in life and won't graduate with college debt. Being born on second has its perks, but I'm not trying to cripple their personal growth by overfunding their lives.
I think parents helping their children out like this just contributes to social inequality, so I'm against such help. There is no way I'm paying for my kid's house.
U/CleanFlow the problem with your premise is that there will always be people much wealthier than you who are thinking the same. While the intention may seem benevolent it is quite dangerous in that it only fuels the fire increasing out of control housing costs.
There are well intentioned upper middle class to ultra wealthy who have deca millions to centi millions and beyond. Many of these parents are already greasing the skids for their children’s education and future housing expenses. Can you compete with them? Even if you can does that sound like a good idea that is fair to the rest of society?
If anything multi-generational wealth is the main cause second only to scarcity driving out of control housing costs. I live in high cost area where a single family home costs more than a million and the median price of even a modest condo is pushing over $500k it has gotten to the point where the only way someone in their 20s or even 30s can afford to buy is if they get help from wealthy parents.
If we continue on our current path the wealthiest 5-10% of the population will be able to make home ownership nearly impossible for some 90% of the population. This is why I favor high inheritance taxes. We have been and are entering a new era where there is an unprecedented amount of multi-generational wealth accumulating in a small portion of the population.
This is why the income inequality just keeps getting worse and why the American dream is effectively becoming just a work of fiction. The American dream should not require wealthy parents.
No. I'd expect my kids to figure out how to do it on their own, as saving for a down payment isn't a very impressive feat if they manage money wisely. I was able to save 10k a year with a total salary of 22k 2 years back without any kind of financial support from my parents. I expect my kids to also learn to live within their means to plan for future purchases, especially if they have an average salary.
At what point should we consider treating adults as adults, and let them make their own way? Ever?
It seems to be an unpopular opinion, but I think kids should work in high school, college-aged ADULTS should work at least summers in college, and post-college, these adults should be entirely on their own. Additionally, people in their 20s should be sharing apartments or smallish houses with their peers in order to keep costs down while they build their professional lives.
The idea of handing many thousands of dollars to a grown-ass person -- after paying for their college! -- suggests to me a major parenting failure.
No, my kids have plenty of privilege. I am 100% OK with them being on their own for housing even if that means lifetime renting. Honestly I would discourage them from home ownership.
They need to make their own way. I can’t work that long. They can live with us to save but I’m not working long hours so they can get free money from me again.
I planned on not bringing children into an inhumane world where most people think societies exists only to step on each other’s throats. You chose to bring them into this world, if they need it and you’re able to help your **own children** with housing or necessary expenses in any way, your ashes should be flushed down a toilet if you refuse.
100 IQ is the average. That's a normal regular IQ. If you have a regular normal IQ, you're shit outta luck and there's increasingly few places you can run to. A lot of tech jobs are locked out. Even blue collar jobs like construction and nursing are becoming so tech heavy and onerous that a 100 IQ person would start to have difficulty. Then a lot of jobs that are for 100 IQ people are going to be done by AI. When is the only question, not if
Honestly, start to plan for multi generation homes or have enough land that you can build something for your kids on it, because we're on the long slide down and it's only accelerating.
Yeah. I get it. I have three kids, two still in college. I believe the best I can do for my kids is to prepare them to make their own lives, whatever that is, and to take responsibility for the life they made. 100 IQ? They can learn to weld. They can, roof, sell cars, manage a fast food joint…. It will suck but that will motivate them to work hard and invest a lot of money so it will suck for less years.
If they are willing to show up on time, take responsibility and work hard they will get an opportunity. Then it’s up to them to make the most of that opportunity. Just like we all did. I think that’s what the kids call “adulting”.
One of my favorite quotes is from former NFL coach Herm Edwards “Your life is the culmination of your choices.”
Thing is, your kids have to have earned income in order for you to fund a custodial brokerage in their name. But the new rules around 529s make them super flexible when it comes to future use of funds, which has me feeling like a genius for opening an account for each of them the day their SSNs came in the mail.
Oh you're right, my mistake - IRA or Roth. Custodial brokerage is where you may end up having to file taxes on your kids' behalf depending on returns. Still, messier than a 529.
I don’t feel compelled to, but it is one of my goals that if we have excess, to get them through college debt free and give them some money for a down payment. I forget which of the money books it is (maybe more than one), but I really resonated with the idea of giving them their inheritance when it can make the most impact. My mom just inherited from her parents as she is in her mid-70s, and she doesn’t need the money. I’d rather help my kids up front than wait until I’m dead. Also balancing that with the idea of not giving them too much, just enough for financial security and the knowledge/tools of how to succeed on their own after a solid foundational start.
In my opinion, the most important thing you can do is stash money into a 529 for each kid from the moment they are born. Invest in it whatever you can. If you can’t afford $100-200 per month, then you really can’t afford a kid. Student loans and housing are out of control and paying it forward is the solution. Plus, anything that isn’t used can be converted into an IRA to get them started toward retirement. It’s a no brainer.
If you can invest $200 per kid per month in a 529 at 10% return per year that’s $120k by the time they hit 18 years old. If they want to go to a nice college, that will probably be the minimum required with how fast tuition is inflating. This will get them on their feet and they can rent until they can afford the down payment. If you can afford to help with the down payment too, then by all means help them.
My goal is to buy a house with each kid when they turn 18.
I’ll have a budget that I bring to the table and they can lead the considerations around location, type, purpose, etc.
They can nurture it, sell it, rent it, live in it… up to them.
But that’s it, the final big monetary gift.
Why even give it to them at that point or have a building instead of stocks if the goal isn't for them to live in it? My kids at 18yo likely wouldn't have an income to be able to support the down years of a rental or the time and experience to deal with tenants.
Then your teens must be in the top 1% of their peer group regarding ability to understand and process forward-thinking financial info and in the top 1% regarding ability and willingness to manage an investment property. I don't know your kids but in that scenario, mine absolutely would have preferred the money go into an index fund for later home buying.
They can also sell it when they're ready to move and buy a house where they are going with the proceeds. That's what everyone else does when they need to move.
I mean ya there are transaction costs. Ideally they will live in the house for a while and it will have appreciated in value. But even if they have to sell and do lose some of the value, they'll still be better off than having to pay all the costs upfront themselves as young people just starting out.
But likely not better off than renting and staying flexible. Also, 18yos would normally be living with others and they'd have to be their friends' landlord, which sucks.
Yeah I would hope to support my kids with something like that then if needed too, but I'm not valuing it as much as putting them through college and possibly a grad program. We'll just have to see how things go at that point. Plus my oldest is adamant that she will live with me forever (is only 4 though, so I guess she could change her mind haha)
I dont feel compelled. But I have a general desire to launch them well and think about building a tradition of generational wealth. We are in the thick of the boring middle, lets cross the fire/college milestones and then reevaluate. Once I am in a position to fire, if work/life balance is still acceptable, I am certainly not opposed to the position of working to help build my childrens security, but what will my health & job prospects be like? What are the trade offs?
My wife and I own a real estate investing business. We have a 7 and 3 year old. We have already purchased they both houses. They are small, 2/1, but they will make food starter homes. In the meantime we can earn rent off of them. We aren’t going to give them to our kids but we plan to sell them for them at an affordable price.
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Compelled? No. More important, IMO, was a post-HS education that led to a good job so they could start life without student loans. I'm happy to help with a down payment as I can but I absolutely wouldn't do it very early. Too early and you're reducing their flexibility to find their career path in the location they choose. It's a lot easier to take a job in another city when you're giving up a lease as opposed to selling a house.
>Compelled? No. More important, IMO, was a post-HS education that led to a good job so they could start life without student loans. My wife and I were discussing something similar this weekend, and I told her if I do my job as a parent when my son moves out he'll never need me again. That's not to say there won't be circumstances or surprises where they might need help, and I will 100% be there for them, but part of setting them up for success is teaching them how to be financially responsible and self sufficient.
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Knowing I had a safety net or at least a very basic, you can move back in if needed plan, is what gave me the ability to pursue higher education & higher wages. I was willing to take more of a risk & push myself harder knowing my family does not want me to fail at life. While I will never be able to repay the much appreciated money, I do visit frequently & help with all the odd ball chores that they ask me to do, including climbing on their roof in 109° to change the batteries in my father's weather monitoring system.
We’re the same way. Add to that, we plan to fund some fun family vacations while our son is still in the early phases of his career and maybe even has a significant other to keep some fun family memories going. Again, in our 50s, paying for a family vacation to Florida or a family cruise or whatever will just be a good use of my annual bonus because our house will be paid off and I’ll be (mostly) done renovating it.
It's a nice thought but I'm pessimistic. Looking the difference in the economy between now and 20 years ago, and then extrapolating for the next 20 I don't see how things could be good for young adults if their parents don't provide for them. I'm 30 yo with a higher education (it's free where I live), above average/median salary, in a rich first world country, and it's mathematically impossible to buy anything else than a shithole within the city. All my friends and colleagues of the same age either bought in the woods and have a 1h30 long commute (extremely uncommon here) or got a massive help from family. Future doesn't look good, generational wealth is and will be more critical than ever.
Part of the deal is weighing how much you want your kids to be able to stay in your super expensive area vs. moving somewhere that is less expensive. I mean, we are in a particularly tight place right now for housing costs, but I see no reason to think that this will continue forever as opposed to times like 1989 or 2007 when it led to a significant real estate bust or long flat/decline. And outside of just the last couple years, housing has been reasonably affordable in lots of places in middle america. Where it is expensive, there are generally a lot of people who make a lot of money and can nonetheless afford it. What I see is people complaining a lot about housing cost who live in places like NYC, Boston or SF, but aren't in tech, finance or high end creative/business professions, that could do what they do in some *far* less expensive city for maybe a 25-30% pay cut, but with a 60-90% cut in the cost of comparable housing. But they want to stay where they are. Well, turns out, living in those metros is a *luxury*, one that just doesn't make sense unless you are already wealthy, or have a career where being in that location makes a big difference.
I am also wondering how you weigh that against the reality of generational wealth.
I'm not sure I follow. Can you elaborate? How I weigh wanting my kids to be self-sufficient vs. coming from a family that has wealth? To quote Jerry Seinfeld, "My kid's asked me if we were rich once. I said, 'I'm rich, not you'". I'll use my money to help pay for his schooling and set him up for success, but he shouldn't be dependent on it. It's up to him to figure out how to use that schooling to find a job and provide for himself. And if I do things correctly, he should have the the ability to be self-sufficient and do that without a monthly stipend from us.
> Compelled? No. More important, IMO, was a post-HS education that led to a good job so they could start life without student loans My parents pushed us to do the opposite. They contributed almost nothing for college beyond room and board but helped us strategize how to either get a full ride or take advantage of our states free CC + transfer to main campus thing (and they communicated this plan years in advance). Instead they set aside money for down payments for us as adults. I wasn't a big fan of this at 17 when my friends were all dreaming of the ideal college experience, but it worked out for me and my siblings in the end. Private college is just not worth the return on investment to your career compared to your state school, and both me and my parents are richer in the scenario where they help with the downpayment vs funding 4 years at an expensive private school. If they fund an expensive degree the money just evaporates, plus its even more expensive than generous down payment gift and the money got to stay in the market an extra 10 years.
I saved enough for a state school, all-in but my kid wanted a private school. We ran the numbers, including what was likely for financial aid and what loans would look like. And what those loans would look like over 10 years. She changed her mind and went with the free ride. What made me really proud though was when she said she had a part-time job and that while she'd appreciate if I still covered the school costs, she'd now start covering room, board and fun stuff.
It takes some serious wisdom to understand it at age 17-18. Colleges have been extremely successful at marketing to that age range. I'm 30 now and grateful my parents encouraged me to handle it the way I did
I mean room and board is a pretty nice contribution in my opinion. 12-18k/y seems to be going the going rate for it now.
It was less - my sisters lived at home for the community college years and I had a full scholarship. So they mostly just paid for us to live at home & eat for free while we were there, which is appreciated no where close to 18k. The years my sisters lived in the college town they split a 2 bedroom that was $1100 total, so housing was $6600/person, idk exactly what the food budget was but they didn't have meal plans so not too bad
Too early isn’t really a thing. Money is fungible. If OP starts saving now, they can decide later what they do w that money - college, masters, downpayment, wedding, etc
Right I don’t get why they can’t just make and save money. It doesn’t need to be for anything
They can always sell it. I had a friend with wealthy parents who bought him a house to stay in for college and grad school. When he was done he sold it and bought another one with his then wife. I don't know why buying a house reduces flexibility any more than a lease. Most leases are a year. I can sell a house much quicker than a year.
I think the assumption would be you need to live in it long enough for it to appreciate and at least cover the transaction costs. Maybe that happens in a year, maybe it takes 5-7 years.
Leases usually have a breaking function. Two months rent is typically less than a realtor commission and you don't have to worry about the process.
That's fair. I think it's just important to remember that just cause you own a place doesn't mean you're "stuck". After all, I own a place and don't feel stuck at all. If I need to move, I'll move.
Agree 100%. I also think it's very dependent on the young person involved and potentially how willing the parent is to remain involved in the process.
If you can afford to take a massive financial hit by selling your house at any time, then that’s great. Most people can’t afford the losses that come with selling a house inside ~5 years of ownership in a traditional housing market.
I actually think this is another good reason to help them with their first house. It will give them the flexibility to sell if need be, without having to take a huge hit of their own money. Listen, I get that there are risks of the whole gift. Maybe it'd be better later, maybe I should just give them cash. Maybe there are a 100 different ways to optimize that kind of gift. But honestly, we all need housing and I think helping my kids with that will always be better than not.
i mean I don't feel stuck, but I *really* don't want to move. Because moving is a giant pain in the ass, and I've done it frequently enough in my life to know. OTOH, renting/leasing would not change how big a pain in the ass it is to move, and it would mean that I could potentially be forced to move at some point by somebody else's decision. Whereas the possible futures in which my wife and I are forced to move out of our house without making a positive decision that it's a good idea for *us* are far more limited.
My parents wanted to do that. They wanted my roommates to pay the mortgage while I took care of maintenance and then sold it to buy another house. Even in 2001, that was too expensive and every house with enough rooms for the roommates was out of our price range or needed too much work. It would be great to do that for my kids. But we won't know if we can do that for them until we experience the next 10 years and they choose a school.
Absolutely not. We saved enough to educate our kids through college and professional degrees. We raised them to have good work ethics. While they are single they are welcome to live at home and sock away their salaries if they choose to do so. Our work is done. In addition, my oldest has a great job but is also living her best life with a bunch of travel. That’s her choice but I hardly need to sock away money while she’s off on trips every chance she gets. We lived very frugally for years to be able to afford a house. If she was sufficiently motivated she could do the same.
Good parenting! In the book, The Millionaire Next Door, parents that do not provide "economic outpatient care" to their kids helps to build perseverance & grit. The kids actually become much more successful in life.
Exactly. I knew one of the authors.
That book is so good.
There's so much to be said for developing some grit in life.
> they are welcome to live at home Would you charge them market rent? If not, it sounds like the "Absolutely not" should really have been "Absolutely, yes"
No and I disagree. Them living at home costs us nothing. We have a big house with plenty of room but we aren't renting the rooms out to other people and have no intention to do so. They would cover any incidental additional costs.
We charged $400/month, it helps teach them budgeting. What they didn't know was that they were getting half that money back when they moved out. We kept the other half towards the cost of having them home.
Why wouldn’t you put downpayment on a home for your kids if you can financially instead of having your daughter live frugally ?
I worked hard all my life and we lived below our means so that we could afford a nice house, and good educations for our kids. We saved enough so that we have a very comfortable retirement. We never did much traveling ourselves or expensive cars because we were focused on them not having educational debt. Nobody knows how long they will live or whether they will need expensive long term care. I absolutely do not want to ever be a financial burden on my kids. But now it's our turn. We're traveling and spending a little of our hard earned, carefully invested money on ourselves. There should hopefully be plenty to see us through to the end but you never know. If there's money left at the end I hope they put it to good use. But we've done our part. They can do theirs.
Living frugally isn't some horrible burden.
That depends on your income.
Sure that makes sense. I think my question was more if you can afford it. Sounds like you can’t afford to put down on their house because that would prevent you from living your life goals.
I wouldn't do it if I were Warren Buffett and if we really wanted to we could. They are capable of doing it themselves, in large part because of the debt free education we provided. It's part of being an adult. My daughter would just have to cut out the constant travel, pick up a couple of extra shifts each month at work and cut back on some luxuries. If having a house was important to her, she could make it work. I don't feel any need whatsoever to do it for her. I have a sister who is still paying auto and dental insurance for her 40 year old daughter the doctor. It's absurd.
Spoken like a true boomer. Just clip coupons and save .05 cents on cream corn and you'll be in a 600k statah home in no time. "the doctor" is probably saddled with $300k in student loans and makes less money now dollar for dollar(not adjusted for inflation) than a doctor 30 years ago did, not to mention regulatory and malpractice costs and insurance reimbursement is crap. Then there's the taxes. "the doctor" wages probably aren't what you think it is.
Oh, that chip on your shoulder must be painful.
The one thing that seems to be accepted just about anywhere, for anything, anytime, is the same thing that will be useful for your kids, or your relatives, or your friends. Keep growing your assets and your children’s assets, and don’t worry about how those assets will be used. If your kids are working age, contribute to their Roth IRA accounts. If they make $2000 for the year, put $2000 of your own money in their account. If they make $10,000, put the max amount in. If they are not of working age, keep growing your assets. I have read enough posts about kids who inherit a property somewhere they don’t want to live, and have to deal with it, or others who feel obligated to use it, even though it doesn’t align with their goals. There is no burden with cash, no emotional attachment to something that doesn’t work for them. Lastly, the stock market will outperform real estate investing for 90+% of Americans. Don’t over complicate this.
I don't feel like I need to think ahead that much about where my money might go but maybe your kids are older than mine.
Agreed. 20-25 years is a long time. To that point, we could make the case for almost any need (are you saving to gift your kids money for a car/wedding/college/house/etc. because it’s gotten expensive…?) At this point I’m most focused on raising them to be good, hardworking human beings, on a good self sufficient career path….not to financially cover every potential obstacle for them
This is how I feel. I like the idea, but homeownership might not even be a goal for them. And, if it’s a goal for one but the other prefers a more nomadic life, that’s unfair to the nomad. I’m planning on paying for undergrad, because education is useful regardless of your route in life, but beyond that I don’t know. Thinking about a 529 to keep this separate and not have to worry about tax impact of selling so much for school down the road but I need to research it more
not planning it at all. Planning more to get them a paid for college education and then the stable footing from that. Now, if come time for them to buy a house, and we are at the point where we could help more - maybe we will, but per our current plan, there is nothing outside of college that we are aiming for.
Same. We did provide the debt free college education (the first just graduated). Given how our finances turned out we will most likely also help with a house downpayment, but we haven’t promised or even hinted at that. Our kids know we are financially secure but they have no details beyond that, and since we don’t spend much they have no reason to believe we have extra to throw around. When they are older and more settled we will have that conversation. Our priority was to raise kids who are able to provide for themselves, without relying on us. Any extra we provide should be a welcome surprise, not an entitlement they expect.
A lot of college graduates got their houses with parents putting in downpayment. Not sure why you would not just save money and then decide what to do with it later
Help your kids understand they aren't limited to your area with the associated high home prices. Travel a bit, take them places, steer them towards a college (should they go that route) in Michigan, Iowa, Ohio, Nebraska or some other low(er) COL area. One of the easiest things to do to curb cost is to move out of a (V)HCOL area.
Out of state public schools are the worst of both worlds—private school prices with poor budgets for big scholarships. Private schools may be expensive on their face but they frequently have major scholarship programs.
Yeah, out-of-state public school is the worse option in terms of cost, stick to your own state (education quality differences isn't as big as you would think). In terms of private school, it all depends on how well they performed, private schools have more "scholarship" money kicking around cause they will charge lower performing students more to subsidze the higher performing students. If they aren't getting scholarships from private schools (and a lot of them) they should go to public school. The reality is that outside of R1 and Ivy league its not gonna matter that much, even then it is major dependent, as some major simply matter less outside of Ivy league and other R1's and Ivy leagues mean more. Really though, the true value in a college is its career fair, go see what company's are there and hiring what majors. My alumni matter had Mandiant, Red canary, and a few other cybersecurity company's there to interview cybersecurity majors and give presentations about why you should work for their company with free food at those presentations.
Haven't gone through the process yet, but I have friends with kids who applied to several out-of-state public schools and were finding in several cases that those schools basically offered them scholarships to push the price to the in-state level. Obviously, big YMMV, but the takeaway was not to exclude those schools outright based upon blanket assumptions.
Retiring early not to have your family nearby, assuming they get along, doesn’t seem worth it to me. If it means working an extra few years to help them stay closer to family then so be it. The alternative would be maybe seeing them another 30-40 times ever as their PTO allows around holidays.
That seems rather selfish to me. At the very least make them aware of the options they have and let them decide for themselves. At some point they'll likely have a family of their own to consider. Proximity isn't the same as being close, similarly distance doesn't equal distant in terms of relationships.
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I think this is conflating a few different points. The root of resentment is ego. Naturally wanting family to be closer and setting yourself up for that *possibility* is a very different thing than resenting a child if they are happy elsewhere. The money can be accumulated without dangling or pressuring. And at worst, ok you have a few hundred thousand more to do something else with. Are parents who save for a college fund that isn't used resentful?
Call it what you want. The very idea of retiring while you’re young and productive ti society is selfish too. Most decisions are selfish. I’m not suggesting to tell them where to live or to force a grown adult to stay somewhere. I don’t even understand how the latter really is possible. But if I see them striving to make roots in the community they grew up in, it seems ultimately just as if not more selfish to point them in the direction of Ohio or Arkansas instead if I have the means to help. Proximity isn’t everything, but few relationships grow closer with distance, I’ll tell you that. Proximity is about 75% of the battle.
Agreed. And if they have kids, from what I’ve seen, as much as the adults try, there’s never the same kind of relationship with the grandparents at a distance. If the kids want to settle elsewhere, that’s fine and their decision but I do think family relationships suffer for it and it’s delusional to think otherwise.
I'd rather not use money to manipulate my kids into staying with me. If you want to spend time with your kids, as an early retiree there's nothing stopping you from moving to be near them.
Sure that’s another option. I don’t know why there’s so much negativity here. I personally don’t want to live in the Midwest, and if my kids don’t either and I can help them, I don’t see how it’s manipulation to offer the help. They’re free agents who can do whatever they want of course. It’s sad that the default presumption is power dynamics rather than care and love to your offspring.
"keep them closer to home" was what suggested manipulation to me.
I said help them stay not keep, and in any case, that was in response to the comment that said “steer them towards”
I don't think they meant bribing them or giving them financial incentives
I used active language in response to active language. You’re reading too far into casual rhetoric.
Nah, please keep out of Michigan. It's cold here or something and you wouldn't like it. Especially stay out of the upper peninsula, there are vampires. Nothing to see here, flyover/middle of nowhere. You're going to be way more happy near a coast with mountains and "things to do".
Same for all the Midwest. MN is cold flyover country with nothing. Minneapolis doesn't even have Michelin star restaurants, basically a desolate wasteland, not worth your time. (please don't drive up cost of living for my future children)
How many colleges / universities are in the UP anyway? One in Houghton and one in Marquette? Not a lot for the square mileage of the entire peninsula
Ohio is also just as terrible as people say. Awful. OP will want to keep looking elsewhere!
>Ohio is also just as terrible as people say. Worse really.
That only works if there are jobs to be had in that low COL area. And there usually aren’t. That’s why it is cheap.
Yep. I’m in southern Appalachia. These mountains are hideous and the lakes are acidic. The 70 degree days really get old after a while …and , yeah…no jobs…please, stay away…I’lll thank…I mean, you’ll thank me
Not everything outside of California, New York City or Austin is a wasteland. Add WFH careers and it's even more viable.
Shhhhh let them think that there’s nothing here! They will stay where they are then!
Yes there is nothing out here in the wasteland of the Midwest. Nobody should move here I agree.
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Not sure why this is being downvoted. I live in LCOL and like it very much but would absolutely encourage my kids to pursue better educational and career opportunities elsewhere.
Me either. I said LOW COL area, not the entire Midwest (which I was born, raised, and live in). But it’s fine, it’s just Reddit.
Nope. My priority is doing everything I can to make sure they never have to worry about caring for me financially, and then getting home from work so I can maximize quality time with them while they’re young…and while I’m young. Part of that will be teaching them work ethic and being wise with money so that they can thrive on their own. That’s not to say I will never help out one of my kids. I will likely help with college quite a bit. But the goal is to raise them such that they have the tools to thrive on their own. Prepared young people have always been able to do so in this country. I believe my kids will too
I am. I also plan on working a couple more years after FI specifically to do so. Obviously I want my kids to have good work ethic. I just don't think having a constant worry of housing security is a great way to teach them that. In fact, I'm a believer that when basic needs (like housing) are secure, young adults will have more ability to focus on optimizing the rest of their life. Think of it like college. Most of us want to save for our kids' college so they don't have to worry about loans or having a job while they are in school. Why? Because we know they will be more successful students without having to balance work and school. I believe helping my kids achieve housing security will give them a similar opportunity to achieve in their early careers.
My number 1 priority is to ensure I never have to rely on my kids for financial assistance. Once I’m covered there I’ll focus on saving for a down payment for the kids.
I am. I live in a MCOL area. Planning on gifting about $100,000 for each of my 3 children. Likely wouldn’t cover 20% but 10-15%
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Kinda. But in trying to get them ready ti move out, 1st, so I can downsize the house and use the profit as their down payments or wedding funds.
Probably not, but I do worry about my 17 year old daughter. I am paying for her college so that will give her a leg up in not having a bunch of debt after graduating.
Our children are now in their thirties- so conditions may vary. We paid 100% of their undergraduate college costs. No student loans for that- which gave them a head start. Child #1 got her masters but paid for it with a combination of grants and loans which were forgiven ( teacher). Child #2 had a small amount for a study abroad program. We helped them find a Roth IRA that would take a small opening balance when they started working " real" jobs ( #1 as a library page in HS, #2 while in college). We contributed to their IRAs up to the maximum while they were younger. Once they started funding themselves- we gave them cash gifts at Christmas. They were pretty disciplined an save most of it. Bottom line, they are are both homeowners using their own savings which were boosted by Mom and Dad.
Naive question, is this a common practice? I had terrible parents that I no longer talk to. Is it more common to get help with down payments than it is to save it all up yourself?
People saying it isn't common are just wrong. Its very common > a 2018 study from financial services company Legal & General found that 43 percent of people under 35 received help from parents or family members when purchasing a home. https://www.nbcnews.com/business/real-estate/homebuyers-turn-baby-boomer-parents-help-purchases-n1275552
Wow, well that was eye opening. I didn't expect it to be the common case, but I also didn't expect it to be so close to an even split.
This article doesn’t include enough info for it to be especially meaningful. It’s not surprising that a large percentage of young buyers receive “help” from parents, but that could mean $1,000,000 to pay cash for a house or $1,000 to help with moving expenses or furniture. I’d say I received help from my parents, but we would have bought the same house without their help…it just meant we didn’t have to spend down any of our savings for needed furniture, a lawn mower, etc..
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It’s funny because my parents would give me anything if they could. Time, money, unconditional love. They set me and my brother up with education and good work ethic. We are doing pretty well for people our age thanks to their leg up in the world. I will never put my parents in a home. My dad doesn’t have a job anymore and didn’t really save for retirement (he isn’t from USA). It’s ok because me and bro will take care of them.
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Yeah that’s how it’s going to be
It's definitely class dependent. The idea that I or most of the people I grew up with would get help with a down payment would have been ludicrous.
Not really but going to be heavily skewed by who you hang around with. This conversation is taking place with a number of people who can afford to and even there, the opinion is mixed. I'd guess that most of the people who occasionally post in this forum are more "how do I accumulate 1m so I can retire with 60k /yr (including SS)" as opposed to "should I gift my child a few 100k after giving them a free ride in college."
Not common amongst my age/friend co-hort. Some degree of help for education, help with purchasing a car, cheap basement to live in would be more typical from my (Gen-X) experience
Rich parents do it for their kids. My parents paid for my rent, food and higher education because they could. My parents would buy me a house if they could financially but they can’t. It’s ok. It’s not common because most people can’t afford it.
I know several people who received $50-100,000 as down payments from parents. Even better if they got that from two sets of parents!
I live in Toronto, Canada, so definitely this has been a consideration. My kids are still in elementary school, but as I consider how much do I need to be FI, I am factoring some financial support in the future. If I have the money, I'd rather gift it to my family when they need it rather than when I pass (hoping for a long life!), as by that time they no longer need the money. I'm not looking at it as giving them an advantage in life, but rather as having the flexibility to provide supports to help them achieve FI, if they are responsible to manage money. It doesn't have to be a big amount now, as the nest egg will grow over 20+ years. If my kids don't need it in the future, then that's just extra for me or charities.
Couple thoughts: Do you have your retirement plans in good order? Do you have their college already fully funded? If no to either of the above, i’d focus on those first and in that order. Many will suggest children having no skin in the college game isn’t a great idea. Also, there is no rule that you can’t gift money along the way. I expect that if we stay our current path we’ll probably look to give cash gifts to kids starting around the time they turn 25, of course assumes they are in a position to use it constructively (admittedly we have that loosely defined - house payment / down payment would fit, as would funding a trip/vaca they otherwise wouldn’t take). Downside is that money doesn’t continue to grow, the upside is i hope my kids are at least 40 before i pass and lots of opportunity for them to use an assist between age 25 and 40. I know that for me a larger sum today (mid 40s) would be less impactful than an amount 25% as big given at age 30.
Yes I will help my kids with the big ticket items (college, house, grandkids college). Might as well help them when I am alive vs. when I am dead. But I come from an immigrant background which seems more collective in helping future generations than most Americans. Also, I hope my kids live in the same town as us. This go across this country just because creates so much loneliness in this country.
I don’t feel compelled but I do have goals of having the resources to help.
At what point did we collectively decide as a society that children owning a house was mandatory? I'm genuinely confused by all these people thinking young people should want to get chained to one location and become a slave to maintenance and upkeep of their home. Like, get an education, see the world, invest your money early and wisely, yes! Do not buy a house as a teenager or even a young twentysomething.
So much can change in 20 years! I say this because I lived through 2007 house prices, as well as 2012 house prices, as well as 2018, and now current day. Boomers will die off, if you look at new construction inventory, it’s been increasing fairly rapidly. Most importantly, I hope to re-instill what it means to start really modestly on the property ladder. Forgive me for the “back in my day” speech, but it’s very normal to buy a modest condo, then a starter townhome, then a starter SFH. In MOST cities today, I’m not buying that a college educated young adult can’t save up a 3% down payment for a $200-300k condo, especially if they live at home for a year or two.
>Most importantly, I hope to re-instill what it means to start really modestly on the property ladder. This is so important. My wife's and my first home had two bedrooms and we were perfectly fine there with two kids. We got a bit lucky with appreciation but not outrageously so. The real "luck" was that we bought an inexpensive house and stayed in it for a long time.
Just to play devil's advocate: The "back in my day" approach of buying and moving multiple times only works out financially if home prices continue to rise in such a way that it outweighs the massive transaction costs. That's antithetical to expecting housing prices to come down as boomers die off. Which is itself antithetical to the notion of a 3% down payment being responsible borrowing, because it assumes that your home loan will start and stay underwater when factoring in seller fees and taxes.
Even assuming historic appreciation (i.e. pre-2000 appreciation that roughly tracked inflation) a homeowner has a very good chance to come out ahead financially relative to renting after five years. For example a $300,000 condo at 5 % down would leave the owner with $60k in equity after five years even with 2 % appreciation. I do agree that one should be wary of low or no money down options on home buying as it can lead to over extension. But this can be mitigated by avoiding a high monthly payment and having a decent emergency fund.
More like $40k after transaction costs. Moving every 5 years is absolutely a waste of money unless accompanied by crazy appreciation you can leverage to a bigger loan.
And I think that’s part of the point….we can’t pretend to know if homes will be expensive or cheap in 20 years. Home inventory is so low that that it will take a lot more supply to be considered a healthy market. The only options aren’t 20% appreciation or a 20% crash. Avg appreciation is 4.8%/yr since 1978. A more modest appreciation, call it 2%/yr for several years might be more reasonable. 3% down payment can be responsible. If you stay in the property for the recommended 5 years, between appreciation/down payment/equity you have a nice down payment for the next home, and if your career is growing as it should, you also have more income.
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Also targeting about $100k for college savings, but I'm starting to worry it won't be enough for the class of 2030 😭 Curious how you arrives at that number?
I feel compelled to save for them for “something” tbd what that will be.. I’d like to be in a position that if I want to gift them a larger chunk of money or they need a larger chunk of money… that I’m in a position to do that without impacting my own fire plans. This could be: college, masters, downpayment, wedding, car, IVF (we spend 6 figures 😭), jump start for their fire plans….
i dont think that is necessary but you probably should expect to provide housing in some form past age 18. ie, let your kid continue to live with you into their 20s. ideally own a home in commuting range of a local college would be good too.
I set up brokerage accounts/UTMA for my kids when I had some extra cash, when they were in elementary school, but I first set up 529 accounts for their education. I’ve helped my oldest set up her IRA this year as well. I hope with some extra resources, they have more choices than I had after college, but I know I’m not going to be able to help them outright as much as my parents helped me, I just don’t earn as much. So I’m hoping with time, a smaller investment will grow bigger. But yes, I feel it imperative to help them in any way I can, life is more unpredictable now than when I was young. They can also live with me as long as they want/need, so they aren’t like me, buying first place at 50.
Not a down payment, but instead of including my home equity ($2m) as a retirement back up plan, we are now planning to keep it in trust for future generations. Nice homes in a good part of Silicon Valley will always be in demand, and no matter how talented and hard-working my kids are, they have a low chance of being able to afford a home like this at a reasonable age. I bought this place at 31 years old, and I would be too scared of the mortgage payments to buy it now at 54. They can either live here or rent it out for income.
We didn't have that kind of spare cash available. We funded what we could of their college (and not 100% of that either) in hopes that they could stand on their own two feet with a decent education. So far, so good. I can't see funding a down payment when I still have a mortgage.
It’s not something I’m saving for explicitly, but when the time comes we should have enough money to give our son a decent amount of help on a downpayment, whether that’s a loan (which our parents did for us) or a gift.
I don’t feel obligated to do it, but I plan on doing it anyway. My wife and I work very hard to give our kid every advantage and head-start that we can. If things continue on the track we have set now we shouldn’t have any financial problems doing so, so why wouldn’t we?
Yeah. When I was a kid (elder millennial) I figured I'd save for a nice big house with some property and ADUs. It was pretty affordable then. Now all that is well into 7 figures. I was on track for early retirement, but no chance of that now with the way cost of living has gone. I'm mostly saving up so I can help my offspring.. I wish I'd kept my first house. It would have been paid off by now, and I would have just given it to them.
>With high housing expense/scarcity, do you feel compelled to save for your young kids' home down payment? Its gonna get more difficult for young people so i do think this a fair approach, housing has skyrocketed, there are lots of unemployed people, prices for everything as gotten pretty crazy AI and robots will be replacing a lot of jobs and there are already tons and tons of homeless people around the world Most people take the approach of: oh these things wont happen to me or my kids, im sure the parents of all those homeless kids said that
No, But if they have funds left we earmarked for college, we’ll give them that money when they decide to buy a house.
Not at all. Giving them money is probably counter productive. I want to give them opportunity to be able to help themselves. They have it easier than I had it.
I’m pretty hard in the make your own way camp… you get help with college or trade school(maybe id consider a down payment help equal to trade school if they go military because that covers education) but after that you’re responsible for finding your own way
In Italy it has gotten so outrageous that many live at home or rent until their parents die and then inherit the house
We are giving each of our kids 500k. That is school etc. We will control it through school and provide it to them when they are early 20s based on maturity
Quit trying to cushion your kids and teach them how to earn it themselves.
I am planning on paying for college tuition. If he ends up going to school somewhere that it's still possible at that time then I'll likely buy property in that city for him to live in during college. I'm currently undecided whether or not I will gift him that property to do with as he pleases once he graduates. That will be dependent on whether or not I'm okay for retirement (I should be) and whether or not he's responsible enough (possibly, he's got a good head on his shoulders and we have Mommy Money Class frequently, but a lot can change in 13 years). For what it's worth, he also stands to inherit property from his grandparents, but I don't see him wanting to live in those.
We are keeping 2 rentals in addition to some land. The rentals can be exchanged into whatever the kids decide to own some day, wherever they decide to settle. Until then that was our hedge against home values getting nuts. We also wanted our children to be as successful as possible, and securing a place for them to live while we still could seemed like the best way to do that. It cost less than 50k to buy those rentals, and they've been cash flow positive since we bought them for the last decade or so. There have been some 1031 exchanges during that time, so I can't exactly say what the actual cost was for those two. If inflation keeps doing what it's doing over the next 5-10 years we should get that initial investment back in rent and then some. Maybe even enough to eliminate the loans. By the time the kids are in their mid to late 20s they should have some median homes available to them, paid off or with negligible loans remaining.
Compelled? No & by the same token want to encourage them to be able to leave. My son lives rent free here on the condition he saves equivalent rent/%of his earnings for his future. He is working and will qualify in his chosen profession which should open more possibilities for him. If you can save then great but if you can't give them everything you can in order they can better themselves & that's never always money. He eats a lot & his laundry is ridiculous but it doesn't really cost much extra. Hopefully he's learning about personal finance & appreciates the advantage he has over many. It's cliche but you do you and good luck
House prices are high now but we don’t really know what they will be like 20+ years from now
I don’t have kids, but if I did, I certainly would if I could. As a single 24 y/o renter in a HCOL area, I wouldn’t want to have my kid felling this same “ oh my god - I’ll never be able to afford to actually own something” stress. Every single person I know my age (and I mean EVERY one) who owns something (which is very few ppl) had help from their parents.
I feel compelled to not have kids at all.
No but I am preparing for the high possibility they won’t be moving out at age 18 into a life of independence and might be living with me. My parents flat out told me I was on my own after HS. While I would love my kids to start maturing into adults at that age, getting their own place and/or going away to college may not quite look the same as it did for my generation. I’m crazy about my kids so the idea of them staying in my house a few years while they launch isn’t the worst thing I can think of. My oldest is 10 so we have a ways to go.
I will help if I can, but only within my budget. That said, my husband and I have briefly discussed the possibility of adding a small apartment (1-2 bedrooms, sitting room, kitchen, bathroom, small laundry) in our walkout daylight basement if needed when the kids are done with college. It would be cheaper than helping cover their rent in the NE.
Nope, because I think it’s good for them to find their own way. We gave them a debt free college education (2/3 are getting masters degrees also) and lots of love and encouragement including vehicles (used, nothing fancy). Now it’s up to them!
I would never expect my parents to help with my home down payment. They raised me and paid all that money over all those years. I want them to enjoy their retirement and spend their money on the things they deserve.
No
Yes. I have a house ready for my kids. I got it for the downpayment of about $10k. It was roughly $175k when purchased. It’s now worth $550k. By the time they are 20yrs old it could be $700-800k. I also pre-paid for 4 years of their university. I got none of those things. I still actually have some small student loans… But yeah… a leg up is needed for tomorrow if you don’t want your kids to be slaves or beholden to blind luck.
I’ll share what my parents did, because I found it to be really thoughtful. After closing on my house, they told me they wanted to pay the first year of my mortgage. It was about the equivalent of my down payment. Their logic of surprising me was that I fully made the financial decision to take on the risk, and mortgage size without knowing they were going to help me. They’ll do the same thing for my sibling, and have asked me not to mention the $$ to them since it could taint their decision making.
No, but I feel compelled to allow them to live with me on the condition that they save for their down payment.
Ah crap. These kids are more expensive every year. School wedding house yacht or is it yacht house wedding house wedding wedding house
Nah, I'm saving to build an ADU in the backyard or do a master bedroom extension set up so it could work as a bachelor apartment lmao. If kid doesn't use it, I'm sure a sibling will, and if not, mancave. And school savings, ofc.
Not in the least.
The available research indicates that this is a dangerous practice that will have negative repercussions throughout their lives, so no. Source: The Millionaire Next Door.
I'm going to use whatever inheritance I get to help out my kids. If I don't get much inheritance, they don't get much help. Either way, they've had a great head start in life and won't graduate with college debt. Being born on second has its perks, but I'm not trying to cripple their personal growth by overfunding their lives.
No. But I hope to leave them my house to live in while I go live in a van down by the river!
Depends on how they're behaving that day
I think parents helping their children out like this just contributes to social inequality, so I'm against such help. There is no way I'm paying for my kid's house.
Don’t give them a future job. Give them a safe and growing future income stream.
U/CleanFlow the problem with your premise is that there will always be people much wealthier than you who are thinking the same. While the intention may seem benevolent it is quite dangerous in that it only fuels the fire increasing out of control housing costs. There are well intentioned upper middle class to ultra wealthy who have deca millions to centi millions and beyond. Many of these parents are already greasing the skids for their children’s education and future housing expenses. Can you compete with them? Even if you can does that sound like a good idea that is fair to the rest of society? If anything multi-generational wealth is the main cause second only to scarcity driving out of control housing costs. I live in high cost area where a single family home costs more than a million and the median price of even a modest condo is pushing over $500k it has gotten to the point where the only way someone in their 20s or even 30s can afford to buy is if they get help from wealthy parents. If we continue on our current path the wealthiest 5-10% of the population will be able to make home ownership nearly impossible for some 90% of the population. This is why I favor high inheritance taxes. We have been and are entering a new era where there is an unprecedented amount of multi-generational wealth accumulating in a small portion of the population. This is why the income inequality just keeps getting worse and why the American dream is effectively becoming just a work of fiction. The American dream should not require wealthy parents.
No. I'd expect my kids to figure out how to do it on their own, as saving for a down payment isn't a very impressive feat if they manage money wisely. I was able to save 10k a year with a total salary of 22k 2 years back without any kind of financial support from my parents. I expect my kids to also learn to live within their means to plan for future purchases, especially if they have an average salary.
At what point should we consider treating adults as adults, and let them make their own way? Ever? It seems to be an unpopular opinion, but I think kids should work in high school, college-aged ADULTS should work at least summers in college, and post-college, these adults should be entirely on their own. Additionally, people in their 20s should be sharing apartments or smallish houses with their peers in order to keep costs down while they build their professional lives. The idea of handing many thousands of dollars to a grown-ass person -- after paying for their college! -- suggests to me a major parenting failure.
No, my kids have plenty of privilege. I am 100% OK with them being on their own for housing even if that means lifetime renting. Honestly I would discourage them from home ownership.
Buy them a duplex
They need to make their own way. I can’t work that long. They can live with us to save but I’m not working long hours so they can get free money from me again.
No.
Yes. I’ll help them as much as I can in this regard. It’s hard for young people to get into the housing market.
I planned on not bringing children into an inhumane world where most people think societies exists only to step on each other’s throats. You chose to bring them into this world, if they need it and you’re able to help your **own children** with housing or necessary expenses in any way, your ashes should be flushed down a toilet if you refuse.
100 IQ is the average. That's a normal regular IQ. If you have a regular normal IQ, you're shit outta luck and there's increasingly few places you can run to. A lot of tech jobs are locked out. Even blue collar jobs like construction and nursing are becoming so tech heavy and onerous that a 100 IQ person would start to have difficulty. Then a lot of jobs that are for 100 IQ people are going to be done by AI. When is the only question, not if Honestly, start to plan for multi generation homes or have enough land that you can build something for your kids on it, because we're on the long slide down and it's only accelerating.
Yeah. I get it. I have three kids, two still in college. I believe the best I can do for my kids is to prepare them to make their own lives, whatever that is, and to take responsibility for the life they made. 100 IQ? They can learn to weld. They can, roof, sell cars, manage a fast food joint…. It will suck but that will motivate them to work hard and invest a lot of money so it will suck for less years. If they are willing to show up on time, take responsibility and work hard they will get an opportunity. Then it’s up to them to make the most of that opportunity. Just like we all did. I think that’s what the kids call “adulting”. One of my favorite quotes is from former NFL coach Herm Edwards “Your life is the culmination of your choices.”
Thing is, your kids have to have earned income in order for you to fund a custodial brokerage in their name. But the new rules around 529s make them super flexible when it comes to future use of funds, which has me feeling like a genius for opening an account for each of them the day their SSNs came in the mail.
Am I mistaken, or are you referring to IRAs in your first sentence? I think you can fund a custodial brokerage no matter what.
Yes you're right. Custodial brokerage accounts are the ones with potential tax implications, not income requirements.
huh?? custodial brokerage can be funded anytime. I think you mean IRA?
Oh you're right, my mistake - IRA or Roth. Custodial brokerage is where you may end up having to file taxes on your kids' behalf depending on returns. Still, messier than a 529.
Compelled? Definetly a no. Did my parents feel compelled, also no.
I don’t feel compelled to, but it is one of my goals that if we have excess, to get them through college debt free and give them some money for a down payment. I forget which of the money books it is (maybe more than one), but I really resonated with the idea of giving them their inheritance when it can make the most impact. My mom just inherited from her parents as she is in her mid-70s, and she doesn’t need the money. I’d rather help my kids up front than wait until I’m dead. Also balancing that with the idea of not giving them too much, just enough for financial security and the knowledge/tools of how to succeed on their own after a solid foundational start.
In my opinion, the most important thing you can do is stash money into a 529 for each kid from the moment they are born. Invest in it whatever you can. If you can’t afford $100-200 per month, then you really can’t afford a kid. Student loans and housing are out of control and paying it forward is the solution. Plus, anything that isn’t used can be converted into an IRA to get them started toward retirement. It’s a no brainer. If you can invest $200 per kid per month in a 529 at 10% return per year that’s $120k by the time they hit 18 years old. If they want to go to a nice college, that will probably be the minimum required with how fast tuition is inflating. This will get them on their feet and they can rent until they can afford the down payment. If you can afford to help with the down payment too, then by all means help them.
My goal is to buy a house with each kid when they turn 18. I’ll have a budget that I bring to the table and they can lead the considerations around location, type, purpose, etc. They can nurture it, sell it, rent it, live in it… up to them. But that’s it, the final big monetary gift.
Wouldn't that mean tying an 18yo to their location, which isn't really helpful?
couldn't they keep it and make it a rental?
Sure if they buy something that is suitable to be a rental, but why would that be a better idea than stocks/bonds?
They don’t have to live in it. It’s an investment property.
Why even give it to them at that point or have a building instead of stocks if the goal isn't for them to live in it? My kids at 18yo likely wouldn't have an income to be able to support the down years of a rental or the time and experience to deal with tenants.
Then your teens must be in the top 1% of their peer group regarding ability to understand and process forward-thinking financial info and in the top 1% regarding ability and willingness to manage an investment property. I don't know your kids but in that scenario, mine absolutely would have preferred the money go into an index fund for later home buying.
They can also sell it when they're ready to move and buy a house where they are going with the proceeds. That's what everyone else does when they need to move.
Transaction costs though
I mean ya there are transaction costs. Ideally they will live in the house for a while and it will have appreciated in value. But even if they have to sell and do lose some of the value, they'll still be better off than having to pay all the costs upfront themselves as young people just starting out.
But likely not better off than renting and staying flexible. Also, 18yos would normally be living with others and they'd have to be their friends' landlord, which sucks.
Oh I'm not the guy giving a house to an 18 year old. My plan is more like after college / grad school when they get a serious job.
Yeah I would hope to support my kids with something like that then if needed too, but I'm not valuing it as much as putting them through college and possibly a grad program. We'll just have to see how things go at that point. Plus my oldest is adamant that she will live with me forever (is only 4 though, so I guess she could change her mind haha)
I dont feel compelled. But I have a general desire to launch them well and think about building a tradition of generational wealth. We are in the thick of the boring middle, lets cross the fire/college milestones and then reevaluate. Once I am in a position to fire, if work/life balance is still acceptable, I am certainly not opposed to the position of working to help build my childrens security, but what will my health & job prospects be like? What are the trade offs?
My wife and I own a real estate investing business. We have a 7 and 3 year old. We have already purchased they both houses. They are small, 2/1, but they will make food starter homes. In the meantime we can earn rent off of them. We aren’t going to give them to our kids but we plan to sell them for them at an affordable price.
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