Bank of Mom & Dad – Should We Spoil Our Children?


Do you remember that colleague who always seemed to have the latest and most fancy clothes? She’s your same age with your similar salary and you’re slumming it with Old Navy and 5 dolla foot long subs (half of which you save for lunch tomorrow!) while she carries a Gucci bag and eats sashimi for lunch. What about that guy who drives a $50,000 BMW 335i coupe one year out of school while you still chugalug with your 10 year old Civic, or better yet, your shiny bus pass? What’s up with that you wonder.

I used to think these young folks just had nice high paying jobs and made home run investments in college, but maybe not so much anymore given the absolute armageddon we’ve seen. The older you get, the more you realize there’s a lot of smoke and mirrors. I remember going to at least 25 open houses one summer in 2004, and I swear to you that 80% of the lookers had parents looking to buy their adult child a place. “But mom, I want a view of the city from my bathroom,” said one young buck. “Oh honey, what what do you think of this nice Brazilian cherry wood?” Bleh. Go to a car dealership, and you’ll find the same scenarios. It’s not unheard of that parents will subsidize or pay completely for their children’s rent, as well as provide an allowance. “Dad, I just have to have that Rolex Yacht Master II watch!”

Should we encourage parents to support their kids after college? Why not, if their child doesn’t have a job or much money. But, how do college graduates learn about personal finance, if all they are doing is receiving hand outs from parents and splurging on wasteful crap? They don’t, because they don’t need to, and that’s fine by me because we need them to consume like mad to help get this economy moving again! At the end of the day, it’s really none of our business what other people’s parents choose to do for their kids. Heck, if you were rich, and could donate a lot of money to get your kid into Harvard, wouldn’t you? It’s just the ostentatious righteousness that may get to us.

The real question is, should we pay back our parents, and if so, when? I say yes, and whenever we have the means to do so. They put the investment in us and many have paid for our education. Why not pay our parents back at least in real terms the money they spent on us from ages 18-22? Many of us in our 30′s have parents who are retired and rely on a fixed income. How nice it would be if their kids started sending them a check for a couple hundred bucks a month for the rest of their lives. I’d sure like that little Social Security bonus when I’m retired!

The issue of Bank of Mom & Dad is that of jealousy. Instead of letting it eat you up inside, use it as motivation to get ahead.  Readers, feel free to share your thoughts on the subject!

Keigu,

Financial Samurai

“Slicing Through Money’s Mysteries”

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Anonymous says

    I don't have rich parents so I don't know what it really would be like to get handed expensive gifts on a silver platter all the time. If a kid is always used to getting anything they want from their parents I'm sure in most cases that will make them less hungry to work and become independent, but maybe they won't have to.

    In any case, I love the way the lyrics to "Everybody's free (to wear sunscreen)" put it:

    "Respect your elders. Don’t expect anyone else to support you. Maybe you have a trust fund, maybe you have a wealthy spouse; but you never know when either one might run out."

    Basically always be prepared to be able to support yourself b/c anything can happen.

  2. RB says

    Hi Anon,

    Thanks for sharing. It would be interesting to see if there is a correlation between a kids hunger to succeed and the level of support the parents give. My parents worked for 30 years in the foreign service and never made much. But, b/c of their position, they mingled with relatively wealthy people in the various foreign countries. I was exposed to that wealth, but never really had that wealth to begin with. I remember my father drove a silver 1976 Datsun back in 1989 with a missing hubcab, and a lack of paint. It was kind of embarrassing getting dropped off at friends homes or going to school with their fancy Audi's and Mercedes, but it is what it is. Seeing the other kids have so much made me want to succeed on my own, and at the very least, not be a burden to my parents.

    Best,

    RB

  3. Anonymous says

    In big cities like NYC, Bank of Mom and Dad is all too common! Look at the new TV show "NYC Prep!" These kids are ridiculous!

    Down with The Bank of Mom & Dad. Time for them to go bankrupt!

  4. Jon says

    Hey Keigu,

    Haha, nice post! Yes, I think if you’re parents helped you out you should pay them back, but mine didn’t. I still would like to help my parents though.

    Personally, I’m not helping my kids either. I think it’s very important that they learn life isn’t about hand-outs and if they want something they will have to work for it. We currently pay our kids commissions on doing chores, 1 chore = $1. They have to tithe $1, and save 1/2, and they can spend the rest… I’m a firm believer in the work then get paid philosophy, but I will help them out as they get older for things or trips that I believe will benifit them. Just don’t tell them that… :)

    Thanks! and Blessings to you!

    • says

      Hey Jon! Good to hear from you man. I like your idea of paying your kids $1 per chore. Actually, that seems like a lot! If I were your kid I’d do 10 chores a day! I’d be rolling in dough.

      Yep, I plan to pay them back slowly but surely. My mom said that one of the best paybacks is that I turned out ok, and don’t stress her out anymore :)

      Hope to see you around more. There’s tons of content on here for you to comment on! FS

  5. says

    Recently, my mom said something like, “helping [you and your brother] pay for college was the best investment we ever could have made.”

    • says

      I think your mom is right. All our parents can ask is that we can take care of ourselves, and perhaps them one day when they get old. Peace of mind for them is priceless!

  6. says

    I don’t think there is anything wrong in giving your kids a leg up … and I also don’t think there should be any expectation of a payback. It’s a parent’s gift.

    When my kids were still kids I bribed them with a quarter for every “A” they got on their report cards (it was a long time ago, quarters were still ok). Amazingly they came home with very good grades. Also, as they grew older and took on small jobs they were expected to pony up 50% of any big ticket items they wanted.

    I don’t believe in a free ride, but when important, a little bit (or a lot)of help goes a long way. If buying a condo or townhouse for your kids is within your means, why not? Especially if you are living where financial real estate values are enough to give anyone a nosebleed?

    best………..valentina
    .-= Valentina´s last blog ..No. 2 Sucks! =-.

    • says

      Valentina – You’re too nice if you think they should pony up only 50% of any big ticket item once they grew older and started working. I’m a firm believer that if my kids have jobs and want some big ticket item, they are going to have to earn it themselves, or not buy it.

      Nope, I’m against parents buying a condo/townhouse outright for their kids as well. I’m for it only if the kids pay the entire mortgage, and the downpayment back to their parents eventually.

      I can’t stand spoiled children. I just can’t.

  7. says

    …lol… you are too funny!

    I think “spoiled kids” is one of those relative terms unless they are just plain ill mannered, take things for granted and ungrateful. There are rich kids who are kind, generous, well mannered and charitable and a pleasure to be around. They don’t seem to take things for granted and are indeed grateful. They work for what they get. A very good friend of mine gave a down payment for a very niche house in a good neighborhood as a wedding gift to her son and while he had to work his way through college and get student loans etc. when he graduated, she paid off his student loans. These were gifts. I don’t think my friend expects to have them repaid. I don’t think my friend’s son is spoiled.

    What frosts me to no end is the entitlement attitude that so many of today’s young have, and that extends to all fronts of life. Those, in my mind, rich, middle class or poor, are the real spoiled kids and I don’t know how that happened, it seems to be embedded in our youth’s culture these days.

    Gee, I never thought I’d be out there sticking up for kids who get a lot handed to them … :-)
    .-= Valentina´s last blog ..No. 2 Sucks! =-.

  8. says

    I think it really depends on a lot of factors. My boyfriend and I have parents with different views on this topic, and it’s interesting to see the results of each.

    Starting when I was about 10 years old, I got an allowance of $40 a month. However, anything that was not a home or a school-related expense I had to pay for (so pretty much anything other than food and my school uniforms). Starting at age 12 or so, I began reenacting, which is an expensive hobby. My parents didn’t increase my allowance at all despite the fact they approved of the hobby, but they did help me figure out how much I would have to save each month to get a new item by a certain date. I may not be the best at day-to-day budgeting, but thanks to those early lessons, I’m very good at saving up for long term projects. Unfortunately, some of their other financial decisions were less well thought out. In college, they forbade me to work, instead insisting that I do internships in the summer. In exchange, they paid for my rent and some money for food, etc. Unfortunately, my parents had a poor concept of how much life on the east coast costs, and I ended up going into considerable debt during that time, just paying for my living expenses. During college/post college parents have always used money as a bargaining chip or bribe, and it really bothers me. If they really want to help pay for something, they should pay for it, rather than making it conditional on something else. If it were just luxuries, I’d say that a bribe was fine, but we’re talking things like rent, here. To me, life necessities should *never* be a bargaining chip. I’ve never really had much money, and as a result, I am never very stressed about “not having enough”, and so when my parents try to pull the bribe card, I at least can say no.

    My boyfriend, however, is a different story. His parents never gave him an allowance as a kid (mainly due to the fact that as a foreign service kid, he never had anywhere to spend it), but they would sometimes buy him things they both agreed upon. As a result, he’s bad at being able to look at his paycheck and *not* see the whole thing as spendable. His parents also pay for quite a few of his expenses post-grad, and I’m not sure how I feel about it. He got a full scholarship to one of the best grad schools in the country, as well as a full-time TA-ship. The TA-ship paid well, but still not enough to live off of in the DC area. So, his parents paid half his rent. I was okay with that, because I believe in supporting folks during their education. However, he graduated this may and has had a job since June. The pay isn’t great, but it’s not terrible either (about $2200/mo), and yet his parents still pay for all our food and non-rent household expenses. This bothers me because in my mind, the only time parents should pay for something is when you’re incapable of paying for it yourself. I make about $800/mo with my part time job, and after my share of the expenses, I have about $50 left over. He has around $1000 leftover after his. He’s capable of paying for our food, so why are they still paying for it, especially since he has around $10k in savings in the bank? I don’t get it.
    .-= Kelsey´s last blog ..More Proof the TSA are Morons… =-.

  9. says

    The other thing is that similar to your Porsche story, because Marc has always had a goodly chunk of change in the bank as well as a decently-paying job, he freaks out when his savings drop (even temporarily) below $10k, or when he doesn’t have at least $500 left over after expenses on each paycheck. Even though it’s all just excess, it still really stresses him out. I keep trying to tell him to relax because he can make all his expenses every month, but it’s hard for him because he’s always had a lot.

    Sorry that that comment was so long, but I had a lot to say!
    .-= Kelsey´s last blog ..Mongolian Blog Name Help? =-.

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