Are you finding yourself in a difficult financial position? This post discusses how to accept financial help from your parents without feeling like a loser.
Ever since high school, I've felt I've been a burden to my parents. I got in a lot of trouble as a kid and therefore felt extremely guilty accepting their financial support.
Guilt is one of the main reasons I decided to go to a public university, for $2,800 a year in tuition rather than attend some private school for $25,000 a year in tuition back in 1995.
I promised myself that as soon as I got done with college, I would never ask for their financial assistance ever again. There was no way I'd graduate and move back in with them. This fear of failure is what ignited me to burn the midnight oil at work. I had to start paying my parents back in adulthood.
Through Spartan living the first few years out of college, I was finally able to accumulate enough funds for a down payment to buy a small condo at 26. From that day forward, I had a belief that if I had been willing to share a studio with another dude for a couple years, eat $1 cheeseburgers for dinner, and shun partying like a broke rockstar, so could others.
I was sure my way was the only right way to be a responsible adult. I was WRONG. Since becoming a parent, I now realize how my stubbornness got in the way of achieving financial freedom sooner. Let me explain.
Financial Help: Seeing The Truth As A Parent
At a recent open house, I overheard a 63-year-old Cantonese mother tell the listing agent in Mandarin that she was house hunting for her son. As the house's asking price was $2.2M, I couldn't help but join the conversation.
I asked the listing agent in Mandarin, “What percentage of buyers receive parental assistance?” It was an open-ended question asked so that I could ultimately assert my opinion that adult children should buy their own houses.
The listing agent said, “About 75% of my buyers last year had parental help.“
I was shocked. But not really. I responded, “Isn't it bad for the adult child's self-esteem and work ethic to have their parents come up with the downpayment or pay cash for their house outright? Can you imagine how indebted the son-in-law or daughter-in-law must feel as well?“
A fireball formed in the 63-year-old mother's mouth and she spat, “Of course not! I love my son. Why shouldn't I use my money to help him while I'm alive to help his life? It's all about respecting your elders anyway!“
Fair enough. Then the real estate chimed in, “How are my kids supposed to afford a house right after college?“
I responded, “By working hard, saving aggressively, and investing wisely for the next 10 years like most people. Why do kids who have just graduated from college deserve to own a home right away? Lives change. Why lock them down before they know what they want to do?“
With that, the 63-year-old mom started getting personal! She responded, “You must be an only son. You are inheriting everything anyway, so you're not thinking of how difficult it is for multiple siblings to get ahead.”
“This isn't true,” I replied. “I've talked to my dad who said everything would be split equally between my sister and myself. But regardless, I don't expect a penny from them.”
Then the realtor responded, “By the time the kid buys 10 years from now, the house price will be even more unaffordable.“
The listing agent's last response made the most sense. I told them both I saw their points and thanked them for the discussion.
Extend The Time Line
Today, buying a home in an expensive coastal city is a suboptimal move. But I attend open houses and submit lowball offers anyway because it's a fun hobby that I get to write about. However, if I extend my holding time period to 25 years, I can envision my son asking me in the year 2043 why I didn't buy more property between 2018 – 2021 when I had the chance.
To me, it doesn't make sense to let him graduate college at age 22, work and save for another 10 years, and then buy a property when he is 32 if I can afford a property for him right now. Yet, I still struggle with the idea of giving a house to my son like 75% of homebuyers do in San Francisco because I also believe you can never fully appreciate what you have if you don't EARN IT.
I would hate to take away my son's pride by buying everything for him. It's incredibly gratifying to buy something or build something on your own. Yet at the same time, it's likely a better move to invest today than wait 30 years from now.
Therefore, the optimal solution as FIRE parents who are afraid of screwing up their children is to continue investing as much as possible today in order to maximize wealth. Your wealth will then provide OPTIONS for your children in the future.
If your children are kind, thoughtful, hard-working, grateful human beings, then you can surprise them with some financial assistance. If they are ungrateful, spoiled brats who never give you a ring, then you can leave them fending for themselves against the White Walkers.
How To Not Feel Like A Deadbeat Loser
For those adult children who have a lot of pride, here are some ways to overcome feeling like a deadbeat loser in order to accept financial help from your parents.
1) If you don't accept reality, you will fall behind.
If the majority of people in expensive cities are buying a home with the help of their parents, you will never be able to afford a home at an earlier age at a price you can afford without them. If the majority of people use family connections to get a job, then you'd be a fool not to ask for an intro from a connected family member. Swallow your pride!
2) Your parents would rather use their money to help you while they're alive.
Helping your kids while you are alive is much more rewarding than helping them after you're dead. Because your parents love you, they want you to have at least everything they had growing up. If they can help you establish roots, get a job, find a partner, they will. They feel a tremendous sense of pride when they can help you have an easier life.
For 2023, parents can give $17,000 a year per child and reduce their estate. This is the gift tax exclusion amount. Dying with lots of money leftover is a waste of time and energy.
3) You are their most prized investment.
You can either pay them back with interest, or you can pay them back by being an incredible son or daughter who always calls, always visits, and takes care of them when they need help.
Another way to pay them back is to do incredible things with your life that help other people. A final way to pay them back is to be happy. Your parents see the money they put into you as their greatest investment. They want to see some fantastic results. Providing financial help increases the chances their greatest investment will be a success.
4) You will pay it forward.
Not only do parents want their children to live their best lives, they would also love to have their grandchildren live their best lives. A grandparent helping fund their grandchild's 529 college savings plan is one common way of helping.
By paying it forward, you honor your parents by helping your kids. You also extend the dividend payment of their investment for potentially another century. There's no reason why you can't provide financial help for your children and others as well.
5) You can always give it all away.
If you start feeling tremendously guilty for all the financial assistance your parents have given you, you can always give all the money away to those less fortunate.
Or, you can stop working at a soulless job for money and prestige, and start working at an organization that is entirely focused on helping the less fortunate e.g. foster home, homeless shelter, food bank, etc. Providing financial help to the less fortunate is a great blessing.
6) A greater chance of becoming a net positive to society.
The more assistance you get from your parents, the higher the chance you will be a regular tax-paying citizen. Given massive budget deficits, your country could use as many stable taxpayers as possible for the greater good. We have a ever-growing population to support who does not have enough food, shelter, or opportunities.
Post-pandemic, America and Americans need all the financial help they can get! We've got huge budget deficits to fill and millions of people who have lost their life savings.
If I Could Do It Over Again
My blindness and pride for independence after college made me miss out on a two bedroom, two bathroom, double balcony NYC condo with a view of the Chrysler Building near Madison Square Park for $785,000. It was the year 2000 and I had just gotten my bonus for four months of work in 1999 and a raise to $55,000 from $40,000.
If I hadn't been too proud to beg, I would have discussed with my parents why it would be wise to help me come up with a $157,000 downpayment to buy this condo. I'd get my existing roommate to come live with me for $1,200 a month.
If that wasn't enough, I'd find an additional roommate to live in the living room for another $1,200 a month. I'd carry the rest of the condo payment myself and work my butt off to ensure I remained employed.
This 1,300 sqft condo would probably be paid off by now and today be worth at least $2,100,000. In other words, due to my pride, I missed out on more than $1,300,000 in gains.
Not buying that Manhattan condo is one of my biggest regrets as NYC, for six months out of the year, is my favorite city in the world. To have pied-à-terres in NYC, SF, Honolulu, and Lake Tahoe would be sweet! Alas, I missed out on NYC.
Swallow Your Pride
Just like how the woman's liberation movement created the need for two paychecks to afford property, we now have the Bank of Dad moment, which requires triple income statements and balance sheets to afford property. As we continue to live longer, it's likely we'll need QUADRUPLE income statements and balance sheets to afford property as grandparents start getting aggressively involved.
Pretty soon, you won't have to do a thing for your money because it'll all be given to you. Accept your parent's financial assistance with humility and make them proud of you. The days of making it on your own are long gone.
Be Responsible With Your Money
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