If there's one generation wealthier than ours, it's The Bank Of Mom And Dad generation. Because our parents have had on average three decades longer to save and invest, it is only natural they have more money.
Therefore, as a shrewd son or daughter, one of your goals may be to extract some wealth from your parents while they are still alive. It may sound cruel or dishonorable. However, I can assure you that adult children have been doing this forever, especially in higher-cost areas of the country. Most just keep it a secret.
Further, given the vast amount of wealth that has been accumulated by The Bank Of Mom And Dad, more parents are willing to help their children financially while living as well. This isn't a forced wealth transfer. This is a wealth transfer based mostly on love, followed by necessity.
How The Bank Of Mom And Dad Helped One Young Woman Start A Family
At the playground one day, a bunch of us started sharing at what age we had our first child. It's a fun topic here in San Francisco since the cost of living is so high.
I went second and said, “Just a couple months before my 40th birthday.” Although I was an older first-time dad, I was not alone. Other dads chimed in and said between 37-43.
Then one mother excitedly exclaimed she had her first child at age 26. We were all intrigued by her story because her husband looked like a graduate student.
The mother said after she had graduated from Bowdoin College, her parents helped her with a down payment on a two-bedroom condominium in Cow Hollow. She didn't say how much the condominium was. But it was likely between $1.2 – $1.5 million based on the median price for two-bedroom condos in the area.
As freelance writers, it would have been hard for them to come up with a $240,000 – $300,000 down payment on their own in their early 20s. Therefore, the Bank Of Mom And Dad helped out.
She didn't sound embarrassed that her parents helped her buy a condominium at all. In fact, she said several of her friends from college had had their parents buy them condominiums or single-family homes after graduation as well.
When I got home, I looked up the cost to attend Bowdoin and it said $73,000+ a year! Well gosh, diggity. If I could afford to send my kid to such a school, then I probably could afford to come up with a six-figure down payment to help my kid live after college as well.
After all, the more you spend on university, the higher the expectations are to become a success. The last thing any parent wants is for their child to struggle after spending ~$300,000 on a higher education. What would these rich parents say at cocktail parties when their friends ask what their kids are up to? Therefore, the financial support continues well into adulthood.
The Bank Of Mom And Dad Is The Reality
Many people have wondered how young people can afford to buy their first home in an expensive city. Now you know. The equation for housing affordability is:
Salary + Another Salary + Bank Of Mom And Dad
There really is no other explanation for how someone can buy a property worth 10X or more than their annual income. I have lived in either New York City or San Francisco since 1999. Everyone I know who bought a property by age 25 had the help from the Bank Of Mom And Dad.
For example, back in 2000, my roommate's parents bought him a one-bedroom Manhattan condo a year after we shared a studio apartment at 45 Wall Street. He was 24-years-old. The condo has since appreciated to ~$800,000 from $250,000.
Meanwhile, I was stuck renting for three more years until I finally found a good deal in San Francisco. If only I had had richer parents. I would be richer today!
How To Convince The Bank Of Mom And Dad To Buy You Things
To effectively compete in today's society, we must accept reality. And the reality is The Bank Of Mom And Dad is ubiquitous. If you are struggling to get ahead, you too might want to swallow your pride and ask your parents for financial help.
Here are some strategies I've learned from adult children over the years on how they were able to convince their parents to buy them a house, a car, and pay for graduate school.
1) Regularly Stay In Contact With Your Parents
When I lived on the wealthier north side of San Francisco, I had a 28-year-old neighbor whose parents had bought him a brand new $42,000 Toyota 4-Runner. He also lived rent-free in his parent's two-unit building. One of the units was rented out. I said “hi” to him multiple times a week over the 10 years I spent living there. He was often unemployed or traveling around the world.
One day he told me,
“Before I plan to ask my parents for anything, I tell them I love them very much at least three times a week for one month. Only then, do I go in and make the ask. After all, what's more powerful than love?”
It's hard to argue with my neighbor's logic. If my adult kids called me at least three times a week and told me they loved me, I'd probably give them anything they wanted!
Back in 2017, when I was considering selling my house, my neighbor actually texted me saying he'd be willing to pay $2.1 million. So you see, having The Bank Of Mom And Dad can really pay off. How many 36-year-olds without a stable job have that kind of money?
According to a study by the National Bureau of Economic Research, parents who had no contact with at least one of their children for more than a year were about 40% less likely to leave equal inheritances to their offspring than parents who remained in touch with all their kids. Therefore, don't forget to at least call your parents!
2) Plan Far Ahead Before Asking For Anything
One 28-year-old marketing associate once told me,
“You never want to just ask your parents for something out of the blue. Instead, create a year-long timeline before asking for anything. During this time, you can demonstrate your enthusiasm for whatever it is you want the Bank of Mom and Dad to buy for you.
For example, I really wanted the latest 4-series BMW coupe. But it cost $54,000 out the door and I only made $55,000 at the time. I knew my dad loved cars so I talked to him about BMWs and Porsches for a full year. Porsche was his favorite car brand and the $130,000 911 S Cabriolet was his favorite model. He may have been going through a late mid-life crisis.
When I asked him a year later if he could buy me a 435i BMW coupe, he said no problem! $54,000 seemed so cheap compared to the Porsche he wanted. We had a fun time going to the car dealership together. We went for a test drive and I let him haggle with the car salesman. It was a nice father-daughter bonding moment.”
The longer your child has demonstrated an interest in something, the more the parent wants to help. In many instances, parents have a difficult time NOT spending money on their children if they show even a hint of interest.
3) Make An Investment Pitch
One woman who had her entire $130,000 MBA tuition paid for told me,
“I created a Powerpoint presentation explaining why them paying for my MBA was going to be a great investment. In the presentation, I highlighted pre- and post-MBA salaries and the top 10 employers who hired from my school. I also mentioned famous alumni closer to their generation to make them proud.
They loved my presentation! Although I felt more pressure to land a great job after graduating, everything turned out well. I got a job in finance that paid me a $180,000 base salary plus a bonus.
Further, I'm now engaged to one of my business school classmates. Together, we make a little over $400,000 a year and will soon save up enough money on our own to buy a house. My parents couldn't be more proud. They feel like their investment paid off big time”
4) Become A Real Estate Expert
If you want The Bank Of Mom And Dad to buy you a home, you should do your best to get smart on real estate. The more you know what you're talking about, the more confident your parents will be to spend money on you.
A 36-year old woman who currently lives in a paid off $2 million, three-bedroom, two-bathroom single-family home in my neighborhood told me,
“Back when I was 28, I made an argument why San Francisco real estate was a good investment. I told my parents about the upcoming tech IPOs from Uber, Lyft, Pinterest, Airbnb and more. I showed them what happened to San Francisco Bay Area real estate prices after Google and Facebook went public. In addition, I highlighted how inexpensive San Francisco was and still is compared to other international cities.
Further, I agreed to pay the mortgage, maintenance, and property taxes so they could rest free knowing their asset was being taken care of. Finally, I rented out a bedroom to a girlfriend of mine for $1,900 a month. From a financial standpoint, we're all winning.
If I hadn't shown my parents how much I knew about the local real estate market, there's no way they would have helped out five years ago. My younger brother, who is a knucklehead, won't be getting any down payment help any time soon. He can't even pay his credit card bills on time.”
5) Demonstrate You Are Worthy
One Bank Of Mom And Dad parent who financially supports her 31-year-old son said,
“I needed my kid to show me his 5 and 10-year career and financial plans before I opened my checkbook. Growing up, he always had trouble committing to something for longer than a year. He lacked grit. I feared that if I gave him too much money, he would just quit his job and go travel the world with his girlfriend and not come back.
Before buying his condo, I made him sign a contract to follow his financial plan for at least five years before doing whatever he wanted. He agreed, and after three years, he hasn't quit his job yet. I'm hoping that as he matures, he will appreciate the value of commitment.“
At the end of the day, getting The Bank Of Mom And Dad to help shouldn't be too difficult if you are a worthy son or daughter. Every parent just wants to have a happy child who finds independence and meaning in their lives.
The Wrong Way To Ask The Bank Of Mom And Dad For Money
Now that we've learned the right way to ask The Bank Of Mom And Dad for money, let's discuss the wrong way.
As an adult child, the worst way to get your parents to buy you anything is to tell them, “All my friend's parents are buying them homes and cars after college, why can't you?” This argument reeks of entitlement! No effort or love is spent in this ask.
Your parents will likely start questioning whether they raised you right after all these years. They may even alter their wills or revocable living trusts.
Yes, we all know that hard work is not the only way to get ahead thanks to the massive generational wealth transfer. However, it's important adult children never let their parents know they are expecting anything.
Perhaps treat The Bank Of Mom And Dad like Social Security. It'll be nice if your parents help out one day, but don't count on it.
What Parents Want From Their Children
In any type of negotiation, it's important to put yourself in the other person's shoes. If you don't, you will have a harder time getting what you want. The Bank of Mom & Dad isn't just going to throw their money around for nothing.
Here's what I think every parent wants for and from their children.
- To be happy and not struggle more than they need to.
- Not take them and their money for granted.
- To do what they can on their own after all these years of support.
- To not rob them of fulfilling their own potential by accepting money.
- Hope they'll stick around when the parents are sick and need help.
- Hope they'll have children of their own who be loved and cared for.
- Contribute a positive impact to society.
- Bring honor to the family like Mulan.
If you, the adult child, are incapable of taking on side jobs, working more than 40 hours a week, saving aggressively, investing diligently, and being patient with your desires, then you may mobilize The Bank Of Mom And Dad to help.
Without a strong work ethic, some luck, and the financial help from your parents, I'm afraid life might become too difficult. You might also get extremely bitter at your peers. The rich are already setting up their kids for life by buying their way into the best schools and giving them the best jobs.
Swallow Your Pride And Ask For Help
My parents weren't rich, they were middle class. We lived in a regular townhouse and drove an 8-year old Toyota Camry when I was in high school. I attended a public university for $2,800 a year in tuition because that's what I thought we could comfortably afford.
However, if I had been savvier, I would have spent more time learning all the nuances of personal finance as a young man. It would have been just a little bit harder back then since there weren't personal finance sites like this one writing about random, but real topics. Instead, there were only traditional books talking about traditional subjects I could leaf through at Barnes & Noble or at the public library after school.
If I had read this post back when I was in college, I would have worked more during the summers and winters to save more money. Then I would have tried to convince my parents to help me come up with a downpayment to buy a two-bedroom, double-balcony Manhattan property in 2001. Today, it would likely be worth over $2 million and be fully paid off.
Perhaps most importantly, not having enough wealth delays family formation. And perhaps there is no greater reward than having your own children.
If The Bank Of Mom And Dad had helped me like it helped the 26-year-old mother at the playground, I most certainly would have tried having kids five years sooner. Alas, I can only move forward and try and help the younger generation understand the secret ways of society.
The Ultra-Competitive World Today
Wages are not keeping up with housing, college education, and healthcare costs. As a result, the average person is falling behind. It now takes at least $3 million dollars to be considered a real millionaire today. Some even argue that having $10 million is the more appropriate level of wealth to be considered rich.
The rich will keep on getting richer. There is no stopping this trend. Therefore, I suggest doing what many first-generation immigrants do and pool together financial resources to help the next generation thrive. The Bank of Mom and Dad is strongest with immigrants trying to make it in a new land.
Once you get neutral inflation by owning an affordable place to live, life is much easier to manage. If you need help from your parents, ask for help in a respectful way. Parents love their children and will do anything to make them happy. At the same time, parents want to feel proud of their children for making it on their own.
Personally, it's become easier for me to invest in stocks, real estate, and alternative investments now that I have children. Children force us to extend our investing time horizon by 20+ years. 20 years from now, we are probably going to wish we had bought more assets today. Children also encourage us to be more thoughtful about why we earn, save, and invest.
This Bank Of Mom and Dad will likely stay open as long as our kids demonstrate effort and kindness. However, our hope is that our children will be resourceful enough to figures things out on their own once they become adults.
We don't want to deprive them of achieving something on their own after a period of struggle.
The world is never going to be fair. Let's bolster our finances so that our children, when they become adults, won't wonder why we didn't do more for them.
Finally, if you can't convince The Bank of Mom and Dad to buy you a house, then you can always invest in real estate more surgically through real estate ETFs, real estate funds, or real estate crowdfunding.
For example, you can invest as little as $10 in a Fundrise diversified real estate portfolio as you build up more capital for a down payment. Fundrise is one of the largest and oldest real estate investing platforms today.
The single-family real estate market is booming due to lower vacancies and rising prices. It is a long-term trend that will likely last for years. As a result, I've personally invested $810,000 in real estate crowdfunding.
Related posts to The Bank of Mom And Dad:
Three White Tenants, One Asian Landlord: A Story About Opportunity
How To Convince People Are You Middle Class When You're Actually Rich
The Importance Of Feeling Consistently Uncomfortable For Personal Growth
Readers, have you received help from The Bank Of Mom And Dad to buy you a house, a car, or pay your bills after you became an adult? How did your parent's financial assistance help or hurt your life? Was it easy to overcome any shame or guilt receiving so much financial help as an adult? At what point should we stop helping our adult children financially?
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80 thoughts on “The Bank Of Mom And Dad Strategy To Buying A Home And Having A Family”
Considering that the costs of living, especially housing, have become completely decoupled from wages it is not surprising that more people have to rely on the Bank of Mom and Dad; when working a job no longer covers what it used to the money has to come from somewhere.
For some it is government assistance because even though they work full time, their wages still leave them in poverty. For others it’s the Bank of Mom and Dad because even though they work full time, their wages only render them ineligible for government assistance.
For others who have the jobs that pay enough for good housing and opportunities for their kids, good for them, just remember that these jobs are a lot more scarce than they used to be.
In a way, it should not be surprising. During most of history, wealth was generally inherited, not earned. George Washington, JFK, Winston Churchill, and Franklin and Theodore Roosevelt all received generous inheritances and that was considered normal during their times, so why not today?
Wow what a timely post. My son is on workmen’s comp and has been permanently injured and is now trying to get disability from SSDI with a probable two year wait.
To prevent the bank from foreclosing on his house, we (his parents) are looking at paying off the 230k mortgage and we will become the new lenders. The terms will be an interest free loan with no payment exceeding 20% of his monthly income and he won’t have to start paying anything until he begins receiving benefits. His monthly mortgage payments to us will still be half of what he currently pays. The balance will be paid off if either one of three things occur 1) they sell the house 2) 30 years after the start of receiving benefits (in which case I will be 98 years old) or 3) upon our death in which case it will be a reduction of his part of the inheritance
We will put a mortgage lien on the house for a couple of reasons. It will prevent other creditors from going after the house and it will prevent them from using the equity in the house as an ATM machine.
I had thought of just paying the house off and forget about it but I liked this idea better.
Bank of mom and dad to the rescue.
PS: we are in constant contact with our children and have very good relationships. Inheritance is the one leverage you have from them throwing you into an old folks home hehe
Looking at my family history, Bank of Mom and Dad did help people having a better life in their 20s and 30s. However, the difference does not matter when you get into 40s. Parents money lowers kids’ ambitions and willingness to take risk in life.
My grandparents got parents to buy their house in cash and annual pensions to help with nannies and other childcare costs. My grandparents were highly-educated professionals. They came from old money families. They worked hard enough to cover daily expenses, but they were not ambitious or risk-takers.
Then they lost most of their wealth in the 60’s during the Chinese Cultural Revolution. They have never recovered from it emotionally. They told all their grandkids and great-grandkids repeatedly how much they had lost.
My parents only enjoyed wealthy lifestyle before they were 12 years old. Then they were extremely poor for 20 years. They were also denied lots of opportunities to get education or career advancement for about 10 years due to their family background. They had their first full-time decent salary job in their early 30’s. Despite starting late in career and finances, my parents and all of their siblings have accumulated enough wealth to be financial independent before age 60. While their parents lamented on the loss, my parents’ generation worked towards a brighter future. They were either business owners or well-known experts in their fields. All of them did much better than their parents career-wise. They also have kept frugal lifestyle.
My parents’ generation has suffered lots of hardship when they were young. So they wanted their kids to enjoy life early. My cousins, my husband and I fit the spoiled Chinese wealthy kid single child stereotype. My parents would give me money before I feel I needed it. My parents paid all my college tuitions. I worked part-time only because I felt ashamed to live 100% on parental support. My mom bought me a condo in Shanghai all cash when I was 20. I did not know about this. I went there for a short vacation. My mom took me to the notary, then explained I need to sign the papers. My brain froze at that moment. Took me a few months to digest this. They also contributed to my house down-payment. I bought a house only when I saved enough cash on my own and got a mortgage approval. However, my parents and in-laws still gave us cash so we only took half the mortgage we planned to. They all dislike any kind of loans. I have a 6-figure professional job. I work hard enough to climb the corporate ladder. However, I spend way more than my parents. I have cousins who are close to 60 years old now who still get money from their parents. They are all good people with stable jobs. But none of us wants to start a business or inherit parents’ small business. None of us has became expert in our field get get known nationally. So my generation spends more saves less and under-achieves career-wise than the previous generation. We are still better than our grandparents generation with spendings because our parents accustomed us to frugal lifestyle when we were kids. None of us is hiring nanny or cleaning lady. My parents generation has suffered a
I only started saving more aggressively this year. With COVID, I realized that most of my spendings were not necessary. I also realized that I might not inherit most of my parents wealth or easily cash my condo currently in China by reading more on the politics in that country.
So at 37, I finally told me to live as if I get nothing from my patents. Try to invest all money my parents and in-laws give us as a cushion for the future.
I send my kids to cheap private school in Quebec (7$K a year). I plan to offer less cash to my kids than what I got from my parents. They only had one-child. I have two. So even if I am willing to spend the same amount on my kids, each will only get half.
The truth is 90% of all you ‘self-made’ egotistical people would have been nowhere without mom and dad saving your financial ass and helping you along the way. It is a story as old as the bible. Most of you couldn’t even run a lemonade stand.
As someone who had to pay for every-single-bill ever in my life having had my first job since the age of 12, I let all of you fuel my inner rage to crush you in life. And in every single way possible. I am on a mission to destroy you with success.
And just for the record, most of you are not that smart as you like to believe. Only I got no help and nobody else!
I also received zero help from my parents from the day I turned 18. It’s more common than you think among those with 7 digit NW. You should read the millionaire next door. The vast majority of kids growing up in well to do households do not do well. I don’t care if someone else had it easier than me…why would I? I’ve worked my butt off two decades and today make 10x more than my parents do at their peak.
Go You! You won the internet!
The most valued of all prizes!