One of the worries about entering the decumulation phase is that you might start spoiling your adult children. If you end up giving your adult children so much money, you might just take away their motivation to work!
Being able to earn your own money and provide for your family creates one of the most satisfying feelings ever. What a shame to take away such a great feeling by giving your adult children everything.
The Fears Of Spoiling Our Adult Children With Money
Here are a couple of comments left in my decumulation post that encapsulate the worries of a financially-responsible parent. If you are a parent who has been reading Financial Samurai for longer than a year, this is probably you.
I want to give my children some leg up. But not enough to be a dealt a “silver spoon” scenario which may kill their motivation to improve themselves.
I want to leave my kids with enough money to do SOMETHING, but not enough to do NOTHING.
As a parent of two young children, I worry not having a traditional day job might warp their reality. Since they didn't experience their dad leaving for work at 5 am and getting back after 7 pm for 13 years, they might think staying at home working 3-4 hours a day is good enough!
Therefore, I have to find a way to show them most people need to work very hard for a very long time before having the option to work at a more leisurely pace. Thankfully, I can easily show my kids what I do because I'm home all the time! The same goes for many parents who are also able to work from home.
If my kids want to play, I'll just tell them to give me some time to finish up work first, even though the work isn't urgent. This way, they'll always be reminded of the importance of work. They'll also practice delayed gratification and develop some grit.
But here's the thing. Maybe parents like me don't need to worry about spoiling their children or adult children at all. We can give them plenty of money once they are out of the house without fear of them turning into ungrateful degenerates.
The reason is apparent once you accept the following true scenarios.
Why Most Parents Don't Need To Worry About Spoiling Their Adult Children
The typical parent begins to decumulate after age 60 because most people retire after age 60. With the average age of first-time mothers around 26, the average age for an adult child to receive significant financial assistance from a parent is therefore over 34 (60 – 26).
And for those parents who want to provide an inheritance upon death, then the average age for an adult child receiving an inheritance may be around 54 (80 – 26)! After all, the average life expectancy is around 80, but increasing.
Therefore, if you receive an inheritance between the ages of 34 – 54, it shouldn't spoil you because you'll already be long set in your ways.
As a 45 year old this year, there is no amount of money my parents can give me that will change my lifestyle or my money habits. I've already got food, clothing, transportation, shelter, and educational expenses taken care of. It's very hard to break my habit of saving and investing for an unknown future.
Further, if you end up being wealthier than your parents, then it's hard for your parents to make a big financial impact.
More Appreciation Of Money In Your Mid-30s
By age 34, you've already had 16 years out of high school studying and working. Very few able-bodied people still live at home with their parents at age 34. That said, the median age for a first-time home buyer is around 34. At this age financial assistance from parents could be huge.
But by your mid-30s you should be much more appreciative of any financial assistance your parents provide because you realize how hard it is to build your own fortune.
You've probably changed jobs at least twice, got backstabbed by a colleague at least once, broken up with at least one love interest, and made plenty of investing mistakes. Further, you might be under tremendous pressure as first-time parents to juggle both work and family.
Therefore, by your mid-30s, you are probably the most appreciative of receiving any financial help from your parents. Due to mostly pride, you may have held off asking for money for a long time already.
I know plenty of adults who would rather work three jobs and sleep on their friend's sofa than ask their parents for money after college. Most people are thoughtful and want to start giving back to their parents after being cared for for 18-22 years.
Given you're so appreciative, you will do everything possible to honor your parents by working hard to pay your parents back. You'll also stay more in touch with your parents if they provide financial assistance.
The right amount of money to leave your children will depend on your child. But if you've raised them properly, you won't have to fear spoiling them.
A Wonderful Scenario For Parents
If you are the parent providing financial assistance, you will most certainly appreciate more phone calls and more visits from your adult children. In turn, you will feel they are more appreciative of your help rather than less.
For so long, you've stepped aside to let your children live their own lives. You've been told to get out of their way so they can fly and crash land on their own.
But secretly, you'd love to be more involved in your children's lives because you love them so much! You've always dreamt of being their best friend once they're all grown up. Having them want to spend more time with you empty nesters is a dream come true.
Related: A Massive Generational Wealth Transfer Is Why Everything Will Be OK
Less Appreciation For Receiving Money In Your 40s And Beyond
If you start receiving money from your parents in your 40s and older, chances are high you won't appreciate monetary gifts as much as you did when you were younger. As a result, being spoiled with money is out of the question.
Think back to the days when you got a crisp $5 bill for your 10th birthday. What joy! Now think back to when you got a $20 bill or maybe even a $100 bill as a teenager. Amazing! But as time goes on, that joy fades because you get used to the monetary gifts.
More importantly, by your 40s, you will have already made a significant amount of money. For example, by age 40, you should have between $250,000 – $1,000,000 in your 401(k) according to my 401(k) savings guide by age.
Hopefully, you'll also be generating a decent amount of taxable passive income to provide you more options as well. At the end of the day, it is your taxable investments that are the source of your passive income streams.
Peak Earning Years
Your 40s are also when you're close to or in your peak earning years. You may be lucky enough to be earning six figures or even seven-figures by your late 40s. As a result, an inheritance or financial assistance might not mean that much.
What you'd rather have is more quality time with your parents. And if you have children, you'd love it if your parents got to know their grandchildren a little better. So in terms of money, the best financial gift may be a grand family vacation.
In your 40s, 50s, and 60s, you are likely also thinking about giving more money away. After all, the best age for decumulation is somewhere between 40 – 60 years old. Therefore, the act of receiving money from your parents who are decumulating later than recommended won't change your daily habits.
The Riskiest Ages To Give Too Much Money To Your Children
In conclusion, most parents shouldn't worry about spoiling their adult children by giving them money. Maturity, pride, and honor will ensure most adult children will appreciate any financial gifts that come their way.
Financially responsible parents teach their children about delayed gratification, strong work ethic, and investing throughout their childhood. By the time their children are in their 20s, they will want to try to create their own wealth without assistance.
The only age range when giving too much money is a risk is likely between ages 5 – 27. Starting around age 5, children begin to understand the concept of money. Spoiling them early without commensurate work is no good. Giving adult children money between the ages of 18 – 27 may take away their incentive to see what they can do on their own.
About five years after college or ten years after high school, adult children will have gone through enough misery to really appreciate any financial assistance. Further, by age 25, neuroscientists have determined the brain fully develops as well.
Therefore, starting at age 28, parents who want to lavish their adult children with money should feel more at ease doing so. But hopefully by then, their adult children will be doing so well there will be no need.
Related posts about money and children:
How To Convince Your Parents To Buy You Everything As An Adult Child
The Bank Of Mom & Dad Strategy For Buying A House And Having A Family
Generational Wealth And The Angst Of The Not Rich Enough Class
Readers, is the fear of spoiling our adult children with money overblown? Hasn't your appreciation of money increased as you've aged? When do you think is the right age to start financially assisting our adult children?
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Very interesting validation. Can it be a coincidence that my revocable living trust is set to start transferring some 1% of assets a year to my kids at age 28 if I’m dead? Just felt like the time when a person solidifies as an adult. Also helps it will for sure be less than the median household income… so a helping hand but not enough to totally do nothing.
Sounds like you structured it very well. I need to double check when our assets are set to distribute we were to pass early. Age 28 really is a solid age.
I inherited a few hundred thousand dollars at age 18 when my father passed away. Today I am 30 and have a net worth close to 2 million dollars. Pissing it away or not continuing to invest it never went through my mind never even went through my mind. In fact, I remember a bonfire party at when I was 19 with a young girl. She had just purchased a brand new Jeep with the inheritance her grandmother bought her. I thought that was so foolish.
Teach your kids the value of investing early on, and it will bear fruit for them.
Sorry to hear about your dad. He and your mom must have taught you well indeed.
I do wonder how much parental guidance as in terms of developing a good understanding and relationship with Money and work.
One of my fears is that all the time I spend with my children will amount to very little because of nature.
This is another thoughtful post Sam. Your reflections on parenthood are really helpful and original.
I have three kids 18, 16 and 6 and I see one of my core jobs at the moment to give them a strong sense of clarity around what they can expect from me in the coming years … basically board, food and the basics whilst they study and launch (there are lots of good universities in our city so living at home is likely).
I am very careful not to let their expectations expand too much until they answer the question for themselves about what kind of life they can build and afford.
However, I love this post because it helps me see that after a decade or so, I should be able to shift gears and be helpful to them and ease their burdens a little. I love the idea of the generous Christmas cheque.
One more thing on my mind is that, of my four siblings, three of us have divorced in our 30’s and 40’s and my parents helped each of us financially through a devastating time. Actually that financial help definitely played a big part in a post-divorce culture of generosity in our family, which has led to amicable divorces in all cases. This has dramatically reduced the distress for all the children involved. I would really like to be in that position too if the need ever arises in the future.
Also, by the time a decade comes around I should know if my own wealth plans work out and how safe I am to provide that assistance.
“ Actually that financial help definitely played a big part in a post-divorce culture of generosity in our family, which has led to amicable divorces in all cases. This has dramatically reduced the distress for all the children involved. I would really like to be in that position too if the need ever arises in the future.”
Thank you for this perspective! I never thought about this but it is so true in a disruptive part of life.
Thanks for reading and sharing. I think your kids will turn out great :)
Hi Sam
Great topic and many takeaways as all ways….I see this a bit more complicated….
Having 6 kids between two wife’s changes things for me. First and this is is no exact order, your kids will not have the same skill set to earn $$, engage in meaningful relationships, IQ, Beauty etc etc…Therefore as a parent your resources, time, energy will never be fairly distributed between them equally.
And as a blended family, meaning my oldest son is my only with my first wife. He will and has always had more $$, time and energy behind him. I think most young parents think that you can distribute your $$ equally amongst your kids and they will think its fair. In my experience parents have to consider the other thigs like extra time and attention that some kids demand…Just handing out money to your kids at different ages equally is too simple an answer to a very complicated life experience…JJ
Ah, if life were not complicated, life would be easy.
We’re all trying to do our best and manage the unknown to minimize damage and maximize outcomes.
Let’s enjoy this journey and be flexible when flexibility is necessary.
I got married young and we had our first child at 23. We bought our first house for $65,000 in the early ’90s. I had a good start on my career but was only making around $30k a year while my wife stayed home with the baby. We were not relying on parents, but were just getting by. My parents began giving me and my siblings each $1000 a year for Christmas. It doesn’t sound like that much now, but back then it was like getting a 3% raise. It certainly wasn’t enough to live on, but it really did make a big difference to our quality of life by giving us a little breathing room.
They never adjusted the $1k amount for inflation, which I think makes sense because as we kids got older we didn’t need the money as much (and inflation was low anyway). At some point years later, my Dad had to liquidate his business and go on disability. The annual gifts had to stop as my parents could no longer afford it. I don’t really remember exactly when it stopped because we didn’t need it anymore anyway!
I now do the same for my grown kids, only the amount is $2k a year. On occasion, I have made other special “gifts” by selling them cars at less than market value, etc. All of the kids are working and don’t *need* the money, but I know from my experience that it sure helps.
Thanks for sharing your story.
It’s a good idea to figure out an annual gift amount that helps and is appreciated to ensure decumulation and help, but not enough to make you lazy. Sounds like your parents found the sweet spot!
And that’s sweet spot is different for everybody because everybody’s motivation and income and wealth is different at different ages.
Brother, Sister and I never received anything along the way but then on their passing (90 and 94 yo) split an inheritance of plus one million three ways. By this time neither of us needed so perhaps as suggested, the 100.00 gifts along the way are more meaningful especially in the struggling years. Just Food for thought.
Giving away money to your children when they needed the most is definitely more impactful. Giving away more money while you are alive is also more meaningful. I don’t think it’s wise to wait until after death to give most of your wealth away.
I’ve also seen examples the other way where children are supporting their parents with elder care. The parents were never wealthy, but now the children are loaded and pay for the services for their parents.
If parents were unable to get wealthy themselves over the past 50 years, then it is great for their children to take care of them in the last quarter of their lives.
Definitely a great benefit of more people getting their financial lives in order today.
My parents are now in their 80s; they did not spoil us as children. My father has often thought about how he could donate his money to charity rather than provide his children with an inheritance. For the past few years he donated from his IRA via Qualified Charitable Contributions. But now as I write this, he has fallen mentally ill. I traveled back to the United States to help my mother; my father was always the one who took care of the finances, and she had little idea of their finances, nor how to best pay their bills. As we now navigate together the health care system in the United States, especially with respect to long term care, I have seen how devastating an illness later in life can be financially. If we were to bring my father home, 24 hour basic care, begins at $20,000 per month; and this is not nursing care but rather simply someone to watch him and help him with basic tasks like using the bathroom and bathing. I think many older parents with a significant nest egg (several million dollars) could find themselves in a similar situation much too easily. This experience has taught me that while it may be nice to donate to charity or help one’s children, one might be better off, simply doing so via their wills and ensuring they have enough money for worst case long term care scenarios. In the state where my parents live, one cannot even qualify for Medicaid if they have given their children money in the past five years. The state expects the children to pay in the meantime.
It’s when we have a moment to breathe, to pause and reflect, that we are able to take time to understand ourselves better. People who are constantly striving due to fear of failure because they do not have a safety net may not take enough time to nurture their self-awareness.
I think if you are struggling to survive, understanding yourself will always be far down the priority list. This becomes a positive feedback loop, of course, but it might explain why so many Americans are in so much consumer debt.
I definitely want to help my kids as adults. We are modeling the good life while they are young by showing them there is another way besides working 8-5 (and in investments of time and education) . They will have to be responsible and solvent before I help them but if they want to manage my businesses when I am older…. awesome.
What kind of parenting is the average American doing? In my circle of educated and accomplished families, there are no such issues.
Do you mean your children would never need or be spoiled after receiving money in their adult years?? Please elaborate. I think if a parent has done their job, their children would receive money as an extra bonus & not out of necessity from their parents. That’s what we plan on doing. The older we get, the less we need/want.
BTW, I always love your responses IndianMama.
I think parents will always worry about their kids even as adults to some degree. My mom definitely still worried about me in my 20s and 30s even though I was financially independent and doing fine. But she’s finally started to stop now that I’m in my 40s.
I never really thought about how old my kids will likely be when I pass, assuming no unanticipated early illness or accident. But there’s a decent likelihood my kids will be in their late 30s to early 40s. So yeah they should have had plenty of time to prove themselves on their own by then. Great insights!
True. I think parents will always worry about their kids, no matter how old they get. But worrying about spoiling them by giving them money is something I’m worrying less and less about as I spend more and more time demonstrating the importance of work, work ethic, saving, investing, and delayed gratification to my kids.
Something worth noting is how one demonstrates the importance of work, and how it goes in hand in hand with valuing money. If a parent comes home every day, angry and sad about working, unable to spend time with their children, but says I work so we can have plenty of money, the child is much less likely to want or care much about money (or may unhealthily like money) and may see work as awful.
I guess the point is it piggyback off your comment, it isn’t the giving of an adult child money that will demotivate them, but more the values you demonstrate while they’re developing
You make a very good point in your first para Jake. Soon after I met my husband, I told him to stop complaining about corporate life in front of my 4 step kids who were at an impressionable age (tweens). If he’s fed up, he should complain to me, but not to them as he is not presenting a balanced view of life. Sure, corporate life was hard, but so is an hourly job. Plus it also provided him with huge number of shares and the possibility to retire at 59 (instead of 66 which is the state pension age here in the UK) with a very reliable pension, all of which he doesn’t mention at all to the kids. Perhaps I came too late in their lives though: only one is on a salaried job, hopefully the others will find themselves soon. The million-dollar question: how big should the Christmas cheque be?