I was playing tennis with a friend who happens to be a partner at a large mutual fund company. During warmups, we got to talking about what is the right amount of money to leave our children.
I told him the right amount of money to leave our children is enough so that they'll never starve, but not enough that they'll completely lack motivation to make their own money.
He agreed with my statement. However, where we disagreed was on the amount of money to give and leave our children.
My friend used the example of what if his son wanted to be a college professor. His son would “only” make about $150,000 a year, which might not be enough to raise a family if his son's spouse didn't work. As a result, he feels that setting up a trust worth $10 million was the right amount.
My instinctive reaction was that $10 million is way too much money. Surely, that amount would spoil his son rotten. But I shrugged off his belief and we started to hit.
After our session was over, however, I started to think more about this subject. Let's discuss further what is the right amount of money to leave our children so they don't become spoiled, entitled, and lazy!
Leaving Our Children Money
One of the big points of contention about the Financial Samurai Safe Withdrawal Rate is whether one should spend all their money before they die or leave some money for their children and charitable organizations.
There is no right or wrong answer. Just different answers depending on your financial circumstance, family situation, and what you believe in.
If you don't have children, then generational financial planning is probably not relevant, unless you have nieces and nephews you adore.
If you have children and believe in leaving money to your children and/or to charitable organizations, you won't find it absurd to amass a net worth equal to 200X your annual expenses.
200 years worth of expenses covers the remainder of your life and perhaps two additional lifetimes after you're gone. Every person I have met who regularly donates money has thought about making their wealth last way beyond themselves.
Leaving A Legacy As A Default Assumption
One thing I realized after reading all the feedback in my proper withdrawal rate post is that not everybody has the same default assumption on the passing of wealth. I call this the Legacy Retirement Philosophy vs. the YOLO Retirement Philosophy.
For example, when I was in high school I just assumed I was going to college because that's what all my friends did. I didn't realize I had a choice not to go, unless I wanted a whipping. But the reality is that less than 40% of Americans have college degrees.
I also assumed, since having children, that I would always leave some amount of money to them when I die. Life can be full of hardship. It's easy to see hardship after growing up in Zambia and Malaysia as a kid. Trying to protect my children from extreme hardship is one of the main reasons why I have all sorts of insurance, including life insurance.
This type of default thinking comes from a place of privilege and my socio–economic surroundings. I'm privileged to have enough money to think about estate planning. At the same time, I'm also surrounded by friends who will all be leaving some amount of money to their children when they die.
Perhaps you are too, which is why you're reading this post. I also think it would be great to provide a perpetual giving machine to charitable organizations you care about.
You may not have enough money to put your family's name on a university building to buy your child's admittance. However, how neat would it be for your trust to donate $1,000 a month to a couple of charities you care about for a couple of centuries?
I'm personally excited to figure out a way to do just that. But enough about charitable organizations. Let's talk about the right amount of money to leave our children so they don't turn into zombies with no direction.
The Right Amount Of Money To Leave Our Children
As a parent, there's probably nothing sadder than seeing our children fail to launch. We want our children to find happiness in their careers and as individuals. We want them to find love!
For over six years, I've been reminded about the sadness of failing to launch each time I see my neighbor's son, who was given everything. He took the super-duper senior route of graduating from college in six years. Now, at 30 years old, it looks like he'll be living with his parents for life.
Giving our children money may increase their failure to launch. If we solve the problem of them living at home by buying them a house, do they end up doing nothing since they got their home for free? Such conundrums!
Let's talk about various levels of money to give our adult children while we are still alive. Then we'll discuss the right amount of money to leave our children once we are dead.
Again, there is no right amount of money to give or leave our children as the decision is personal. However, we can come up with a framework to help us make more rational decisions.
Giving Our Children Money While Alive
Giving money to our children feels better while we are still alive. While we are alive, our adult children will likely also need more financial help from us.
Further, there's a balancing act between how much to financially support our children while also supporting ourselves in retirement. Therefore, focusing on the right amount to give our children while we are living is more important than after we are dead.
Up To $16,000 A Year
Giving our adult children up to $16,000 each year is a great way to decrease the value of our estate. The $16,000 is called the annual exclusion amount (from your estate). Ideally, you don't want to leave any money above the estate tax threshold, otherwise, your estate will end up paying a ~40% death tax on every dollar above the threshold.
I think giving up to $16,000 to an adult child every so often is fine. However, if you regularly start giving the annual exclusion amount, your adult child might come to expect it. Once they expect the annual gift, they'll stop appreciating it as much. They will rationally bake in the annual gift as income.
Therefore, it is best to limit the annual exclusion gift amount to no more than once every three years. With this cadence, you get to help while minimizing entitlement.
Up To $32,000 A Year
Given the annual exclusion gift amount is per person, two parents can give a total of $32,000 a year to their adult child.
Once you start giving $32,000 a year to your adult child, you run the risk of him or her slacking off. Most single individuals can live off $32,000 a year, especially if they can live rent-free in their dad's basement.
Therefore, I recommend only giving the double annual exclusion gift amount once every six years to prevent spoilage. This is consistent with giving your child the annual exclusion gift amount from only one parent every three years.
If you have young children, funding their 529 plan for private grade school and college every year is a great way to give money to your children. After all, one of a parent's main responsibilities is to provide their children the best education possible.
Lump Sum For A House
The annual exclusion gift limits are enough to buy a median-priced car. The money will surely help with rent, food, and clothing. It's enough to help with graduate school tuition as well.
However, if your adult child wants to buy a house before 30, then the annual exclusion gift amount is likely not enough.
Given there is so much variation in housing prices across the country, let's assume the lump sum gift amount is equal to a 20% down payment, whatever the house price.
If your adult child follows the 30/30/3 rule for home buying, paying for a 20% down payment should still be safe. This is because if he does follow the rule, then he will still have to come up with a 10% buffer and make enough money to satisfy the other two parts of the rule.
If he doesn't or can't, then I recommend you delay providing all of the 20% down payment. Give your child more time to make more money. Otherwise, you run the risk of your child always asking you for more money. You also take away all sense of pride for independent living.
Money Beyond Housing
After you've paid for their education, provided a down payment for a house, bought them a car, and given the occasional gift tax exclusion amount, giving your adult child even more money becomes riskier. Heck, giving all this stuff already is already red-lining your risk-o-meter.
Remember, you're trying to prevent your child from becoming completely unmotivated in life. You want them to achieve happiness by letting them earn their reward. Let them struggle making a minimum wage service job as an adult. You want them to appreciate the value of a dollar.
Therefore, once the above conditions are met, it is my opinion that no more money should be given to your adult child until after your death. Whatever excess money you do have should be spent on yourself or on charitable foundations.
That said, I think the fear of spoiling our children when they are adults is overblown. If we are giving tens or even hundreds of thousands of dollars to our children when they are in their 30s and up, we shouldn't worry. They have already experienced the hardships of life. Further, they've already developed a lot of their financial habits already.
Giving Our Children Money After Death
Hopefully, for most of us, by the time we die, our children will already be wise adults who have figured out how to live independently.
Receiving an inheritance when you're 50+-years-old is probably not going to change your money principles, no matter the amount. Your children will likely stick to their same old habits.
Think about Warren Buffet still living in his same old house from decades ago. Think about how your parents are still going to their favorite early bird special buffet, despite amassing a nice nest egg after decades of investing.
Therefore, I think it's OK to give each child up to the estate tax threshold upon death. In your will or revocable trust, make sure you share your views on how you wish the money to be spent. Then realize whatever they do with their inheritance is really up to them. If you raised them right, they'll make you proud.
If you find yourself fortunate enough to have way more than the estate tax threshold, then actively try and spend more money on a better life. Feel free to also identify charitable institutions that could use your support.
Of course, if you find your estate to be large and the estate tax threshold to be too low to give to any one individual, it'll be up to you to figure out how to divide your estate between individuals and institutions.
Your child could end up being a multi-millionaire on her own. Therefore, you may not need to give anything to her when you die.
Creating Charitable Trusts
Once we have ensured that our children will always have a home, a good education, and not starve, we shouldn't feel obligated to give them any more money.
Let us not rob them of the glorious feeling of making something of themselves. If they are planning on having children, we can then make further estate plans when the time comes.
There are plenty of people who need way more help after we've provided the basics for our children. Creating trusts for charities seems like the much wiser use of our estate.
Let's use my example of donating $1,000 a month to a couple charities forever. I care about a foster youth center and a disability rehabilitation center in my district. The innocent are those who I'd like to help the most.
Therefore, to provide $12,000 a year each in annual income using the 4% return would require me to earmark $300,000 to each organization.
However, just eyeballing the $300,000 figure doesn't provide me much confidence that it will be properly managed and invested to last 25 years. I can envision the $300,000 running out within 10 years.
Therefore, I will likely allocate at least $600,000 to each institution, which would be equivalent to having a 2% withdrawal rate. This means I'll probably have to save and invest for another 10 years.
So you see, another way to use the Financial Samurai Safe Withdrawal Rule is as a smell test. The Rule helps you decide whether the amount of money you are thinking of giving will achieve its intended results.
Have Children And The Money Will Come
What I've learned so far about parenthood and money is that if you have children, the money will come. Even though children are expensive, once you have children, you will spend more energy trying to save and make more money.
Because you love your children so much, you will do everything you can to ensure they are loved and taken care of financially.
Eventually, you'll get to the point where you may start wondering how much love and money is too much. You may also wonder when is it time to let them fall and learn from difficult experiences.
I hope this article has given you a better idea of what is the right amount of money to give our children while alive and leave after death.
Only we as parents know our children best and must make our decisions accordingly. Personally, I'm building a rental property portfolio and an online business to provide for my children.
My hope is that when they grow older, they will find some appreciation in one of these businesses and take one or both over.
Diversify Your Investments Into Real Estate
Instead of giving your money physical real estate, considering leaving your children passive real estate investments instead. Further, if you want to dampen volatility, diversify your investments, and build wealth at the same time, invest in real estate. Real estate is my favorite asset class to build wealth.
My favorite real estate investing platform is Fundrise. With over $2.5 billion in assets under management and over 210,000 investors, Fundrise is the leading, vertically integrated real estate platform today. Investors can invest in their diversified real estate funds with as little as $10.
Fundrise primarily focuses on single-family, multi-family, and build-to-rent properties in the Sunbelt. With lower valuations, higher yields, and strong demographic shifts, Fundrise investments are in the sweet spot of a positive long-term trend. Come check out what they have to offer.
Track Your Estate Carefully
If you want to leave your children and charities some of your wealth, then you need to carefully track your estate. Do so by signing up with Personal Capital, the web's #1 free financial tool.
Personal Capital enables you to track your net worth, analyze your investments, and help you plan for retirement. There is no better free financial product offering on the web today. I've used Personal Capital since 2012 and have seen my net worth grow tremendously since.
Related posts regarding leaving money to children:
Inheritance Tips So You Don't Spoil Your Children
How To Get Your Parents To Buy You Everything As An Adult Child
Three White Tenants, One Asian Landlord
Readers, what do you think is the right amount of money to give your children while you are alive and after you die?
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This was a great write up. This is the question we have asked each other for a while. How much is too much? We love them but don’t want to rob them of their own goals. If we give too much a loss of potential and opportunity in their lives?
I rather have them have it then the IRS… If I hold back the government will get it !
What does a HNWI family do?
Very informative article. It is very important to teach kids about money. To do something good in the future, it is important to keep knowledge about money from childhood. After learning financial knowledge they will be able to properly use money, how to invest, and how to save money.
Thanks for sharing the valuable article.
Family fortune comes and go. What stays with your kids for life are the values and life skills you taught them when they were young.
I think a good inheritance include: teach kids to live below their means, teach them how to make money, pay for their college (but do not pay for grad school), support them buying an average starter home, support them at crucial life stages (e.g. child birth, divorce/widow, starting business, prolonged unemployment, disability). If you educate your kids well, having enough financial support will encourage them to take more risks to accomplish their dreams. They won’t be limited by finances.
My great grandparents were very wealthy. They owned family farm land and built their business. They split family wealth when they were around 60 yrs old, all kids were over 30 and mature enough to handle inheritance. As per Chinese tradition at that time, eldest son got 51% of the business shares and farmland. The rest is divided equally between other kids. The other kids had to choose to keep their shares and receive dividends or sell shares within family and get paid in instalment. My maternal grandparents got enough to build a house on 2 acres of land, start a birthing centre, start a small high-end bedding workshop, hire in-house helps and nannies. They had enough money to do nothing in the eyes of average people, but they were educated to work hard and contribute to society. So both my grandpas had a day-job and a business on the side. Both my grandmas worked. My maternal grandma was the first western medical obstetrician in her town. She opened a birthing centre to promote mother-child safety. She offered free service to lower class women while charging wealthy families high price. She gave free lectures on preventive cares. She saved lives by offering guidances to women seeking abortion. She donated money to all her patients who needed better nutrition within a year after childbirth. My grandpa worked during the day to build roads and bridges for the government. He worked in the evening and weekends in his workshop. They were well-respected contributing members of society until the Chinese culture revolution. They lost their fortune and were sent to re-education camp in the countryside for 8 years. My paternal grandparents also come from wealthy family and received their inheritance years before their parents passed away. My grandpa was a colonel, he fought the Japanese invasion. Meanwhile he also built a factory with a friend to manufacture steel products. My paternal grandma worked school teacher, stage actress, singer, accountant, store clerk. They also lost everything in 1970’s and were re-educated. Their siblings also were in similar situations. None has done nothing just because they were born wealthy. They were taught to keep and create wealth to help communities and make their country better for future generations. They got some money back in mid-80s from the government to compensate for what they lost, they invested well and paid grandkids’ airplane tickets to American/Japanese/Australian colleges and first year cost of living abroad. No one expected an inheritance after their death, but they still left some cash they saved for medical cost. Their primary residence is equally divided among the kids.
My parents went from heaven to hell when they were teenagers. The change in family fortune beyond individual’s control had taught them life is unpredictable and cannot be well planned. My parents believed more in changing their fate with good education and work ethics. They also immigrated to Canada for better safety to keep individual wealth. They taught me to live below my means, setting lifetime goals and financial planning when I was a kid. They gave me $50K CAD when I got into the college. I used this money to pay for my 4-year undergraduate program. I also worked and had good paying internship. I still had 30K left when I started working full-time. I always knew I can get money from my parents if I had a good cause to ask for it. So I was not focused on finding the highest paying job or save as much as I can in my 20’s. I was encouraged by my parents to find my own life goals beyond buying a house or save for retirement. So I took low pay job to find myself, and only broke 6-figure in salary at 30. Looking back, I don’t regret it. Now in mid-30s, I have a 150K stable job that I love, a loving husband, two young kids and a comfortable middle-class lifestyle. My parents gave me 100k CAD cash gift when I got married. They matched $ for $ the down payment my husband and I saved for our house. My in-laws matched 0.5 for every $ we saved in down payment. We did not buy a larger house with parental subsidy. We just bought enough house so we can live in it forever and pay a very small mortgage. We maximize all our RPP, RRSP, TFSA, RESP, company shares savings. My parents and my in-laws also gave us $40,000 in total per each year of maternity leave I took. I was making 120K per-tax before birth, but government only paid 48k pre-tax a year for maternity leave. Without money gifts, I might chose accelerated 6-9 months maternity leave instead of the full year. I am very grateful of the money I get from my parents and in-laws. I am working full-time and saving enough to retire comfortably at 55. My family has longevity genes. So I do hope my parents live until 90’s. I want to retire at 55 so I can spend more time with my parents and take good care of their final years.
My parents now plan to sell an investment property they bought 17 years ago. The property has appreciated by more than 300%. My parents want to give me half of investment gain on the condition that I use this money to buy 2 rental units. My 2 kids will get these rentals when they grow up. This is the money my parents wish to pass to future generations. So I don’t view it as mine. I am just an administrator for 20-30 years.
I’m in a different position and would appreciate comments. I’m a 71 year old widow polishing my will/trust. I have no children only cousins of whom 3 were like sisters to me, and other cousins more distant. I’m fretting over how much to leave my close cousins when they are my age and the money will soon pass to their kids and grandkids. I feel I don’t want to enrich their dynasties which are already educated and doing well but one cousin does have a handicapped child and I’d like to help her family.
I am thinking about leaving small $100,000 amounts to many cousins and friends just for the heck of it but I’m hesitating to leave $1 million+ amounts to my close cousins especially the ones already doing very well. Then how much to charity, 30%, 50%, I’m having trouble deciding?
Remember one thing any estate plan you do now can be changed! You have small children and want to make sure they have enough money to get a good education and to give them financially secure life. Your children as they get older will give you signals on if they can handle the estate they might inherit. If they show a lack of drive and waiting around for the money there are many techniques that can be used. I am optimistic that you will share with your kids your knowledge of finance and independence that will make them productive citizens.
Over the years I have received gifts from my parents that were sizable, but I never asked them for anything. The best gift they recently gave was renting a very large house for the whole family for the week in the mountains. Getting to see the whole family together for a week was way move valuable then a check.
As a dividend investor, I plan on living off the dividends myself and putting my portfolio in a trust where the future dividends can only be accessed for education and testing business ideas.
Maybe a wierd plan, but I like it. =P
-Andrew
I dont’ see any harm in gifting your children the exclusion amount each year (if you can afford to do so) provided they are working and productive. Let’s say you have a kid who is a teacher or journalist where they really enjoy what they do but maybe struggle to live in a high cost area (which may be close to where you live). Doesn’t seem harmful to them to gift them some money each year. Even then, it’s unlikely they’d need any extra money unless they have kids. By the time they have a career and kids, extra money from their parents isn’t likely to change their values or motivation.
Sam,
Interesting post, and interesting question. So many variables are at play as to what would be appropriate given the individual situation. Certainly, the balance is to provide a big enough safety net to not just survive, but have financial confidence to be able to take some reasonable risk, lose, learn from the loss, and adapt and thrive vs. providing so many resources that the incentive to become the best person one can be is squelched in guaranteed security, never having learned the need to thrive to individually succeed.
Potentially the biggest blow we’ve had in planning for our daughter’s financial acumen and independence is the recent change in having to distribute qualified assets (IRAs, 401ks) within 10 years of the decedent’s death. If my wife and I live to a ripe old age this is not a concern, but if we perish before our daughter has fully established her own financial habits, she could receive and mismanage a great deal of her inheritance. To help protect against this to some degree, the non-qualified assets will be in a Revocable Trust that we are actively working to finalize and structure decision making authority to a small advisory committee that includes our daughter as a member. Decision making of the advisory committee is at first out of her control and with time advances to her shared control, and finally her control, up through age 40.
Two other ways we are distributing assets while we are “young” and healthy — One of the absolute best things I learned about a decade ago is the Donor Advised Fund for charitable contributions. Much less complicated than a family trust, and has the benefit of separating timing of the taxable donation event of a charitable contribution from the actual distribution to a charity. We have funded our Donor Advised Fund from appreciated stock so to also have further reduction of capital gains taxes.
The second way we are distributing assets early is to gift to family and friends that may be in need in a given year, or that we just want to share with. We have set up this targeted funding as a percentage of our net worth gains year over year. Committing to this thinking has allowed us to easily gift what are meaningful and appreciated “random” gifts to several family and friends over the years. This is much more personal than the charities that we contribute to through the Donor Advised Fund.
Thanks for continuing to do what you do
“Potentially the biggest blow we’ve had in planning for our daughter’s financial acumen and independence is the recent change in having to distribute qualified assets (IRAs, 401ks) within 10 years of the decedent’s death”
good reminder on the need to distribute within 10 years after death! We’v also set up a a revocable living trust with all instructions and various people on the trustee list. Fingers crossed.
Good call on the DAF too. Sounds like you guys are very charitable. Awesome!
Best,
Sam
This might be a bit off topic but it seems to be a good place to start a conversation. With US debt continuing to spiral and no end in sight, I find tax deductions for charitable contributions to be nothing more than a government subsidy to said charities, which then force those of us with less wealth and lower incomes to subsequently pay the difference in lost taxes. I am all for giving to charities but not at the expense of the taxpayer. I’ll use a simple example – Hillary Clinton’s tax return during her presidential run showed a one million dollar contribution to the Clinton Foundation. Based upon the highest tax rate, she saved well over $350,000 with this donation and thereby shorted the treasury by that same amount. Now when we consider the Gates, Buffets, Waltons, etc of this country, the amount lost is easily in the billions. Someone has to pay for this as those ultra wealthy certainly are not.
This is quite simple, you provide opportunities for your kids to grow and succeed. Parents, if they have the means, should provide for college and educational opportunities. The goal is for your children to be productive members of society (yes, loving, rule following….). Profession and lifestyle is up to your children dreams and desires. Parents should not fund children’s lifestyles. For those that have not yet read the Millionaire next door, I recommend it. It is an older book but the message is timeless.
The other thing I forgot to mention in above comment was I am aware of the flip side…wealth tends to be stem from a multi generational family pool.
There was a lady in my city who used to give workshops on how to ask your parents to unclench. The idea was they should be giving money to their family and you were encouraged to bring them along. Some sort of hippie crystal new age vibe thing was a part of it. Maybe because those people are the ones likely to need the money. Being divorced from capitalism requires a lot of capital! I found the whole thing repulsive and entitled.
I don’t know how to solve the issue. Maybe I’m conservative, but it seems wrong to leave money to a charity so someone else can have a house but say no to your kids. But the inheritors I am surrounded by are pathetic people living out their lives counting other people’s money. You think 30 is bad to be living in your parents house. 50 and your main source of income is your parents but still holding out the illusion to the world you’re supporting your family and having kids with a 30 year old you have zero ability to support is even more pathetic. I don’t know how a person lives with themselves when your parents have purchased your house and car. It’s embarassing.
I’ll tell you that I have several examples of rich parents around me. They give their kids 24k a year and it’s spent immediately. They fix up their house for 500k and the kid won’t even mow the lawn. Education money spent on useless pursuits like massage where they have no hope of making a living. Everyone surrounding these people just has their hand out. Even saw a daughter say “this will all be mine” when she was trying to seduce some dude. She also showed him her family’s collection of Tesla’s.
I don’t know the answer to this. You can plan all you want, but history is full of families whose wealth was gone in four generations. I’m like you and will give money to “the innocent”. Don’t feel the particular need to give money that help people who are completely irresponsible with their life or have directors making outsized crazy salaries. I set up UTMA accounts and bought stocks for nieces and nephews. One has turned into a total nightmare and I totally regret it. I may never tell her the money is there and just let it lapse into unclaimed property status. I despise her and what she did to her family that much.
I totally disagree with “have kids and money will come”. The majority of people living in poverty are those that have kids and did zero planning. Unfortunately they keep having more. The extra couple of hundred bucks they get from government for another child feels like it will be the answer to their problems. They are unlikely to be those that read this blog though so maybe that is okay advice for this audience. Don’t know.
This just reminded me of a comment my 7 year old made at a thrift store the other day “Mommy, I wish we were rich ”
Granted we are completely debt free, paid off house, fully funded retirements, take great vacations etc.
I’m a 35 yr old immigrant, oldest of 5 kids who has had to work for everything I have. My plan is to make sure my 3 kids invest fully in ROTH IRAs once they get their first jobs. Instilling work ethic is the most important financial tool we can teach our kids.
When kids expect good inheritances they might slack off a bit more. Great example is my Brother in law, his wife is an only child so they will get her parents inheritance, and then split his parents inheritance with his brother (my husband)
They live above their means, always in debt, always buying something useless. They have a “get out of jail” card just waiting for them. Best part is they get free child care from all of the grandparents for their 3 kids!
We get 0 help from anyone and are much better off because we don’t expect free $ to come to us.
You sound rich to me!
I like the part about opening up a Roth IRA and contributing as soon as your kid makes money.
It makes me very sad to read this comment. Just wow. Kids don’t know what wealth is. I work with people that lease a BMW and can’t afford to pay down their debt or contribute to a 401k.
Hello Sam
All you can do is make a plan and then see what happens. I think the key is helping your children get a good education and ideally some help for their first house or condo.
My gramma is over 100 and spending her money to live in a nurturing environment. Who knew she would have been spending money at this rate at this age. But her children are fine and don’t need money, they are all well into their 70/80s. I’m sure some of my aunts and uncles thought they’d receive a inheritance by this point, but no.
So, I’m going to focus on helping my kids pre 30 and ideally living nearby to help with any grandkids. But I’m not sure why I’d plan to help adult kids. I’d rather help grandkids pay for college if my kids can’t figure it out by then.
Sam, this article is the very reason I look forward to seeing the articles show up in my in box. Even at 61 my husband and I struggle with what’s appropriate for our college educated (paid by us but at in state college) son and daughter. My own parents were generous when my husband and I were starting out and I always felt it really got us off to a good start especially in the early years. We’re in our 3rd year of retirement and life is amazing. We just never want our adult kids to think the $15k should be a part of their annual income like you mentioned.
My parents helped with college and helped with a down payment on my first house.
Since then, they’ve told me: “if you ever lose your job or whatever and need money, just ask. We’d be happy to help.”
I wouldn’t underestimate the value of that sort of assistance. Not active annual gifts or anything, just the knowledge that you have a support system behind you.
When my parents were alive they would give me the annual exclusion amount each. Back then it was around $12,000 per year x 2 = $24,000. My parents (particularly my father) were afraid they would run out of money in retirement. After their deaths (when I settled their estate), I realized that fear was irrational. Perhaps they were worried I would spend the money frivolously although that would be out of character for me.
The compromise we reached was that I opened a bank account under my SSN and with JTWROS (Joint Tenancy with Rights of Survivorship). After a few years, the balance was large enough that they felt comfortable in moving some of it into CDs with the same JTWROS registration. For me that was an inefficient investment since interest rates were so low and I could have invested it in the stock market and bought at the bottom of the Great Recession Bear Market.
My mother predeceased my father. My father had Alzheimer’s at the end of his life. I handled his finances for the final year or 18 months of his life. He would ask me to transfer the annual exclusion limit to that bank account. I told him that I did but I did not. I thought his mental capacity was diminished and didn’t want to be accused of elder abuse if some third party saw that I was moving money from his estate to mine.
That was a strange time. I was the sole heir and I was handling his finances. I started moving his investments into slightly more aggressive investments. He had dumped most of his money in a MMF that invested in US Treasury securities. It was paying 0.02% APY. Just by moving him to a on-line savings account I was able increase his yield by 50X. That was an easy choice but I moved a small portion of his net worth into some variable price investments that were yielding 100X to 300X more. When I discussed it with him, he was against it but I chalked it up to the dementia and did it without his knowledge.
Thanks for sharing. In retrospect, what do you think they should have done wrt giving money? And how did regularly receiving $24,000 a year as an adult make you feel? Did it change your attitude or work ethic about money at all? Thanks!
To a certain extent it didn’t matter if they gave me the money in annual increments because the alternative would have been that I inherited it after their deaths. I would have preferred that they spent it on themselves but they had a hard time spending money on themselves.
I didn’t really think about the money much. Per our agreement, the money sat untouched in bank accounts earning between 0% and 1% interest. It was essentially our shared emergency cash and none of us ever needed to tap it. It was out of sight, out of mind. I don’t think it affected my attitude or work ethic.
I think you have raised a very important issue. However, even the generalized advice can be extremely different, depending on the country of residence … For the United States, I agree with you. However, in the context of developing countries, I fundamentally disagree)) For example, for most countries of the former USSR, where, for example, I live, many can achieve success only with the support of their parents. Until a certain time, of course. The general situation is that you will work for your home all your life if you are not well helped at the start. In this regard, I think it would be more correct to say: we should leave enough for the children so that they can do what they like. And in each case and the family, of course, it will be a different amount. Depending on the position, worldview, and so on …
I don’t know. I think that at the end of the day, we all want the best of our children. However, leaving them lots of money can disrupt their motivation and life on so many levels as many readers have highlighted.
I remember in college having friends that had super wealthy parents. At one party in the suburbs of Georgetown in Washington, D.C. we would have a blast at a mansion that was so hidden and private you wold not even know it was there. My friend’s parents were out of town but you can see how she just did not care about money and would just spend it like there was no tomorrow. Now, I wonder how she is doing and if she is still burning that money.
That is my concern. Having my two kids just burn the money and not learning anything about finances. All my hard work gone.
Personally, I think we should not worry much about leaving lots of money to our kids. Why have all that stress. If there is anything left, great. But us parents should enjoy it. Just leave enough to cover educational expenses and perhaps a house for each child. I may leave my kids extra money because I don’t think me and my wife will be able to spend it all. But I still think we should not worry too much about leaving money to children. We should be worry about us, parents, living life and enjoying life. If there is anything left, fine. If nothing is left, that is fine too.
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I think I’ll develop a clearer picture of the amount when my kids are in middle or high school.
If I see that they’ve established a good foundation of working hard, delaying gratification, and showing gratitude vs feeling entitled, I would feel comfortable helping them with their college tuition, their first home, my future grandkids 529 and/or daycare.
The onus is 50% on me though since I will have to work hard(er) to be more present for my kids, to provide them opportunities to grow as a person, and to show them that they are fully loved and appreciated. The other 50% will be on them.
I hope to be in a position to help them in the future. $ is great, but $ feels even better when it’s used with purpose and towards the ones you love.
I think that’s right. By high school or end of high school, we should certainly know our children’s personalities, views about money, and work ethic.
I started an investment club with all my children – they were in college when we started. I seeded the initial capital, every voting share is $500, with an annual requirement of at least 1 share per year – forced investing. The family votes on investment decisions based on owned shares. We actually bought Tesla at $350 – i voted against it as ‘way overpriced. Good thing I lost that vote. Now I have to convince them to sell.
We have just started looking at investment properties. Nothing bought yet.
It has been a joyful experience sharing the limited investment knowledge I have and watching them research and grow on their own.
Excellent post Sam!
I too flip flop on my views of leaving money to my daughter. After reading articles about how generational wealth is typically squandered away by the 3rd generation and even in some cases the 2nd generation, I am less inclined to deprive myself to try and set my daughter up for life.
I always thought it was strange for billionaires like Bill Gates to say that they will leave only a small percentage of their wealth to their kids (I believe it was around $10M) but it makes more sense now.
I think if possible $2-5M in today’s money would be max I would leave so that she doesn’t feel entitled and not contribute to society.
The risk of making your heirs unmotivated should not be taken lightly. Sam, I love your idea of charitable trusts. This is a lovely way to leave a mark in this world. I am the son of immigrants who never had the luxury of having wealthy parents or being wealthy parents. They were both motivated and raised three children while becoming medical professionals. My siblings and I are also doctors. I don’t expect nor do I desire an inheritance. I would trade all the money I have now or in the future just to keep my parents alive forever. I also would not stop working if I had all the money I wanted now. In short, I agree with you that children should not starve but should also not be shackled by golden handcuffs in life.
I tend to agree with those who say that it is less about the amount and more about the timing. If those kids are raised without a want or care in the world, I think there is danger in leaving them a large sum of money.
But if those kids were raised to respect the value of money, by getting all of what they need, and only some of what they want, and embrace things like allowances (in exchange for doing work) and summer or part-time jobs, then those kids are likely to develop a relationship to money that puts them at less risk of suddenly turning into a couch potato upon receipt of an inheritance.
I don’t (and won’t) have kids, so perhaps I am the least qualified person to comment on this topic, but I think that if the parent can accumulate a sizable estate to pass on without subjecting the parent to many additional years of work that they don’t love, and they can teach their kids to appreciate the value of work and a dollar, then there’s little risk in leaving them a whole bunch of money.
On the other hand, if the only way to pass on a sizable estate is to keep working a job you don’t like, or one that turns you into an absentee parent, there’s almost no amount of estate transfer that I would consider to be worth it.
My default assumption has been that I’ll buy each kid a safe but inexpensive car when they turn 16 (for my benefit as much as theirs), I’ll pay for their college, and if I have some money left over in their 529 plan, I’ll help them with grad school. I have no plans to gift them money as adults or help them buy a house because I want my kids to launch and experience the confidence and independence of succeeding on their own. I plan to set this expectation when they are teenagers so there are no surprises. This is what my parents did for my siblings and me and while we all have our issues like anyone else, we all got advanced degrees and are doing well financially even though the bank of mom and dad closed when we turned 18 (other than for college and grad school help, which was soooo generous).
How much of Grad School did they pay for. I feel as though a lot of parents try their best to pay for their kid’s college tuition but grad school is more of a grey area.
Should the adult child take more of a responsibility for this?
Rather than the actual dollar amount, I think the age a child receives the money is more important. If my wife and I were both to die, my kid gets her first installment at 35. Hopefully she’ll be old enough to handle the money then without screwing up her life.
We’ve always told her that mom and I are gonna try to die broke so don’t expect a penny. This is a lie. However, we want her to make it on her own and just worry that if she knew she was gonna get a large sum of money that would lessen her desire to succeed.
But what is that amount if you are comfortable to share? Are you guys giving consistently To her while alive?
Just trying to understand a good system others have incorporated. Thx
If we died she’d receive a million at 35, 45, and 55. Adjusting for inflation we figure it’s a little over a million in today’s dollars. Everything else goes to charity. The trust is not allowed to tell her she will be receiving the second and third payment. We’re trying everything in our power to give her something without turning her into a trust fund kid.
As far as helping her today, we’re paying for college and very little else. She pays for her food, gas, insurance, clothes, entertainment and so on. She works at a fishing lodge in Alaska during the summer and makes great money for a 20 year old. Enough to last the school year. We’ll probably help her with a house down payment if needed and if she has kids we’ll definitely pay for their college or trade school if they go.
Instead of giving your kid cash on a routine basis, you could also consider starting a business with them (a multi-family rental property, for example). You could give fractional interests of the rental property, with the expectation that the kid will work for their share of it. Or your could require them to put in a year of work in order to get the annual gift of a sliver of the principal. The kids could learn the business as they go along, with you guiding them.
Over time, as rents come in and the building is paid off, it could be a great way to transfer wealth to your kids, because the income stream goes along with the gift of principal value, and the kid learns that they have to work for the supplemental income. You’d get really good discounting in early years when you’re transferring a tiny share of a building that has very little equity, and as the rents pay off the equity, it could turn out to be a substantial share of their own retirement plan.
My grandfather started that tradition, and it has led to a lot of kids/grandkids doing rental property investing on the side. Some of the more enthusiastic ones have gotten very involved and are doing very well for themselves. Some of the less enthusiastic ones have less to show for their efforts. The middle of the road kids are middle of the road. It’s worked out pretty nicely in terms of rewarding the kids who put in the effort and expanded upon what they were given initially.
I have read a fair amount about this topic in the past. In a sense looking at what happened as my grand parents passed, perceiving the plan for when my parents pass and also what I might do when I pass.
A couple trends that seem to pop up come from how people raise their kids. sure you could take the Warren Buffett quote, “A rich very rich person should leave his kids enough to do anything but not enough to do nothing.” However, I think the amount of money passed on should (ideally) be correlated to how much they can handle. If you are going to be leaving large trusts with structures, etc. Hopefully the next generation(s) has been educated about them.
If you are going to leave a sizable cash value, hopefully the next generation(s) has been educated about what to do with it.
If you have nothing to give, hopefully the next generation(s) has been educated about why, whether because of your own choices, or lack of funds to share. Hopefully the reason is shared.
I do think as some others mentioned there is a definite difference in the time in life in which a person receives the money as well. I went to college with a kid who parents passed in an car accident. He received a very large settlement and also the balance of their estate. He was a young 20 year old and faced with a large amount of cash. So, as I recall one of the first things he did was purchase a brand new fully loaded SUV. Then he took it to a shop and had it upgraded with all kinds of “enhancements”. I’m talking TVs in the headrests, TVs off the tailgate, that you could fold out to each side, sound system, etc. It was a “cool” tailgate vehicle, but hardly worth the near $100k in upgrades he spent. However, he was 20, and likely days before he was deciding what to do with his $5/hour wage from his job. I can only imagine that guy is kicking himself all these years later, wishing he chose better options for the money. Then again, maybe living it up and blowing the money was the best decision for his life.
Too much cash into the hands of those who lack experience is a risk in my mind. As a side note, just think about all of the professional sport players who ultimately go broke. You can blame them for poor decisions or you can understand, that maybe they went to the stratosphere too quickly. Hard to adjust. Similar with mega lottery winners.
So, I tend to think that I will ideally do what my grand parents did, and likely my parents will do. Set up and LLC to keep all the properties in the family name, and leave a blood line legacy. And then set up a trust with tranches so the money can last longer. The trust pays for the properties, and kicks off some funds to the family. The smaller payments last longer and the decisions we make with the funds are less impacting. If its a little money passed over a longer period of time, you are likely to do better than making mistakes with a lot of money at once.
In my mind family money is just that – family money. Enjoy the interest, and pass the principal down the line.
So potentially, I would like to do the same. Ideally gift the current properties I own to the family LLC, and then set up a trust to trickle down the rest of the money overtime. With that said, I do intend to pay for college and maybe assist with a down payment if needed.
The again, who knows… I like that quote mentioned earlier, “man plans, and God laughs.”
“In my mind family money is just that – family money. Enjoy the interest, and pass the principal down the line.”
I think this rings true to my mentality. Very well written and thought out reply.
There is a fine line as you said between expecting a gift and not. My parents are those that think about gifting annually as they think it is much better to pass their inheritance prior to their joint demise (than as a lump sum, subject to any taxes, etc.) I have always taken my parents money, and invested like 95% of what they have given me as I lived off of what I earned (Roth contribution for the year, etc.) My sister might have spent 50% of it on stuff (cars/home repairs, etc.) and saved the rest. My bother considered it income and his budget inflated as part of that.
My dad has been gifting precious metals (US mint coins) for the last few years and my brother has really had to figure out how to change his budget (so far that his wife had to go back to work). My Sister and I have had no issues with it we just put them in a safe deposit box. Honestly we I have been looking at how to do my inheritance as I am not married, but have one child. He is 25 and still starting out. I have done some things to start him out right. I gifted him $20k (over 4 years, starting at age 20) to be deposited in a Roth so he could have $1m when he retired. My parents did the same thing (except it was $2k max contributions), and I contribute the max to it every year just to keep it going.
I am actually debating on what I want to do. My problem is two fold. I know I am getting a large inheritance from my parents, on top of what I personally own (~$1.3m net worth, plus life insurance). I really think that is too much for one person to get. I am looking at helping my nieces and nephews by giving them money for college. I am not doing 529 because as it stands, my oldest nephew is 17 and almost in college (and I don’t think I will die before then) so I have UGMA/UTMA accounts for each which I can contribute to for them to get when they graduate and help with any expenses and help them in life.
I don’t know if this is the best way to do this, but at the end of the day, it is what I think is best for each family etc.
How much should be dependent upon the emotional and financial skills of the individual. Specifically, are they a decent person who Can balance a check book and live below their means. Or do they torch cash on hookers and blow?
Arbitrary financial numbers are just that, arbitrary. If a person has sound financial
Habits and understands money then no amount we pass to them will cause hardship. If they have no understanding of money and no good money habits any amount will be squandered or cause hardship.
For us we are funding 529s for our kids college. We have our ROTH accounts that we have earmarked to pass to our kids upon our death. We have established custodial ROTH IRAs for each child that are being funded. We are educating them now on finances. We want the money to be a blessing and not a burden.
Ever the optimists, we educate and demonstrate wise and reasonable
Money behavior. If someone behaves inconsistent with what we have taught then we have established checkpoints in our family trust to address it. We won’t subsidize or enable destructive behavior.
Fascinating, “If someone behaves inconsistent with what we have taught them we have established checkpoints in our family trust to address it.”
I’m curious as to what the checkpoints are, would you mind sharing? I have heard negative things about incentive trusts, but it sounds like your is more inline with do not do “x”, rather than most incentive trust where an heir must do “y”.
Just for talking point, i’m curious how that is written in… considering things that could be considered bad, such as various drug use has changed over the years. Example, Marijuana has become legal in a lot of states. Do you have specific things like that listed in your checkpoints? Like no drug use, or arrests, etc.
Again, not knowing if this is applicable or not… But if you did have one of those and the heir was arrested for something which later turned out to be legal is there any reversal on your trust verbiage?
Sam, you’re spot on with the concern of expectations. A worthwhile story comes from my friend Bob who passed away a few years ago. His parents were frugal and managed to save quite a bit. He regularly received $10k from his extremely wealthy grandparents for him, his wife, and 2 daughters ($40k/year). Yes, I think they came to expect it. They had the life – nice house, new cars, country club membership, vacations, etc. He had a great job, worked hard, and was able to save a fair amount as well, but not as much as me. I started with nothing and never had any handouts but learned to live well under my means and save and invest. The most grinding comment was made about a year after Bob had passed and his parents handed over POA to his brother and his widow exposing their finances. She told me “his parents had so much money, they could have afforded to give us $20k a year and not even miss it…. that would have relieved us of so much financial pressure!” I was absolutely floored. Really? You chose your lifestyle and you accepted the annual handouts and that wasn’t enough? All I can say is that I’m even more proud of what my wife and I have done – all on our own. My parents paid for most of my college and that was enough. Dad gave me a $2000 loan for first month’s rent and security deposit for an apartment along with a downpayment on a used car. I had 3 months to pay it back.
My net worth now is pushing 4M+. I would like to leave enough for my kids so they can go to college, don’t struggle too much financially, don’t have to accept a job strictly for the money, and can have a clean start without being burdened by interest on loans. I know I would really be doing them a disservice by handing them enough money that they don’t have to work a day in their lives…they need to do their best and contribute as their skills and talents allow…investing in those is the only way to go! Live life with the rest and make some awesome charitable donations!
Your friend must be doing very well for himself to consider leaving his son a trust with $10 mil, wow! Leaving money to kids feels a bit like a foreign concept to me because my parents did the opposite, lol. Instead of giving me money as an adult, they ask me for money. But I’m grateful that they raised me well and helped support me with a good education.
I certainly hope to have independent adult kids someday. I plan to teach them about the importance of financial independence and key personal finance concepts that are left out of schools. My parents didn’t teach me anything about that stuff so I had to figure so much out on my own.
One thought I have about giving my kids money as adults without actually giving them money directly is through great family reunion vacations. I would love to stay close to my kids as adults and being able to go on vacations with them in their 20s, 30s and maybe with grandkids someday would be so incredible. I’d happily pay all expenses or most expenses if it meant that we could all get together and make lasting memories. Especially if they don’t live close by.
And if I were to ever give my kids a house, I’d like for them to pay “rent” even if the house was fully paid off. I could offer them a discounted rate and secretly put that money into 529s for their kids or something like that.
For now I hope my kids stay small and sweet. They grow up too fast! I’m going to go play with them now while they still want my attention. :)
Yes, I love our young kids! So sweet. They are a blessing.
Grandkids really would be amazing. Shows they found love and we all lived long enough. Can’t beat that!
Sam,
You did not mention anything about grandchildren. I think some of the best gifts are given there. For instance, I know many people who are doing well and desire to send their kids to private school. However, the extra $30K per kid requires them to work more…and miss out on some of the joys of being parents. To me, grandparents who are willing to pay for their grandchildren’s private school accomplish several things. They can feel good about giving a great education to their family while also easing the burden on their children. In some cases, this may allow families to go down to a single income and provide more time to their children. It’s a win-win and the money doesn’t go directly to the kids. My in-laws are in their mid-70s, sitting on about $5M in net worth. They are frugal and intend on giving us their money upon their death…but it’s a bit frustrating because they don’t do anything with the money. I don’t want to come across as greedy but it seems like a waste for their wealth to sit there when it could be making things better for the family.
Hi Josh – I mention grandkids briefly. I agree grandparents helping kids is really nice. Helping fund their 529 plans is one way.
To clarify, are you basically asking for your in-laws to give you their money? How do you know they have that much? What about asking your parents or just make more yourself?
I haven’t interacted with anyone who is frustrated their in-laws don’t give them money, so your perspective is very interesting. thanks!
On that subject, Sam, can you do an article or speak about when (or even if) to let your adult children know what your wealth level really is? Even if it’s multi-millionaire when is it it appropriate to tell them? Is it something they should know or just find out when the will is read?
It’s their money. Why should it frustrate you when it wasn’t earned by you? If they’re frugal, it will give them satisfaction to live by that principle until death. How about if they elect to just donate everything to charity instead?
I don’t mean to sound so rude, but I don’t understand your perspective at all. I do appreciate the honesty though (although we are somewhat anonymous here).
This is why people are private about their finances. They get unfairly judged and sometimes even resented.
How would it make it better for the “family”? Right now you have in-laws that have a secure future who are poised with $5M to take on any health issues. Health issues are apparently the number one contributor to bankruptcy, so I hear. You should be happy that their ways brought them success and will potentially give them a stress free retirement. They have the resources to take on many challenges.
If they were to hand over the money to the family now, what if they need it back for medical issues? Life takes turns all the time. Another thought, just because they said they plan to send it on to you doesn’t necessarily mean they will. People get funny with money especially as their faculties leave them. Hope for them that it won’t be the case.
Also, you say they are not doing anything with it? Does that mean they are not invested in anything or in a savings account of sorts? Or do you mean they have it stock piled under the mattress? I would be hard pressed to say someone is doing nothing with their money just because it is different than what you would do with it.
I realize you didn’t intend to come off greedy, but it does sort of sound like you have a watch on the death clock. I would think you should just take the potential windfall with a grain of salt. If it comes great, and if not, be ready for that as well. What’s likely to be more important is the time you have left with them. Life changes all the time, and you may find that the money won’t replace family. So maybe you will eat slightly better meals, drive a nicer car or live in a larger house or whatever. But, when someone is gone they are gone. Don’t wish them gone just for their money.
My husband and I are both retired and 70 years old. I prefer to spend the money and he prefers to save it all. He complains I “gift” too much, and I say he’s cheap. We have 2 sons and 5 grandsons, who are both successful. Both families are have a high income and enjoy spending their money. But, I like to give, and he doesn’t . Can you believe after 45 yrs. of marriage we still argue about this? Please advise!
Hah, not sure! Maybe split the money up and do whatever you want. Or fund your grandsons’ 529 plans.
I inherited about USD 1.3 million when I was 53 years old, when my mother died. Before that I got a bit of help with college, though my Dad required to pay him back. Eventually, he cancelled the loan when he sold some artworks he inherited (for £750k in 1995 or so). Also there was one other payment from a property in East Germany that he didn’t want to get involved with resolving. We had a small share in it.
So, this amount was about 80% or so of my existing net worth. Knowing this money might come maybe made me a bit less risk averse. Though now, like you my risk aversion seems to have increased. It is very useful to get this money near retirement, because now we can have a better retirement and hopefully leave money to our children too. With 2 young children (1 and 4 years old) I am continuing to work. So, is my brother. I have thought about retiring, but at the moment it seems risky and though we could live on a 3% withdrawal rate, our costs likely will continue to rise faster than inflation.
Regarding the details in the article, my understanding is that under US tax rules the annual gifts count against the tax exclusion on death. In other words, the amount excluded from tax on death is reduced by the sum of gifts given “inter vivos”. But there is also a limit on this “borrowing” of tax free money and hence the annual gift limit. Also, isn’t a charitable foundation required to pay out 5% per year?
Moom, I would definitely continue working if I were you. Perhaps you may finally feel at ease if your inheritance makes up less than 50% of your net worth.
There’s this inherent desire to build our own wealth that’s hard to overcome.
The inheritance was 80% of our net worth before getting it and so 40% of the total. I figure I teach for 4 months of the year to earn my salary and do what I like more or less for the rest of the year :) So silly to give up AUD 200k by retiring. Now if they push me into a big-time admin position again, like I had for several years, that will be a different story.
Enough to do anything, not enough to do nothing.
$1m each feels about right in today’s dollars.
We are a healthy couple in our 70’s with a seven figure net worth. Each child receives varying (and usually unexpected) cash gifts at different times of the year below the IRS annual exclusion. We’ve contributed to 529’s over the years for grandchildren. We recently hosted a family reunion at a favorite resort and had a brief family meeting of children and their spouses to discuss our estate as we wanted the children to know about our will and our intentions. We shared the amount of the estate, bequests to charitable organizations and the remaining net would be equally divided among the children. Great feedback about our openness.
Nice transparency. Hop you guys get to really enjoy your wealth for the rest of your lives.
As always, great stuff from the Financial Samurai. As someone who is older, maybe not totally wiser, I can offer one solid comment. You have the luxury of making decisions now based on intelligence, logic and common sense. But once your children become older, 20’s, 30’s, etc. you may look at things a little different as emotions will come into play much more than they do when your children are very young. But the best time to make decisions is when you don’t have to and have the time to think clearly & unemotionally, as you are doing now. I may not be wiser than you but based on my age (63) and years of experience with children and grandchildren, I can tell you that with age and experience comes wisdom. Hopefully, that wisdom will allow you to make clear-eyed, non-emotional decisions about passing money to your children. Unfortunately, once emotions come into play, it gets much more difficult to stick with decisions that were made at an earlier time in your life when you didn’t have the benefit of “wisdom”. Good luck and thanks for your column. You are doing many of us a great service.
I am sure you are definitely wiser with 20 more years of experience! Can you share an example of where emotions came in to play when your kids were in their 20s, 30s, and 40s and how it made you do something you do not expect? Thx
If there are multiple children, you may find that one needs more assistance in their 30’s or 40’s than you had originally planned on & more than their siblings. People get divorced, lose jobs, have children with different challenges. We all want to be fair to our children but it’s quite possible we need to be a little more fair to one than to the others due to life’s expected twists and turns. Planning is important but as they say, “man plans and God laughs”.
Good advice. I can definitely see a lot of things happening in life that could use some help.
I agree that if you have children; you would be motivated to work harder and accumulate more money.
As a single person, it is hard to go back to the salt mines when you know that your money will last slightly more than a lifetime