How Much Money Should I Leave My Children

by David Ning · 16 comments

My son really wants to buy a house here, but it will really stress our financial situation if we help him with the down payment.

– A mom talking to her friend at the grocery store.

For many parents, helping their children financially is of the utmost importance. They will often try to please the young ones even if it means delaying their retirement plans. 529 plans before 401ks, going to Gap kids before the Gap, and paying for a high school graduation trip before the high school reunion.

Kids first right?

The stories my mom shared with us projected a very stressed financial situation when we grew up, but my sister and I never knew. We got most of what we wanted growing up, we never ever felt deprived financially and more importantly, we were never denied of any opportunities because of financial reasons.

We were so lucky and my parents made sacrifices that we couldn’t even dream of. Yet, I wanted to hop over and tell the mom to not help her son at the grocery store. It’s one thing when you can retire comfortably (or at least be well on your way) and have extra savings lying around, but it’s another to worry night and day so your children can delay the inevitable reality check – the fact that money doesn’t fall from the sky.

When we were in college, there were all sorts of students. There are some that worked really hard, and there were others that didn’t even go to the lectures. There were students that borrowed money up to their eyeballs to attend classes, while others worked part time to supplement their living. There was every combination in between, but one permutation was always missing. Those who needed to work their ass off just to pay for college always paid attention in classes. It’s not surprising that those people usually came out ahead in later years regardless of how smart they seemed too.

I speak with many entrepreneurs and successful business people regularly, and it’s amazing how many of them had a tough upbringing. One of the common traits they have is that they NEVER give up. They NEVER EVER give up. Compared this to people who had a dream like childhood, and it’s obvious that many of them lack the toughness to keep fighting when times got tough. I’m no psychologist, so I cannot tell you why this happens. One thing is for sure though. When you never need to fight at a young age, it’s much more difficult to develop the mindset to keep fighting when you grow up.

If you are financially affluent, then give your child the support they could get. However, if the means aren’t there, don’t try to manufacture a false reality for your child. It doesn’t help you for sure, and I doubt it helps them either. You won’t be here forever, and your child eventually needs to strike it out on their own.

When I overheard the conversation about the down payment at the grocery store a few days ago, I wanted to walk over and introduce myself. Instead, the better part of me realized how impolite it would have been and decided to write this piece. This is dedicated to all the loving parents out there. I’d like to represent all the children out there and thank you for all your support and love. Without you, we will all be half the people we are.

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{ 16 comments… read them below or add one }

Macy September 3, 2009 at 7:34 am

I applaud you for the effort (and you are absolutely right), but I truly believe that it will fall upon death ears. Providing for your children is ingrained in all of us and to tell us not to stretch ourselves to help them in anyway is like telling us to stop breathing because we are drowning.

It just doesn’t happen.

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MoneyNing September 3, 2009 at 9:34 am

It doesn’t matter if the majority will ignore me. As long as I help at least one family, then it’s worth the effort.

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Lisa September 3, 2009 at 7:48 am

I’m a mother of three and your scenario of the fortunate child being not tough enough really worries me. I work hard to give them the financial means to be happy, I do their chores for them so they don’t have to, and I let them worry about what kids are suppose to worry about, which is school, friends and which sports to play. Will my children all turn out weak? I could use some advice.

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Kelly September 3, 2009 at 9:13 am

Your dilemma was one that I contemplated for a long time as well. I think it’s not so much the money you give them but the care that you provide. Many parents neglect their child and somehow feel that money can fill the void. It’s really just the same old false belief that money can solve every problem.

In my opinion, and thank god my experience as my boys are turning out great, it doesn’t matter how much you provide for them as long as you show that you care and explain / teach them values every step of the way.

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MoneyNing September 3, 2009 at 9:36 am

I agree with Kelly. It’s all about the care you give to your children. Having money means that the children need to exert more self control and that they don’t take everything for granted. As long as you spend the time to explain it to them so they absorb the right values, there’s nothing to worry about.

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RB @ Financial Samurai September 3, 2009 at 8:21 am

I love this post. And I also love your quote “Those who needed to work their ass off just to pay for college always paid attention in classes”.

When I went to business school part-time during the last downturn, I was scared as I thought I may get fired. I paid for the first year of b-school myself ($28,000) and paid attention like a hawk. I actually then got reimbursed, and my 2nd and 3rd year were paid for. I still focused, but not as much. Meanwhile, those students who didn’t have employer assistance were HARD CORE TO THE BONE. Group projects etc, they focused focused focused.

I have neighbors who live off Bank of Mom & Dad. Two brothers live in a $1.5 million home purchased by their parents. Another two guys around 26 years old live in the upper unit of their grand mother’s $2million duplex.

I am extremely AGAINST parents providing for unneeded items. If the kid can’t afford a piece of property, TOO BAD. And to put yourself in peril is just silly.

MoneyNing – I think I might have to write and highlight my thoughts over at Financial Samurai regarding this post.

Best, RB

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Peter September 3, 2009 at 11:56 am

There’s a lot of merit in what you and MoneyNing said, but it’s a natural instinct for parents to provide for their kids. A $2 million duplex is definitely not necessary, but it’s just natural to let them live in it if it’s already there.

Sometimes, it’s actually HARD to not provide to your children if you have the means. If you don’t though, you obviously shouldn’t stress yourself just to buy your son a BMW.

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David@Dinks Finance September 3, 2009 at 10:09 am

I know this post is about children and finance, but it made me think about my own upbringing and what it meant to my personal financial life. My parents (as well as others I knew) seemed to fight consistently about one thing – money.

My parents are far from poor and are staunchly middle class (dad is a chemist – phd). But he has a different mindset than me (perhaps I have him to thank for it). He is the guy who goes to work, collects a paycheck, and does not want to think about making more money outside of his job. I on the other hand am always looking for alternate sources of income. Even early on in high school I read books by Donald Trump, Warren Buffet, and others who have become wealthy to see what they did. I still can’t get enough of biographies or auto-bios of succesful individuals.

One thing I learned – you need many streams of income (or one giant stream). But you can’t count on any one of them to continue. Businesses fail, times change, etc.

It doesn’t matter how much money you give to your children. It matters if you teach them where it came from and what you had to do to get that money. Once they are out of college they are on their own, in a sense. I will partner with them and help them increase income streams, but I will never simply hand over money.

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MoneyNing September 3, 2009 at 11:52 am

I think the multiple streams of income is a great idea to teach your children, especially at a young age. Most people have their job as their only source of income, and then when retirement time comes, there’s such a worry of the lack of funding.

On the other hand, if there’s always been a side business or other types of income generating vehicles, then it doesn’t matter what age you’re in.

DINKS, from your website name, you don’t seem to have children yet, but I’m sure the partnership will work well in future years when you do.

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marci September 3, 2009 at 1:41 pm

One of the hardest lessons a parent HAS to learn is to say NO to their kids.
You do them no lasting favors by constantly doing for them, solving for them, and getting them out of their scrapes. Kids HAVE to learn to do for themselves, to solve their own problems, and to suffer the consequences of their actions. If they think Mom/Dad will always be there to bail them out, they are in for a rude awakening one day.

The best thing we can do for our kids is to give them the guidance, learning tools, and skills to make their own decisions wisely, to make their own way wisely, and to learn from their mistakes AS well as the mistakes of others, so hopefully they don’t have to make all the mistakes themselves.

By giving them a solid foundation, we allow them to keep on building up – to make of themselves and for themselves the most that they can/want. We allow them self-pride in their accomplishments, and fortitude and experience to keep them going on their own. It’s called “tough-love” – and it needs to happen to more kids.

Never loan/give away more than you personally can afford to lose – friend, kid, or other family.
That being said, if my kids are credit worthy and need a small loan, yes I will loan them the money – just like a bank would – with signed documented paperwork and interest due – just like the bank. We started these “loans” out at an early age, instilling the value of saving for something and paying back what you borrowed. My kids know that if the loan is not paid back per terms, there will be no more loans forthcoming … have to say, over they past 20 years, loaning to my kids, I have NEVER had a default – and neither have any of their other lenders – I believe it was a lesson they learned well.

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marci September 3, 2009 at 1:44 pm

oh – I digressed…. the question was, how much $$ should I leave my kids.
Answer – whatever’s left when I die :) Probably not much – I have it planned out pretty tightly til age 103 :)

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Nick September 3, 2009 at 2:30 pm

I can relate to this story. I was born into a wealthy family, but my parents never gave me allowance like every other kid in my school. My dad always told me to get a job and work hard for my own money.

I would be jealous when my friends went out to just spend while I was at work, but now that I grew up, I’m so glad my parents made it tough. I look around at most of the people I grew up with and I find that I’m my financially savvy than most of them. While they are struggling with credit card debt and working entry level jobs, I’m already in middle management and pretty much debt free except the mortgage payment. If my parents were never tough on me with money and made me experience the hardship of earning an income when I was young, I would never be able to get ahead so quickly.

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Jen September 4, 2009 at 4:23 am

I have ensured that my mother has her own savings/retirement account, which she is not allowed to touch to help anyone other than herself out, children included. I strongly believe that parents do need a safety net which they can lean on for financial assistance in case of a cash emergency. After a certain point, it is up to their children to look after themselves and stop depending on their children for financial support.

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UH2L September 4, 2009 at 7:51 am

I’m not a parent yet, but I’ve met many people of various classes and upbringings, dealt with many children including my nephews and nieces. It comes down to this. If you spoil your children and give them everything they want, they will take things for granted, will appreciate them less, will begin to expect them. They will be disappointed when they can’t obtain what they want and will come to their parents to help them in their adult lives. Some deprivation is good because in reality, you can’t always get what you want. To put a child in an environment where they do always get what they want (especially without effort), will subject them to a harsh reality later.

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Greg September 4, 2009 at 5:40 pm

As a parent, I believe the best thing I can do for my kids is to teach them how to be self-reliant and responsible. My kids learned first to say thank you and yes ma’am/sir. Then they learned the most important rule… always save 20%.

I shouldn’t need and won’t give to my kids. What is left from my estate will be put into a fund to provide interest free educational loans and/or grants to those that need them.

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kenyantykoon September 7, 2009 at 12:44 am

This is all true but there are some kids that were taught the value of money and how to make it when there were still young and therefore have even grown the fortunes that their parents had. But these type are very few, the others are just spoiled kids that think that cash grows on trees and live accordingly. I have also noticed that it is the mothers that tend to spoil their kids as opposed to the fathers. Support is necessary, but there is a limit to everything

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