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Tuesday, May 5, 2009

Financial Help to Adult Children, Part 2

Sorry about the return to yesterday's topic. I am still thinking about the issue. And I noticed that Duchesse, one of the most astute and thoughtful bloggers I've read, returned to comment once more on yesterday's post. So below in that post you can read Duchesse's two interesting comments, from the perspective of both a receiver and a potential giver. And there is also a thoughtful post from FB, a recently out of college person, whose writings show a tremendous sense of energy, ambition, and responsibility.

Let me just divulge where I got the idea of giving my children the unused money in their 529 (education) accounts. A while ago, probably before I discovered blogs as a source of information and entertainment, I saw this question. Perhaps this was on the CNN money site? Anyway, this fellow in his 20s raised this issue: (I am paraphrasing from memory, so the accuracy is subject to question)

I decided to get a PhD in psychology. My parents have always paid my educational expenses. The PhD would probably cost around $150,000.00. I mentioned this to my father and he said that he would pay for the PhD OR give me the money to start a business. What should I do?

The answer (also paraphrased from memory) went something like this:

Wise father. He was testing whether you really wanted that degree or if you made the decision based on the fact that he would pay for it. You have been given a great opportunity. Use it well. Think carefully about what it is you want.

This made a great impression on me. I spoke to Mr. FS about it. We liked that the adult child had a stake in the decision, that his decision had consequences.

So Readers, any more thoughts on the issue?

By the way, Duchesse suggested that one should perhaps help the medical student more than the less-ambitious child. Interestingly, according to the Millionaire Next Door, this is the OPPOSITE of what parents do. Most parents "strengthen the strong," by forcing the more ambitious children into self-reliance and independence (i.e. they give them less or nothing), and "weaken the weak," by giving the less ambitious or accomplished more, thereby encouraging dependence.

Food for thought, once again.

And again, Readers, where do you stand on this vexing issue?


Funny about Money said...

Interesting discussion!

Fabulously Broke's remarks in yesterday's comments are particularly telling, because she's on the receiving end of our generation's practices. It's important to note the sense that unfairness needs to be remedied or avoided and the insight that at least to some degree young people need to experience challenges, even hardship, to develop survival skills.

My ex-husband and the New Wife find themselves in exactly the situation of "strengthening the strong."

NW has two adult children. Her son is frighteningly smart and very much together in every way you can imagine. With little or no financial support from her (she's a paraglegal; his dad was a truck driver, long gone from the family scene), he took himself to Johns Hopkins, where he obtained an M.D., a Ph.D. in medicine, and a wife. He is now gainfully employed with a vengeance. NW's daughter, however, is a sad case. She found a loser online, married him, promptly produced a baby, and, after arriving home from work one evening to find all their belongings on the sidewalk in front of their apartment (he not having mentioned that he'd lost his job a while before), ran straight home to Mom.

Twelve years later, daughter and grand-daughter are still living with Ex and NW. Daughter pays no rent, nor does she contribute significantly toward food or utilities. Although she finally did manage to get first an A.A. and then a B.A., she's working in a low-level position shelving books at the university's law library (where Ex no doubt pulled strings to get her a job). A half-hearted attempt at an online M.L.S. went nowhere. It now appears they will be caring for this woman as long as they live, and Ex probably will end up leaving a substantial chunk of his estate to the girl. Let's hope, for her sake, that he makes her brother the executor!

Whether this is a case of weakening the daughter by cosseting her or whether there's something wrong with the young woman is unclear. She may have underlying psychological problems that interfere with her ability to function. Or she may have parents who do that.

As for the choice between funding a Ph.D. in psychology or capitalizing a business start-up, it's really the same. A doctorate in psychology allows you to put out a shingle and start your own practice.

The father gives himself the opportunity of deferring the expense (it will take son several years to finish the doctorate and so the money can be disbursed slowly over that time) or while offering to pony up the cash forthwith. The son has only to decide what kind of business he wants to go into: psychology or something like a MacDonald's franchise. For him, the outcomes will be similar financially; he needs only to decide which looks like a more appealing way to spend his life.

Over the Cubicle Wall said...

To me (based on people I know only - I don't have children), the money would be a blessing if you raised your children in such a way that they are independent.

The people I know that have a background of earning what they have tend to make better use of financial windfalls.

The people I know who were handed most everything they have tend to waste financial windfalls on, for lack of a better word, crap.

Duchesse said...

Funny About Money's story movingly describes the deeper question: how much support, for how long? Could a parent bear to see a child and grandchild living in poverty or homeless?

These people are giving more than money.

Counseling can help families like Ex/NW's to assist but not create dependency; it's a delicate balance.

SLF said...

As the potential recipient of this money I am obviously not the most impartial judge. Having said that, I think it really depends on what kind of kids you have. Perhaps the safest method is to force the kids to use the money "responsibly" i.e. a down-payment on a house.

Suzy said...

I see no reason to support a non-achiever nor do I think it's fair to 'cut off' one who's doing well and could use the money. If anything it should be fair. My parents said they would pay for college; my brother didn't finish and thought he'd get a chunk of money. He was in for a rude awakening - the money was for college not either/or. My parents are pretty much fair with money - I think my brother borrows from them but I know they'd loan me money if I needed it. My mom's a stickler for fair because as the oldest she saw her mom(who didnt have much) always give to the youngest(basically a wouldn't-hold-down-a-job 60's kid with the drugs and everything..) and not give equally to her and the other brother. She would even say they didnt' need anything like 'so and so 'did..'poor so and so'. It's like she thought he should do nothing yet have the same material things as the others. So, every Christmas my parents give both of us some money and even my brother's wife gets the same amount though we know it's expected to be used for taxes or house/car expenses and not for stocking up on dvd's.