Issues involving money are some of the thorniest issues imaginable.
In some cases, there are distinctly right and wrong answers. But more often than not, there is a tremendous amount of gray, where potential solutions or answers are neither right nor wrong. That doesn’t stop people from having fervently held beliefs, though.
There are dozens of examples in the financial world. Let’s focus on just one: Giving money to adult children.
There are probably thousands of ways to slice and dice the options of giving to adult children, but let’s boil it down to two simple methods – giving while you’re living or giving after you die, to put it bluntly.
Not too long ago, I stumbled upon a social media post that was circulating in financial planning circles. In the post, a young man with a young wife and two small children was grumbling about the fact that he was barely getting by, while his parents and in-laws were unquestionably wealthy but chose not to offer financial support.
At one point in the post, the young man wrote: “I would give my last dollar to my son to make sure he was more comfortable. To make sure he didn’t suffer debt or bad credit as long as he was working. Here are our own parents sitting on their piles of gold, watching us navigate [a difficult world].”
The young man is clearly an advocate for giving while living.
The opposition’s argument is well known and easy to articulate. It goes something like this, “We struggled financially and bootstrapped our way to wealth. It’s hard, but if you do the right things, you get through it. And it makes you appreciate what you have, builds character. You shouldn’t expect to be given anything in this world.”
Unfortunately, it’s not black and white.
Look, let’s face it, if you wait to disburse your wealth until after death, in most cases, your children will be in their 50s or 60s. By that time, their money struggles are typically behind them. So while nice, an inheritance often doesn’t fundamentally change their lives at that point.
And I don’t think anyone can argue the point that money given to children in their 20s and 30s – or even 40s – has a greater ability to alleviate life’s financial struggles. At that age, there are numerous ways to deploy that kind of monetary gift: home purchases, child care expenses, tuition assistance, vehicle upgrades…the list goes on.
So, is waiting to give until after death just stinginess or is it thoughtfulness in disguise?
A new survey from Charles Schwab found that just 21% of baby boomers with at least $1 million in investable assets said they “want the next generation to enjoy my money while I’m alive.” When asked that same question, 53% of millennials and 44% of Gen X Americans with assets in the same range said they plan to give to the next generation while they are alive.
Is this a generational issue? Or will millennials and Gen Xers eventually come around to the wisdom of the baby boomers? Only time will tell.
I suspect it’s hard for younger generations to understand the uncertainties that go along with aging. What looks like stinginess could simply be concern about becoming a financial burden to the next generation if their money runs out. Conserving wealth can provide peace of mind for the holder, reducing the likelihood of relying on children for things like elder care in the future.
And yet, there’s a reasonable argument to be made that giving wealth while alive allows you to share in the joy of watching your children use those gifts or to make lasting memories with them.
Therein lies the gray.
In the end, there’s no right or wrong way to give wealth. Like beauty, it’s in the eye of the beholder.
It wouldn’t be an issue if it was easy.
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