Key Takeaway: In giving money to our children, we may feel that we need to keep the giving equal. But doing this can multiply the dollars given to the point that it can affect our retirement. It is better to have a discussion with our children that fair is not equal.
I was driving with my 15-year-old the other day when he asked me why I have different expectations for one child over another. He has noticed, for example, the differences for each child (I have four) regarding school grades versus sports. I explained that my expectations in these two areas are based on the strengths of each child: If one is a natural learner, then I expect all A grades; if one is a good athlete, then I expect them to make the best team. But, I went on to explain, my expectation is based on fairness to that child, not equality. After all, fair is not equal.
Teaching your children that you will always try to be fair, but not equal, is a lifelong project. When they are young, for example, you may need to explain why one child gets more time from you if that child needs help learning to read, while another child gets more computer time because they like math websites instead of just watching YouTube. As children grow and become adults, you will find yourself explaining why you are monetarily helping out each child differently. And this is where issues can crop up.
Our children will get into trouble (or even opportunities) in life at different points. As parents, wanting to help them out financially in those situations is normal. But the desire also comes with guilt—the feeling that if you help one child out financially, you must give the same amount of money to your other children at the same time.
But your other children don’t need money at that time. So, by giving them money, you are essentially creating a lifestyle for them that they otherwise could not afford, and you multiply the amount of money you spend on “help.” In multiplying how much you give away, you could eventually jeopardize your own lifestyle.
I have written about not creating a lifestyle that children cannot afford on their own. The interesting point of a rising stock market is that it obscures my related point: You could jeopardize your own lifestyle. By multiplying how much is given away in good times, we set ourselves up to feel like we should do the same in bad times (i.e., down markets). Practically speaking, this will often mean that we must sell assets that are dropping in value, locking in a loss, to be equal with our children. In turn, this impacts our retirement spending and, potentially, speeding up when we run out of money.
Give as Needed
I am not arguing against helping children in times of need. Instead, consider the need of the respective child as an isolated event, and understand that your other children will have their own isolated events where you can help. There might be years separating these events, but sooner or later you will have a chance to help everyone.
Also, consider that help is more than money. If one of your children earns enough to afford day care for their children (your grandchildren) but your other child does not, then jump in and provide day care for that second child. In doing so, note (and I would explain this to them) that you are contributing potentially thousands of dollars per month to their household. This counts as monetary help, as it is money they do not have to spend.
Finally, consider that your children are not asking you to be equal, just fair. I have heard this from children themselves; if one family member needs help, the others don’t always expect anything (of course, there are always exceptions). I do suggest speaking openly to your children about this topic, though, as trying to help one in secrecy rarely works out. Once everyone finds out, they wonder why the secret was kept from them, and a lack of trust can build. Ultimately, it’s your money, and most children will respect that.
The opinion of the author is subject to change without notice and must be considered in conjunction with relevant regulation, as well as subsequent changes in the marketplace. Any information from outside resources has been deemed to be reliable but has not necessarily been verified. Each individual has unique circumstances to which this information may or may not be relevant. Under no circumstances will this information constitute an offer to buy or sell and it does not indicate strategy suitability for any particular investor.