July 14, 2015

The Gift That Keeps On Giving: Parental Financial Planning

One of the subjects that never fails to generate interest is almost anything to do with finances. That isn't surprising. After our health, having a firm handle on one's money is the most important topic for many of us. As we age, and either leave the work force or look ahead to a time when regular income will stop, the key question becomes, " Will I run out of money?" 

For most of us, I think the answer is, No. Are changes in lifestyle, a downsizing and pulling back on what we spend possible? Absolutely. In fact, I would probably say, likely. In our case, we are living on about 40-45% of our pre retirement income. Cutbacks in the type and scope of vacations, the number of meals out or how often we replace clothing and furniture, and how often we replace a car have changed since retirement. 

Importantly, what we find most satisfying and where we choose to invest the bulk of our time and resources are different. Family-oriented activities and making memories have become so much more important than material items and things. Stuff just seems, well, like stuff. We joyfully spend money if it makes our daughters, grand kids, or son-in-law's life easier and more fulfilling.

I have been reminded of the power of parental giving over the last few months. My dad passed away in March. Since then I have been the one charged with overseeing mom and dad's final financial gifts to their three sons. Our parents' desire was make life better for their offspring, both during and after their lives. I have a firsthand view of how stunningly successful they were.

We grew up solidly middle class, which considering our circumstances is quite remarkable. With almost 20 moves before I left for college, friends always assumed my dad was in the military. The reality was that he had a tough time holding onto jobs, so we were constantly moving to his next opportunity. One of my strongest childhood memories is our dining room table stacked high with resumes, as dad gamely searched for work.

Throughout every one of his periods of unemployment, he never became discouraged or took out his frustrations on the family. He did a masterful job of keeping his sons unaffected by his problems. Meanwhile, mom taught elementary school. Her steady paycheck kept us afloat. Most meals were simple casseroles, but we were never hungry and never wanting for anything important.

I am pretty sure only the death of my mom's brother and her parents, all within a year of each other, allowed my mom and dad to retire with the insurance and estate monies left behind. I can't think they had much in the way of savings.

I can only speculate that is what prompted mom and dad to be so vigilant in protecting their assets and providing such a life-changing financial gift to the three boys. With so many periods of unemployment and living on just a teacher's salary, leaving much of anything would seem unlikely, much less the balance sheet I am looking at.

My parent's gift of financial planning has made my future (and that of my brothers) much more secure. I am well aware that I am amazingly lucky that my parents did what they did. 

I am not one of those folks who puts a bumper sticker on the back of a monstrous RV that says, "I am spending my kid's inheritance." Nor, do I believe Betty and I should live a bare bones life so we can pass everything along when we die.

But, I do take the lesson of my parents' planning and thoughtfulness to heart and hope to make my children's lives just a bit better and easier when the time comes.

I see that as an important part of being a parent.

21 comments:

  1. A powerful post, Bob. I, too, am the recipient of my parents' careful financial planning. And, like you, I've benefited-greatly- from the frugality of the generation before that as well. It has made our retirement not only easier but possible. A teacher's retirement isn't much, but with the gifts that my parents and an great aunt and uncle specifically left me, my wife and I can live even better than we did while in our working years. Every day I'm grateful and feel the love they had for us. With equally careful planning and a decent economy, we can do the same for our children.
    Jeff

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    1. It is a delicate balance: planning well enough to leave a gift to your children or relatives, while not short circuiting your own life by bypassing all opportunities for fun, enjoyment, and a full life.

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  2. I think this post will generate lots of feedback because most of us are trying to figure out finances. While still under my parents' roof, our family struggled to keep the family farm afloat during difficult years. Financial tension was a constant threat that affected every aspect of our lives. As the oldest kid, I had to figure out how to earn my own money in order to buy what I needed, plus, save for college. Truth be told, I hated it. None of my friends were in such straits, and I secretly envied them their lighthearted existences. Ironically, after I went away to school, my parents sold the farm because they, too, were sick of the struggle, and from that time on, their finances improved greatly. They were blessed to find great jobs with full benefits, and their financial struggles were over. They lived the balance of their years being frugal, but splurged on travel, campers, and a second home. What always makes me smile is that they were not overly generous with us kids, but they were generous with their church and those in need. We were recipients of their generosity after they passed. And the truth is, now that I'm older, I understand why they didn't heap finances on us while they were living. Quite simply, they didn't know how much money they might need to live on, and they probably assumed we needed to learn how to live within our means. Admittedly, I made the mistake of trying to ease my kids' finances by giving them substantial cash gifts, but hubby and I have decided we probably won't do that in the future. Why? Because they're young, and they need to learn the lessons we had to learn along the way. Hub and I have made a pact that we want to give good gifts to our kids; we want to treat them to fun experiences; and we'd be there for them if they faced a life or death emergency. However, we will follow my parents' example and protect our finances for our future needs, and, hopefully, they will end up with an inheritance, too.

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    1. Excellent summary of this situation, Pam. I didn't mention it in the post, but my dad became the "man of the house" and principal breadwinner at age 16 when his father died of a heart attack. I am sure that financial pressure influenced his view of money and protecting family for the rest of his life.

      You make an important point regarding giving younger people too much too soon. We are all familiar with stories of kids whose lives are ruined when they are given an unlimited budget by wealthy families well before they have the maturity to handle it. Keeping your children safe but "forcing" them to learn how life works on their own is one of the most important lessons a parent can teach. Sometimes it is not easy, but it is necessary.

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  3. No one in my family had anything to pass along. I never expected or wanted anything from them. My in-laws were very frugal but lived a nice life. The problem was, most was in company stocks and dad felt it would be ungrateful to sell them when they began to tank. He rode out thousands of shares of kmart and avon stock to the bitter end. He is now left with nothing to pass on, which would truly bother him if he were of sound mind.
    b

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    1. Based on my parents' financial history and how tight my dad was with money (which was entirely understandable) I was quite surprised when i first learned of what they had managed to do. My retirement planning never took anything they might leave me into account, so everything is a bonus and allows us to do things, both for us and for others, that we never expected.

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  4. I was also the executor of my parents estate in 2013, and my wife her mother in 2014. While we never counted on anything, both estates left us some monies, along with my four siblings in my parents case. Growing up we were even in poorer shape than your situation, Bob, since my father as a blue collar worker was the sole breadwinner. But he was fortunate to work for a small company named IBM during their glory years, which afforded them a pension, some stock, and good healthcare. I had managed my mother's $ after Dad passed so I was able to keep her going quite well, since she never spent a lot except for her apartment in a good retirement community.

    As for our daughter (an only child), while we gave her a lot growing up (car, cell phone, free college, etc) she never became spoiled in any way, nor does she expect things. Instead she works hard, but knows that I will be there if she needs help. I always thought she was not listening when she was growing up about finances, but come to find out (just like myself) she actually was. While Deb and I will enjoy our retirement, I also want to make sure that we can leave her a reasonable amount when we pass. Hopefully health and the state of the country will allow that contingency.

    The more I read of your life, Bob, the more I find us to have more in common than not.

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    1. Yes, I see alot of similarities, too.

      Both my daughters learned their financial lessons well. My oldest does an amazing job in managing the finances of her family of five. My youngest just used some unexpected funds to pay off a car and college loan and never runs a credit card bill.

      They make me proud!

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  5. In our case, very little of our savings comes from parental inheritances, nor will that likely change much in the future. Our daughters, on the other hand, will likely be the recipients of decent inheritances once we both pass away. Whether that will be a positive or negative force in their lives remains to be seen of course, but we certainly hope it will be the former.

    I have previously read that truth wealth occurs when generations are skipped, meaning inheritances are left to grandchildren rather than to children, and we kept this concept somewhat in mind when setting up our will. Although the bulk of our estate will go to our daughters, our grandchildren will receive respectable inheritances as well, which will hopefully give them a leg up at a pivotal point in their lives. (i.e., advanced education fees, home or trade up home, business start up, etc.)

    I know there are is much debate on whether or not retirement spending should or should not allow for an inheritance at life's end. In our case, I find that electing to live a bit below our means provides considerable peace of mind in that we don't have need to stress over outliving our estate during our lifetimes.

    In the interim, we do not disclose the amount of our estate to our children, as I don't want to diminish their own savings efforts, efforts which I believe are essential to their long term financial health.

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    1. My grandparents included us in their estate. It helped three of us. The other two never really grew up. So difficult to know if it was the money that stopped their growth out of their twenties. I hope your grands take the money and use it wisely. Have you considered leaving them ideas on how to use it? We had no real guidance.

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    2. Having recently revised our will to include larger bequests to the grandkids, now that we have them, we intend to review the changes with our daughters, including the amounts that will be left to the grandkids. Your idea is very good, and I'll make note to mention that to our girls when we all sit down to talk.

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    3. Thanks to both of you for excellent additions to the discussion. Betty and I have decided to tell our daughters roughly what we hope to leave, but knowing there is no guarantee.

      Both are so responsible we decided to tell some so we could eliminate some worry and uncertainty about the future. There is no risk that the information will change how they conduct their lives.

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  6. My husband grew up poor- very poor. He was working in potato fields to help family finances at the age of eight.
    Ever frugal, once the four children moved away, both his mother and father worked full time. They ended up with enough- and a bit left over for each of the four. Before he passed, my father in law lamented that he had not done enough for his son. My husband clapped him on the back and said he was never hungry and always loved. That, he told Grandpa, was the legacy that he wanted his own children to remember about Grandpa and himself.

    I was always middle class. I just assume that food and shelter will always be a part of my life. I do not count on an inheritance---but know that it is out there. I have worked on and off over the last 45 years. During our marriage, my work was always savings.

    I take care of the money. The plan is much like Pam's. We plan on always having enough to pay for ourselves (even if we live with one of the kids- which may happen, by choice). We hope that, if nothing crazy happens to us, there will be plenty for the two families to split in the end. The reality is that are spending our "surplus" money now so that we can live in the memories of our grandchildren---as Grandpa lives in the memories of my children.

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    1. Great response, Janette. Betty and I will always spend to build family memories and bring something of value to the family...even if it means we skimp on something for ourselves for awile. That is a lesson we learned from our parents.

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  7. Welcome back, Bob. I applaud your choice of continuing with the blog in its new vein. Truly, it's hard to separate retirement from this journey of life. This post is reminiscent of one of your previous ones that questioned whether or not we felt obligated to leave our family an inheritance. And I'm reminded of a young adult friend who felt his parents were obligated to leave a financial inheritance as well as invest financially in their children's endeavors while they were still alive. I'm still befuddled that this young man has such a sense of entitlement. At any rate, I maintain that it's not an obligation but a privilege to bequest a financial inheritance to our children, an example of good fortune and good management meeting in the middle.

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    1. I remember that post from a while back. It did generate some very definite responses from those on both sides of the issue.

      This time around I am really addressing an open "thank you letter" to my parents for their decisions and how they will affect several generations. I am committed to doing my part to keep that gift alive.

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  8. Dave Ramsey refers to that gift as "changing your family tree" and it truly does!

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    1. I hadn't seen that expression before. Thanks, Glenda.

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  9. My parents divorced when I was young. Years later when I got to know my dads new wife, I knew I would get nothing from his vast estate. I was right.
    My wife and I lived frugally. If we got an extra dollar, we saved ninety cents.
    We accumulate a sizable amount and figured we would live comfortably and leave most to our only son. Up until last year we figured he would need it. Then ,as a computer and internet wizard, he was part of a startup that got bought out for over a hundred million. It causing us to completely rethink our plans. Time to replace our 18 and 17 year old cars?

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    1. Part of 100 million? Yes, I think you and your wife can get those cars replaced. Your son will be just fine on his own.

      Well into our 14th year of retirement we continue to live very happily and comfortably in a way that should mean we will have a decent estate to pass on, thanks in large part to my parents. I am pretty sure neither daughter will be part of a $100 million windfall.

      BTW, Betty's car is going into its 14th year and with only 99,000 miles probably has a ways to go before giving up the ghost.

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  10. The 18 year old has 65000 miles. The 17 year old has 55000. As Paul Harvey used to say ....And thats the rest of the story.

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