March 14, 2021

Parental Financial Planning



One of the topics 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 vital for most of us. As we age and either leave the workforce 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 lifestyle changes, downsizing, and pulling back on what we spend possible? Absolutely. In fact, I would probably say, likely. In my case, Betty and I live on about 40-45% of our pre-retirement income. Cutbacks in the number of meals out or how often we replace clothing and furniture, and how often we replace a car have changed since retirement. Medicare has resulted in substantial health care savings compared to our pricy individual market policies.

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, grandkids, or son-in-law's life easier and more fulfilling.

My dad passed away six years ago, in March 2015. I was the one charged with overseeing mom and dad's final financial gifts to their three sons. Our parents' desire was to 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 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 two years of each other, allowed my parents 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 was left looking at.

My parent's financial planning gift made my future (and that of my brothers) much more secure. I am well aware that I am fortunate 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.

We saved a lot and inherited more. But, that does not mean we are to spend it all in such a way that what my parents passed on to us or what we worked for should come to a grinding halt. 

As an important part of being a parent, I see that bringing some financial comfort to my offspring. 


26 comments:

  1. Bob, I applaud your and Betty's decision to deploy some of your resources now to make your family members' lives easier or more joyful. When a cousin and I became legal guardians for one of our aunts, my cousin handled our aunt's personal care and I handled the finances. Our aunt moved to a nursing home due to dementia, and we watched her hard-earned life's savings dwindle as I wrote out five figure checks month after month. Her only child had predeceased her and, in a way, I'm glad it happened that way, just so her son didn't have to see his mom plus all of her resources fade away. As long as we're able to gift our young adult kids with unexpected pleasures while we're around without spoiling them or risking our own financial future, count me in. I consider it an excellent use of discretionary income now, even as we work to ensure that we'll be able to leave a decent estate when we pass.

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    1. We have made it a habit of gifting a small portion of each adult child's potion of their eventual inheritance at Christmas time each year. Both have said they are happy to receive a little now, rather than wait for (hopefully) 15-20 years when the daily need will not be as great.

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  2. We grew up in a row home and my parents rented the upstairs to a single women. Our living room was in the basement using lawn furniture and the bedrooms were the dining room and living room. I was probably about 6 or 7 and my oldest sister would have been 11 or 12 when my parents decided we needed more room. So, the single women moved out and my dad converted the upstairs to 4 bedrooms and remodeled the bathroom. We could finally use the main floor for the normal purposes. We had one used car and one of my parents would stay home with us kids while the other went to early mass and then they would switch roles. We hardly ever ate out and I don’t think I knew what a McDonalds was until I was a teenager. They bought a 8 man tent at Sears that was on sale because the zipper was broke. My mom was a seamstress and replaced it and we started camping- that was our vacations. They never loaned money except when they bought the house in 1954, but paid it off in 9 years. I never felt we were poor although I heard we lived on “the other side of the tracks”. When my mom passed away at 76, my dad gave each of the 3 kids Savings Bonds that my mom had been saving for us- it was substantial. Then when my dad passed away, we inherited more than I would’ve thought. My parents were millionaires and I never knew it. They saved and did everything for us kids and never spent money on themselves. Their frugality has rubbed off and I am thankful for it. It's a blessing not to have to stress over finances and you can take pleasure in doing for others in your family!

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    1. Keeping your children feeling safe and sheltered from some of the more unpleasant realities is part of the job. Obviously, that is exactly what your mom and dad did. As a younger child, the broken tent zipper repaired by your mom was a non-factor in your enjoyment of camping. Paying off a home mortgage in 9 years to guarantee a safe and steady shelter is no easy feat.

      Technically, my mom and dad left an estate of over a million dollars, too. There is no way they should have been able to do that, but they did. It is my inspiration.

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  3. Cedcreston's comment above sounds almost like my own story (except for the "did everything for us kids" part). The only thing I wish is that my father had used some of his money he had scrimped and saved while he was alive to enjoy things a little more. When he passed the nearly one million he had in the bank was split among his and his deceased wife's children. Split 6 ways it wasn't enough money to make a lot of difference to us. I wish he had used the money to make his and his wife's life a little nicer while they were alive.

    Even though my father's frugality has indeed rubbed off I try to keep in mind that dying with a lot of money in the bank might not be the best thing as we go through our retirement years. If I leave something for our children that would be nice but it's not a main goal of mine. I figure it's better to use the money while we are alive, for ourselves and to help the kids when they need it, rather than having everything wait until I am no longer here.

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    1. I should have added that my mother is 90 and in a retirement home still going strong. She sold her condo 2 years ago to move into the retirement home so she has plenty of money from that but her number one concern is that the monthly costs for living in the retirement home is slightly more than her pensions bring in. It's only a couple of hundred dollars a month but still she worries that "they are taking the money that's for you kids".

      My sister and I are doing fine, we don't need or want her money, but still she worries. I don't think any child (or very few anyway) wants their parents to go without just so we have an inheritance.

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    2. Our thinking follows yours: giving away some of the money while we are around to enjoy what the gifts can do for our children, son-in-law, and grandkids is a blessing. While we expect to leave enough for a nice retirement cushion for our daughters' future, they (and you, David!) encourage us to not skimp on things we enjoy just to make their final payoff bigger. If they sensed we were doing that, both would be upset.

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  4. I am 1 of 6 kids. Mom had a bit of money which was divided among us. I had told her years before, to please spend it on yourself. I don't need it. She told me to give it away if I didn't need it. So I spent it on her grandchildren who wanted to do some travel and play they otherwise could not afford. When they would chat and say "I wish" I would say "I have some Grandma money and you are going". I didn't stop saying that when the money was gone. It was FUN! (they did not have extravagant wishes.)

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    1. After a lifetime of saving and investing it is hard for us older folks to let loose enough to enjoy some of the fruits of our labors. Your mom telling you to give it away if you don't need it instead of spending on herself is a good example of that mindset.

      The flip side would be my parents approach. They did not spend all that much on themselves, but also did not allow any of their nest egg to be distributed early until I began managing their accounts. I was able to convince them they had enough money for two lifetimes and the estate tax (low at that point) would take a chunk for the government.

      That did it for Dad: the inheritance "advances" started. I know they deeply enjoyed the load that extra money took off their three sons at a time when it was very helpful. It just took some creative thinking on my part to help them let loose a little and get the enjoyment the money brought while they were still alive.

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  5. Hi Bob! Interesting. I am not a parent so I see it from a different perspective. My parents were very blue collar entreprenuers so while there were some resources--and in the end they left all us children $10,000 each which was welcome--it was not expected. But had they left me nothing financially (which I was more than okay with) what they did was raise me and teach me in life was to be responsible and also frugal and careful with finances. If I wanted something beyond the basics I had to get a job and/or figure out how to pay for it myself. They taught me to only responsibly take on debt if necessary but to avoid it if possible and to spend within my means. Those lessons to me were far, far more important than any monetary amount they could have left me. Frankly, I would love to see more parents teach those lessons to their children than spend a lot of time and energy trying to hang on to money to leave to them. What's the metaphor? Teach them how to fish rather than give them a fish. While I'm sure it made my dad proud to leave us something, it was those life lessons I learned that are invaluable and seem absent in many families today. ~Kathy

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    1. I agree completely. Financial literacy is a missing part of too many youngsters' education. Your parents gave you the tools and confidence, and that is priceless.

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  6. Great topic and discussion in the comments. When my mother passed last year, I and my two sisters received a small sum after everything was settled. The biggest part of the inheritance was each of us received about 1/3 of her 26 acres of land. My youngest sister and I had been given our piece years ago as mom worried about how things would eventually get split. It is doubtful we will ever move back to that piece of land and if we sell it I have vowed that the proceeds will be used for family travel for us, our two kids and their families on an annual trip. I would rather make as many memories as possible for our kids and grandkids than to have cash in the bank. We have also set up a 529 college fund for our only granddaughter and have been funding it on a monthly basis and plan on doing this for each additional grand that comes along. I like your idea of giving the annual gift to your kids and we may look at that as we progress with our retirement.

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    1. Land creates an interesting problem. Betty is part owner of a useless hunk of land in West Virginia that is a played out coal mine. Nobody wants it, so it just sits. At least the trees and grasses are growing back.

      I don't know much about the 529 plans except they seem to be a good way to help your kids or grandkids pay for advanced schooling.

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  7. I received a significant inheritance when my mother passed in 2008. We invested most of it and are pretty comfortable in our retirement. On two occasions we've been able to help with debt for two of our eight children. We have changed our trust so that the other six will be compensated for the money given in advance. We are not scrimping so that our children will have more, but our needs are simpler now that we're older. We have a small place in Tucson where we live during the winter, and a new apartment created last summer in our family home in Seattle. We want to be sure we have enough to fund any assisted living needs we might have, so we won't do a lot of spending down.

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    1. Like you and Art, we are trying to strike a balance between enjoying our lives and providing help for our children, a little bit know, and more in the future. Of course, we have two kids, not eight, so you are into some serious planning!

      One of our daughters has needed financial help more than the other. So, yes, we keep track of what has gone to each in excess of the annual distribution. When it is time to do the final accounting, each girl will see what their fair share should be.

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  8. My in laws did well to raise their kids in a working class neighborhood. Their goal was to give everyone a good start. They did that. Not much left over in the end- and that was good.
    We don't do our finances choosing to save for their retirement. We help now with enhancements to their lives. We have a LONG way to go if our genetics is right. They both have expressed that they really want us to save so we are not impoverished when we are 90. :) If there is something left over it will probably go to our great grand children. (At least we there are great grandchildren).

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    1. Protecting our children from having to worry about our well being is at the top of our list, too. Our plans to move to a CCRC at some point is not that we are anxious to do so.

      Rather, we do not want them to be in the position of having to put their lives on hold while taking care of us physically or financially.

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    2. My mom just moved out of her CCRC into a shared home in Anthem! My understanding is that a number of CCRCs have been taken over by publicly held companies-looking at boomers with money on the move.
      Although Mom's independent apartment and the assisted care still had the original great staff, the new company "laid off"/hired many new people for nursing and skilled nursing (less public areas). The change in a year has been dramatic (with or without COVID). It seems to be a sad move for the community.
      May things like this be straightened out by the time you move! No matter what, it will be easier on your kids to be in your own space at the elder stage of life.

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  9. We were poor when I was young, although we didn't realize it. Both my parents came from large, Depression era families (I have 63 first cousins). Dad was a "townie" and my mom grew up in the country without running water or electricity until she was a teen. They always made ends meet, but there were eventually six of us (I'm the oldest), and until my dad bought his own business in my teens, he kept looking for more lucrative jobs to keep up. Of course, we didn't think anything of it, because it was normal. I started earning babysitting money at 12 and bought all my own clothes and provided my own spending money from then on. One summer I took care of five kids for a working couple, because I was one of the few kids in town that could handle that crew. LOL. If we wanted or needed something big that wasn't in the budget, we generally got it but with conditions. For example, when I wanted a French horn in H.S., they paid for it and I had to pay them back half of it in payments. My brothers worked at my dad's business as soon as they were old enough. If there was one lesson from our youth that we all remember, it's that we needed to learn to "paddle our own canoe." We laugh about it now, but it was a lesson we all took to heard and have each done well for ourselves.

    My mom is 89 and still going strong and has outlived three husbands. I don't think any of us expect much of an inheritance - we're just happy she has enough to care for herself while she's alive. Given their background, our parents came a long way and, like Kathy, we got some great lessons from them.

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    1. Yes, you did learn some tremendous traits from your parents. I wonder if the world has changed to the point where not enough children will have the type of life lessons you and many other folks who commented here had instilled in them. I am afraid kids today are so used to having instant gratification that they do not understand the maturing power of some struggle and sacrifice.

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  10. Yaay to the parents who care enough about their kids and grandkids to leave them atleast some money - when you're 50-something, inheriting even a few thousand is a leg up. Somewhere in the Old Testament, it says we're to leave an inheritance to our children's children.

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    1. Occasionally I read about someone (with children) who wants to die with zero money left. I find that thinking to be unfathomable.

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  11. Leaving a financial legacy is a privilege not available to everyone. As in Hope Spring's response, there are legacies in the form of solid life lessons and experiences.

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    1. No argument. If money can be left, that is a blessing. If it can't just being a good parent is priceless and sets a child on the right path.

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  12. During the last twenty years of my dad’s life, my parents experienced considerable financial difficulties as a consequence of poorly timed investments during the inflationary spiral of the early eighties. As a result, they both worked into their 70s and did not spend much in retirement. My mom passed away in 2018, nearly 15 years after my dad. Although my mom always told my brothers and me that she was financially comfortable, we were surprised to discover the extent of her savings when she passed away. Consequently, we all received an unexpected inheritance. I chose to use my portion as follows: I used 1/4 of it to pay down the mortgage, I divided 1/4 of it between my three kids, I spent about $10,000 on travel, I donated some of it, and I saved the rest. I do find that it is a dilemma knowing how much financial support to give my adult kids now, versus how much to save to ensure that I do not become a financial or caretaking burden for them should I happen to live a long life.

    Jude

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    1. We have struck a happy balance, I hope. We are determined to leave enough for our daughters to make a difference in what they can afford to do when they retire, while living a life that is fully satisfying to us and insuring we are not a financial burden to anyone.

      I have written before about how what makes Betty and me happy has simplified over the years. We are not skipping on life's pleasures, it is just that what we want has simplified.

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