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flowerseverywhere
1-15-12, 10:00am
recently in the smart phone thread both Loosechickens and Bae mentioned something I have been thinking about. The idea that any money you don't spend can be used to generate income for your children, grandchildren or favorite charity.

Obviously education and trying to get your kids out of college or trade school debt free or almost debt free is a goal that I personally had and managed to do. So I wanted to kind of solidify my goals of securing my kids and grandkids futures, by my mindful spending and taking advantage of everything I can. A long time ago I remember someone, probably Suze Orman giving advice to secure your retirement first then worry about education which we did. So our retirement is about as secure as it can be today, and our kids are married and out of school. So I am looking for suggestions, what have you done or aspired to do to help secure the financial future of future generations once you have achieved debt free and FI status?

razz
1-15-12, 1:08pm
We are debt-free, own our own well-maintained farm and FI for now.

Until I have a better idea of what is going to happen around the world and in our lives, I am very hesitant about planning for anyone other than myself and DH.

If either of us needs extended longterm care, the funds available will be depleted very rapidly. I have seen too many couples where one is requiring chronic care in an institutional setting and the balance of funds available for the spouse living at home is severely limited. Getting a haircut after a few years is a big decision never mind paying the housing expenses. Imagine saying about the death of beloved spouse, "his death was the best thing that happened as I could no longer afford to have him alive".

It easily costs $60,000 per year for chronic care for one person and over a 10 year period, with the extra services and the cost of inflation (and low interest rates on investments), it will cost $700,000. Many live in longterm care for 10-15 years. That is just one partner. What will be left for the other partner's care?

Now add in the turbulent financial situation around the world where pensions have been cut drastically and no country is immune from this happening, the best planning that I can do for my family is not to be burden on them and also never to get them to rely that any funds will be forthcoming at our demise.

Sorry to be so outspoken on this but it is a very hot button for me as I have seen examples of the terrible tragedies where families have aided their adult children with retirement funds and then been in serious financial trouble later, usually the older women who are no longer able to earn any income.

The best thing that I/we can do for our kids is to remain completely independent financially.

Back to the regularly scheduled thread...

loosechickens
1-15-12, 2:19pm
The best thing we have done to protect our children is to be living on the "fruits" of our investments and not on our capital itself. Unless some total catastrophe happens, we should be able to pass on the bulk of our investments intact to our children and charities, as we have, for quite some time now, lived on the "eggs", not the "chickens".

And should catastrophe strike, with many years of long term care necessitating use of part or all of that capital, we will, at least, not be a burden on our children, even if such catastrophe means that we are unable to pass on the capital we would wish.

Of course, all anyone can do is to consider all the expected risks, protect the best you can from them, and as many unexpected things as possible, but other than keeping your health as long as possible, developing abilitiy to do things for yourself and live really frugally in case that becomes necessary, it's really something of a crapshoot. No way to protect yourself from an asteroid hitting the earth, nuclear war, collapse of the economy, etc., but we do our best.

And forming that habit of looking at any purchase not just as the specific number of dollars that item costs, but looking at the returns that amount of money could be creating forever if unspent, certainly cuts down on the number of frivolous purchases. Although, in our case, long term thinking like this has made it VERY difficult for us to spend any money frivolously, even when there is quite a bit of extra income unspent.

Perhaps trying to achieve BALANCE, which is what we are striving for at present, is best. We've had varying degrees of ability to implement balance, but we're trying. We don't want to be people who live on pennies and old clothes and when we die, people discover we were millionaires.

redfox
1-15-12, 2:31pm
Being sensible in our personal lives. Bigger than that - making sure Social Security is safe, working towards creating a just and equitable society, and one free of war. Money is an important tool for well-being; connected communities, responsive government at all levels, and a just and civil society are more important, IMHO.

cattledog
1-15-12, 2:44pm
I personally think college is important. I started a college fund for my kid as soon as I got home from the hospital. I fund as much as I can every month. If I'm tempted to go out to eat or buy her a cute outfit I just think of how much that money will be in when she's an adult. I don't want her to have so much debt when she leaves school. If college is not in her future, then I'll consider buying her a house or helping her start a business.

Stella
1-15-12, 3:25pm
My children are very young and it will hopefully be a long time before Zach and I die, so it's hard to know how that will all pan out. I am 33 and he is 29. If we live to be as old as our grandparents, living into our 80s and 90s, there are just too many variables possible in 60 years to see that clearly. There are even a lot of variables between now and when the kids are adults (between 10 and 18 years) to know how it will play out. I don't know what direction their lives will take them.

That said, we are certainly conservative with our money and we intend to pay forward the help our elders have given us. My grandparents, who are wealthy, gave my parents most of the money to buy the house we now live in. I believe my grandparents paid $50,000 and my parents paid $30,000.

Now we live in the house with my Dad. This is a mutually helpful thing. We have the benefit of a nice house in a good area that is large enough for our whole family without a mortgage, which gives us a considerable edge financially. Our monthly fixed expenses are a few hundred dollars a month. When Dad retires we will take over his half of the utilities and the taxes, which will mean his only monthly expenses will be his iPhone and car insurance while his monthly retirement income (the eggs, as LC put it, not the chickens) will be about $4000 a month. Our monthly fixed expenses will go up by about $300 a month, but it will still be very, very low. Since we are all pretty frugal with our variable expenses, this should put everyone in a pretty good position to help whoever needs it.

For the moment I think the best thing I can do for my kids is to encourage them to learn many skills, study hard, be resourceful, creative and frugal, approach their lives with thoughtfulness, participate actively in their community and family and work together. Speaking from experience, avoiding getting caught up in financial craziness when you are young goes a really long way towards a good future.

flowerseverywhere
1-15-12, 5:18pm
Razz, I am glad you posted what you did. That was exactly the kind of viewpoint I was looking for, as well as the other excellent postings here. Our first goal was to secure FI for us, and be in good enough health to be able to enjoy our lives. I hear of a lot of people donating to 529's for grandkids for example, but I am starting to think that the best thing we can do is to hold on to as much money as we can. Since I will be almost 80 when any grandkids get to college I can always help them then if things are going well.
I know if I ended living longer than DH I would have no problem giving up my house and moving to less expensive housing, as I could never keep the house up the way he does. It seems like he regularly has a screwdriver or hammer out making minor repairs.

Cattledog you make a very good point as well, it won't seem like much of a sacrifice in the future if you are able to help your daughter get a good start.

Great ideas and viewpoints, I hope more people weigh in.

Anne Lee
1-15-12, 6:02pm
My parents fully funded a trust account to help the grandkids pay for college. They lived very frugally and my mother who is still living has a decent pension so it was a do-able decision for them. I think if you buy each child a savings bond for birthday presents that should be enough. We are not planning on any inheritance although if everyone would die tomorroe (God forbid) there would be a nice one.

lhamo
1-15-12, 11:01pm
We have a fair amount set aside for our kids for college already -- over $50k/kid, and we dollar-cost-average an additional $250/kid/month. Plus I have made a couple of strategic one-time lump sum contributions at points when the markets were down that have turned out very well, and may continue to do that if our regular savings exceeds our targets. I am reluctant to make additional regular contributions at this point until we have enough saved up to pay off our mortgage if we need to. We are open to providing additional financial assistance for undergraduate degrees, but that will be contingent upon the kids having PT jobs or structured internships or other meaningful volunteer opportunities. I am not going to give them a full ride so they can play beer pong.

If the kids decide they do not want to go to college right after high school, I would be open to using some of the college fund to provide startup costs for a small business, or to support up to one year of "gap year" activities involving travel and volunteering, assuming the maturity level is there for them to handle the experience responsibly. I think the gap year idea is great, and would love for my kids to at least try the entrepreneurial route. I also think they would appreciate the college experience more having had such experiences. They would need to at least partially self-fund, though.

Like others, our biggest investment in the security of our kids and future generations is probably our diligent savings. We have a significant net worth already, and it will be truly substantial if we keep up our current rate of savings for the next decade or so that we are likely to continue to be a dual income family. We are currently saving roughly 50% of our household income in retirement and other types of savings. And we have decent incomes. It adds up quickly.

lhamo

Gregg
1-16-12, 3:37pm
We are doing our best to get our kids through 4 years of college debt free. Fortunately we have been able to do that without raiding retirement accounts. I actually doubt we would raid them if we were pressed. I firmly believe that the BEST thing we can do for the kids is to give them the tools to figure it all out on their own. That isn't meant to be snarky or overly simplistic, both DW and I just feel that way. If it works out we will certainly leave assets for them. If we die broke I will not lose any sleep because I know they will find their own way. Our true, targeted plan actually involves future grandkids (none born to date). We want to provide for their educations as well. Not knowing how many will come along or when makes specifics a challenge so we have what amounts to a general fund right now.

bae
1-16-12, 4:05pm
My wife and I have focused not so much on being able to hand down material goods to our descendants, but rather moral values, education, skills, training, intelligence, drive, fearlessness, and those sorts of things. Because then they will be in a position to create their own wealth, or prevail without much.

uji
1-16-12, 5:16pm
My wife and I have focused not so much on being able to hand down material goods to our descendants, but rather moral values, education, skills, training, intelligence, drive, fearlessness, and those sorts of things. Because then they will be in a position to create their own wealth, or prevail without much.
Nicely put.:+1:

flowerseverywhere
1-16-12, 9:24pm
My wife and I have focused not so much on being able to hand down material goods to our descendants, but rather moral values, education, skills, training, intelligence, drive, fearlessness, and those sorts of things. Because then they will be in a position to create their own wealth, or prevail without much.

Yes, I agree that is the greatest skill to give them. But I also know how valuable DH and I found our education, as well as my children and their spouses and I hope that I am able to help them receive the education I know my grandchildren need to fully reach their potential.

The one thing about money is that you have no control over it once you give it away or leave it to heirs.

bae
1-17-12, 12:32am
The one thing about money is that you have no control over it once you give it away or leave it to heirs.

Not necessarily so. Faced with the problem of leaving a 8-9 digit fortune to an infant daughter, I spent some time talking with some of the folks mentioned in this helpful article, and got some good ideas on how to avoid the wastrel-heir issue.

http://info.wsj.com/classroom/archive/wsjce.00feb.ymm.html

iris lily
1-17-12, 1:01am
My cousin is worth a few million and he has one child. I'm sure she doesn't know how much money the old man has. He inherited his, but he lives modestly. His wife worked at Aldies for years. Last time I checked he was cleaning his child's school on a janitorial contract.

I think that's an awesome lesson in work ethic and humility: there's my dad, mopping the floor. It's hard to get uppity when your dad is the school janitor.

I love my cousins, they are frugal. He's the cousin who informed me about color days at Goodwill--on red day red tag products are 1/2 off, same for blue day, green day, etc.

flowerseverywhere
1-17-12, 8:19am
Not necessarily so. Faced with the problem of leaving a 8-9 digit fortune to an infant daughter, I spent some time talking with some of the folks mentioned in this helpful article, and got some good ideas on how to avoid the wastrel-heir issue.

http://info.wsj.com/classroom/archive/wsjce.00feb.ymm.html

Thank you for the most interesting article. It has given me a lot ot think about. We are no where near the position to produce a "Paris Hilton" but I am hoping we have some wealth as the years go by. I do have some mixed feeling about controlling from the grave. One of my kids was a free spirit and never conformed to school or society, yet as an adult is a very successful artist. I fear if we had been too controlling he would have lost contact with us or turned to drugs or other unsavory characters if we hadn't supported him all along. While other parents drove around with bumper sticker that said "my child is a high honor roll student at Middle School" mine would have read "my child's grades are mediocre, but you should see the stuff he creates and paints." many of his skills would have had little value in a society solely based on things like grades, but he made them valuable and worked hard to make a mark. It's a tricky thing, but I see so much value in not just handing over huge sums of money. We don't have enough to make a huge difference in their lives, but it would be a shame for them to waste it being jerks.
but I digress, your advice is certainly valuable and has given me a lot to think about.

razz
1-17-12, 9:28am
Interesting article, Bae.
At present I simply give time, energy and some money when some unique need appears like a new KitchenAid mixer or similar item as I can afford it. I leave our investments alone and over time as I/we advance in age, the investments will be adjusted to include the names of the kids who are both responsible and careful to avoid probate. It all depends on what the future unfolds.

uji
1-17-12, 10:09am
What a great discussion! Even if your estate is more like 4-figures than 9, it still important to think about what you want to leave your kids -- and to what extent you want to control their life choices.

My wife and I spent our wage/labor life teaching art, in various forms and venues. We found that everyone wants to "express" themselves, to "communicate" with their audience. The problem is that you need to have a "self" to express -- and there aren't that many folks out there who've troubled to make one. I'd say a "self" is not something you have, it's something you build -- it's a relationship that you have to things and people. Similarly, meaning is not a property objects or people have, but a relationship an individual has with someone or something. (In short, everyone wants to be an "artist", but few want to go to the trouble of learning how to make art. But that's an argument for another thread, I guess...)

So I, too, found the article Bae posted provocative, but I find myself gravitating more towards his first, wonderful bit of advice:
"... to hand down ... to our descendants ... moral values, education, skills, training, intelligence, drive, fearlessness..." I would imagine that if you were successful in this last, you wouldn't need to worry about their future life choices. In any case, I'm not sure I would want to control them any further than that even if I could. I think Gavin's choice will have the opposite affect on his children than what he supposes. Why I feel that way, I'm not quite sure, except that in my experience one's intent -- when applied to one's children -- seldom yields the expected result, or, better, yields that result if at all in unexpected ways.

(My sample is small, though: a boy and a girl now 30 and 34.;))

jennipurrr
1-17-12, 10:57am
Thank you Bae for the link and other thoughts.

I don't have any kids yet but I have seen multiple friends squander substantial trust funds before age 30 and others live on continued "economic outpatient care" while counting on inheritances from family members deaths. Its something that gives me pause, the balance between providing the environment where they can thrive to create, become educated, to be entrepreneurial, artistic etc with out financial fear and then creating a spoiled brat entitled monster who has no concept of work ethic, or even as one of my friends had happen may not be savvy enough to avoid people swindling money. I do think that BAEs strategy of instilling them with the values we wish to pass down is one of the best ways to accomplish this.

flowerseverywhere
1-17-12, 1:43pm
(In short, everyone wants to be an "artist", but few want to go to the trouble of learning how to make art. But that's an argument for another thread, I guess...)


interesting opinion. I am an artist that spent my life working for "the man". since I left full time employment I spend my days creating, and I love it. There are different types of art, art that sells, art that is functional, art that some people would call trash and others would spend millions for. I read a lot about famous artists and the struggles they went through when they were alive but they wanted to follow their dreams. My own son has a community of art friends and they are an interesting bunch. Some are doing well, others are struggling but that call to theater, music or art is a song that you can turn the volume down on but if it is in your heart it follows you through your life. Even working through my life at a job I always made stuff, quilts, clothes, I painted murals on their walls, made pots, arranged flowers...the list goes on and on.

As time goes on this should be interesting in our family. A grandson ( not the child of the successful artist) seems to have an attraction to music. He loves to listen to it, to sing, play with various instruments. How can I judge if he wants to pursue this in lieu of more respected professions? What if he wants to go to India and learn the Sitar? Or bang drums in a garage band? What if that doesn't meet my standards of what I think this bright child should pursue?

All a very interesting discussion with many variables.

uji
1-17-12, 3:11pm
A grandson ... [who] seems to have an attraction to music. He loves to listen to it, to sing, play with various instruments. How can I judge if he wants to pursue this in lieu of more respected professions?
If what he wants is "to become" a musician, then I'd say discourage him; if what he wants is "to make" music, then encourage him.

This ties back into the previous discussion, I think.


"An artist is not a special kind of man, but every man a special kind of artist," —says a fella much wiser than myself. Whether one makes "art", or builds bridges, or teaches the young, it's still the same.

The "art" -- IMHO -- resides in the maker, not the thing made. That's why critics, markets, popularity and all the rest of it are utterly irrelevant; all entirely miss the point.

flowerseverywhere
1-17-12, 3:17pm
interesing Uji. I don't think I could discourage him if his heart was set on becoming a musician. I could not be so judgemental. I hope the one thing that I have given my children is that I love them unconditionally, but I guess it is easy when money isn't much of an issue, they know we don't have enough to support them and us and ask us for nothing of monetary value.

fidgiegirl
1-17-12, 6:19pm
I don't have concerns about how I will support any potential future but currently non-existent children, but I do have concerns about how to support my parents in their old age. IMO their planning for the future ain't been too hot, though they do have retirement funds mainly through my mom's stock and my dad has a pension, so they are doing much better than other peers' parents that I know of. They've taken on loans throughout the years for the most (again, IMO) frivolous things, and they are hoarders . . . I just sometimes worry that what if they have nothing to live on and it falls to us to provide it? It's a feeling that surfaces every once in a while, but one I tamp down because until it happens, I can't know what would happen. It's a double-edged sword because if they are around long enough to go broke, well, they are still around and that's great! Anyway, not sure it's really adding anything to the discussion, but that's how I see it.

I am happy, tho, that like flowerseverywhere, my family nor DH's does NOT get into requests for money whatsoever. In fact, recenly DFiL and DMiL offered to lend us money to do our kitchen cabinets, totally unsolicited, and I was so surprised and borderline offended. We had in no way hinted that we would want to do that. We probably said we didn't know if we would have the money to do it NOW (meaning to us that our EF is getting a little low, not that we are going to start bouncing checks) but I wouldn't be borrowing money from a relative for something so silly as countertops in a million years!! In fact unless I was dying and it was the LAAAAAAAAAAAAST option would I be borrowing money from ANY relatives. I get that people have to do it sometimes, and sometimes it's probably just fine, but I see it as a recipe for disaster in many cases.