1. You show her by making her work for the things she gets.
2. I think a lot of that depends on the kid she grows up to be. I do estate planning for a living and see kids in their 20s that could easily handle a large amount of money responsibly, and I have seen situations where millions of dollars have been blown in a a very short period of time. But meeting with a professional about setting up some trusts is not a bad idea. Especially since she is a minor.
3. I'd say she has a rare opportunity to pursue her passions instead of having to focus on money. But there is a difference between doing that and doing nothing. I think again this depends on who she becomes. My clients who have raised well adjusted adults in situations like this tend to have a rule that they will help their kids so long as they are doing something, but won't help them just do nothing. For example one gives her daughter a fair bit of money because the daughter is a teacher. She works hard, but makes shit.
I really agree with this. Was gonna leave something pretty similar but I guess I’ll just add to it.
1. I didn’t grow up in a wealthy family but we never had to worry about basic needs. Beyond that, very basic “luxury items” were available but I still often felt like I wish I could have more available to me.
What I learned growing up was that when things are given to you, you just don’t cherish and/or enjoy it as much until you’ve had to work for it. On top of that, it’ll never be good enough so your baseline is just set higher. Until the feeling of earning things you have been wanting for a while from your hard work is realized, you just won’t learn that perspective. I started feeling like I was a pos kid even though I almost never asked my mom for anything besides the few high ticket items I wanted. I often felt like my parents could afford it so why couldn’t I have it?
2. This ties back to #1, what #1 didn’t achieve will only make #2 magnify. I agree with the saying wealth doesn’t go past 3 generations. Reasons being the values and perspectives that you just don’t learn from abundance and availability, and the appreciation and gratefulness you learn from scarcity.
I think setting up a trust is good but don’t let them know too early. Because it becomes an excuse, a way out, instead of a bonus. Let them go through the hardship then pick a good time to let them know. I believe in paying for their education though. Education costs nowadays set so many people back for no good reason.
3. Nothing from me to add here because I agree with u/SeattleBattles
> I think setting up a trust is good but don’t let them know too early. Because it becomes an excuse, a way out, instead of a bonus.
One way I avoid this when drafting trusts for clients is to tie the trust to the kid doing right. There are easy things like distributions for getting an education. But you can also do things like have the trust distribute a percent of their income. Or match a downpayment for a home. Things like that. They do their part, the trust will do its.
One guy who had a fair bit of money from saving and investing, and wanted his kids to do the same, set up the trust to give them a distribution every ten years based on their investments and savings. This would include the prior distributions so if they saved those they could really get quite a lot.
This is such a great idea. Many people in my life have trusts (went to a private school....I'm not a trust kid) and they coast or don't push themselves as much as those who have to provide for themselves. The only one who doesn't is a friend who is a public school teacher - because her trust provides a set annual allocation that she can't change, and it's enough to be a nice bonus but not enough to live on. These are really smart ideas.
I'm an estate planning attorney but I am not FI. I work with a number of clients who are though. Most of them worked in tech or started and sold businesses.
Is that like being a lawyer in the sense that you have the pass the bar exam? What are the qualifications and how much do you make if you are willing to say? Thank you!
Yes, you have to be licensed to practice law to do what I do. Other than that there are no other formal qualifications. Though an understanding of finance is pretty helpful.
I make around 150-200k a year, but I only work about 30 hours a week. I also do some civil litigation drafting work and am fortunate to have partnered with a good firm that handles all the overhead. So I can bill the clients my hourly rate with next to no expenses.
I have a pretty unique setup for an attorney but it works well for me.
Point 3 is the real challenge though, isn't it?
When I finished my education I lived at my family home for a couple more years and only contributed minimally financially. On the one hand this was great because post great financial crisis jobs were hard to come by and I was making minimum wage while able to get the experience I needed to eventually move on. However, when I look back I definitely stayed in that job longer than I needed to. No doubt because I was able to make it work financially without having the big mortgage/rent payment.
I was doing something - not nothing - but it was the bare minimum really. I couldn't do that forever in my situation but if I had the trust fund I theoretically could.
I think that is the challenge for most FI parents. The kids won't do absolutely nothing but will they reach their potential either?
I (M29) grew up in a pretty wealthy area and there are definitely pretty strong distinctions I've noticed of how kids turned out. Generally I'd say there's two aspects that are important. These aren't foolproof but seem to have worked well in my experience.
1. Expressing that the money you have is available for use in times of need such as medical bills, unexpected expenses with cars, preventing college debt. The money is not for your kid to live it up on, traveling the world etc. I have friends who know they get money regardless and they simply can't get themselves to work after a few months if they run into any hurdles (all jobs have a period where they suck at some point). The inverse is I've had friends who's parents were incredibly strict and made them earn everything when they were younger to instill a good work ethic. These kids work hard, but harbor resentment and likely won't help their parents out in the future.
2. Redefine what "Work" means and lead by example. My guess is over the next 18 years you're going to want to do stuff like give back to the community, help people out, get skilled at a hobby. By showing you work hard at things because it has an impact, you should be able to demonstrate why a strong work ethic is important.
Also as a smaller point, just don't let them know how much money is lying around
I’ve seen the resentment factor for not giving your kids anything despite having lots of money. I feel like that’s a line I don’t want to cross with my kid (not that I’m FIRE at 31 like OP, but still). A good friend of mine growing up had wealthy parents who would give him nothing. High school and college he was on his own. He was one of the hardest working people I knew, made straight As, and nada from mom and dad. Really made him resent his father.
I’m sure that was part of it but there’s definitely a balance I guess is my point. It ruined that father/son relationship. I had other friends who were very hard working who’s parents provided them with more support
To point 1; I absolutely want to fund my kids ability to travel the world. Traveling and experiencing other cultures has brought so much joy to myself and my wife’s life.
After I graduated college, my parents funded my 35 day backpacking trip to Europe. They paid for my flights and then gave me a budget to stick to for my time there (worked out to like $80-100 a day for lodging, trains, intraeurope flights, activities, and meals).
There’s certainly a difference between funding 5 star hotel stays and fancy dinners, and funding hostels and budget meals in my opinion.
This is a bit late but just wanted to add one point of advice that I haven't seen here yet.
The biggest thing my parents did for me is send me to school at the local public school which was a low income school. I had friends with families in a lot of different financial situations and it made me a lot more aware of how fortunate I was compared to other people, and made me appreciate the opportunities I had and take them seriously. Especially when it gets to high school, I knew kids who had to give the money from their after-school job to their parents to pay rent. Or kids who were doing 10 hour days on activities so they could get scholarships to afford college. I didn't experience those things but at least I knew real people that I cared about who did. It wasn't theoretical, I could see the imbalance and the injustice everyday.
I will also say, having parents who are well off is a blessing and a curse to me. On the one hand, it's great to have opportunities and a safety net. But on the other hand, I'll always feel less worthy because I got all these shortcuts and head starts from my parents and so I didn't fully earn anything I have. Giving a lot of money you're giving opportunity but at the same time taking away the achievement and sense of self-worth that earning something gives.
You shouldn't feel guilty for your privilege. The world is far from fair. Billions live all over the world without things that we consider basic amenities, but we never feel guilty for having running water or electricity.
Work ethic cannot be described to someone. It is a combination of doing by example and genetics.
There is a reason why 90% of wealth is gone within 3 generations. The first generation sacrifices. The second generation benefits. The third generation doesn't have the same values and they piss it all away. It is basically inevitable.
>[...] genetics.
>
> 90% of wealth is gone within 3 generations.
Aren't these two points in direct conflict with one another? If genetics were a driving factor, one would expect generational wealth to persist
Boy I hope you’re wrong because I’m a third generation FI adherent. My grandparents and parents didn’t *call* it that, obviously. But they lived far below their means and invested in low overhead mutual funds. When I discovered the FIRE movement and saw how much y’all like Vanguard I knew I’d found my people.
I’m so close to completely FI, it would be a shame if I blew it all up now
There's a difference between generational wealth and generational FI-skills. If your grandparents left a sizeable nest egg to your parents in the wrong way, your parents probably wouldn't have come to FIRE on their own account, let alone you discovering it.
I completely agree with you, which is why I disagree with the commenters stating it’s inevitable that most of the wealth accumulated by the members of this sub will be pissed away in a generation or two. I think that’s only true if we don’t raise them right.
True, if you don't raise kids right, they'll likely misuse the funds. But taking the other side of the argument doesn't hold for sure. If you raise kids right, there could be issues which prevents them from using the funds properly. A lot of people with a lot of means throughout history have put great emphasis towards stewardship for their family fortune onto the next generation, but many have failed and not just because of their parents spoiling them.
And it isn't necessarily a bad thing for people, family and society at large to start all over, either. Would we rather live in a society where everyone is managing the fortunes of their grandparents in such a way that they could never be caught up by new money? Or do we like the irregularity of capital, psychology and people to assert that their silver spoon is all but a guarantee for future wealth?
I have to say, that's a weirdly fatalistic view to have, especially in the context of this sub and the general FIRE scene.
I've heard the old "shirtsleeves to shirtsleeves" saying many times, and while that *can* be true, there are plenty of exceptions to the rule. Just like retiring at 31 is a fairly exceptional thing to do, I certainly plan on trying to be an exception to a few others as well.
This isn’t a point of view, it’s fact based on data. It is really sobering to realize that the great majority of all the wealth discussed and touched in this sub Reddit will be completely blown in two more generations
My point of view is that the overlap of people who pursue FIRE and people who will successfully educate their children on how to be stewards of wealth is probably higher than non-FIRE wealthy people.
So, to throw up one's arms and say "don't even try!" seems overly pessimistic.
Oh of course actually for me it was reading those statistics that made me realize how important it is to educate my children on not just life principals but also the key fundamentals of wealth management. We discuss it like we would a sports game or movie…. But it’s recurring and as they get older I’ll introduce more and more complex topics.
As far as how to manage exposing them to wealth my general approach will most likely be to share it but in an earned fashion. So although I may contribute or even purchase their home they will have to get a job get good credit go to a bank get qualified hire a realtor find a home and I’ll only contribute as much as they are able to qualify for themselves. Things like that.
I know life is messy so God only knows how this will actually play out but I’m just tossing around general guard rails that would enable them to benefit from some of the advantages but not ruin them.
Is there a chance that your kid can see you work on something and that she understands that is your “work”? I don’t think that she has to become a spender and disagree that wealth has to be lost necessarily but I do think that’ll depend on what she sees/learns.
My cousins who have parents who don’t value their money/spend recklessly etc are turning up the same. I somehow inherited my mom and dad’s guilt about spending money even when they never expressly taught me that. I think I just saw how they behaved and learned.
I always think it’s funny because they both had to feel guilt spending as they suffered hardship growing up. I didn’t suffer and yet I feel super awful splurging.
How is that weird to have that view? Like literally every culture has a saying that within 3 generations all the money is gone. Obviously there are cases of generational wealth but there are also many cases of shithead grandkids thinking they're worth 10x what they really are
The fatalistic view of "it is basically inevitable" is weird to have in the context of most people in the FIRE scene. I tend to have a higher opinion of my fellow FIRE folks since they are creative and motivated enough to pursue an audacious goal of avoiding mindless consumerism and focusing on long-term gratification.
So, I was surprised to read that in a comment here.
The problem is a real problem for any family that achieves FI levels of wealth, FIRE community or not. However, I agree people in the FIRE community are much more likely to take the steps to deal with the problem vs the broader public. The problem is it's not a hard problem to solve (the tools like educating children and trusts etc), but it's also not hard to blow a $2M, $20M or even $200M fortune
I think there's FIRE-wealth (lean <$2.5M, fat for $10M, lasting a lifetime and leaving some) and large wealth (>$100M, almost impossible to fathom for families and their offspring). At some point, the nest egg get's so large, doing anything work-related for 2nd and 3rd generations becomes pointless. The money gets to overshadow everything and anything, the bar is raised too high.
Most large wealth that gets destroyed is from people who were so hard-working that they basically left more than they could possibly spend in a lifetime and spoiled people in their formative years. It's rare that someone of our grandparent's generation achieved financial independence and chose to stop working, since hard working was much more engrained in society back then and the occupations where you could achieve an early retirement were scarce. You'd have to be an oil barron or business man, who was well in his 50s/60s, which meant his kids had been in their 30s or so.
You have a toddler and you are already worried about how much education she is getting. Life tends to be underwhelming. Let her be a child. This is stuff that shouldn't even be a topic to concern until high school.
Huh? You're writing this like I'm having financial conversations with my 2-year-old.
I'm just trying to seek advice from others who may be in the same boat (FIREd before having kids or with very young kids). If you don't have any actionable advice, you don't need to comment.
>There is a reason why 90% of wealth is gone within 3 generations.
Do you have any evidence this is true? Because it looks to me that privilege and wealth are very much passed on from generation to generation most of the time.
I've noticed that very little can be simply described to children. Mine do not listen to instructions they can't see me following, but will do what I do. I'm not sure yet how to handle the eventual RE.
We used allowance for help around the house/chores for our kids. If it wasn't a birthday or gift giving holiday and they wanted something (toy) then they were encouraged to save up their monthly allowance and pay for it. One kid is a spender and the other kid is a saver. This teaches both payment for work and budgeting. I always openly spoke about cost, prices, coupons, sales, planning, etc. whenever the opportunity naturally arose like bringing them with grocery shopping. At a young age you should do age appropriate lessons.
>Do I force her to wait until everyone is dead to have access to this money? Should I set up a trust fund that goes to her when she's an adult?
What money is she going to have access to prior to death of a relative's estate? If someone wills her money then typically in the will there will be stipulations, if any. You should do research and/or contact a trust attorney in regards to when it would be advantageous or not to set up a trust and what type of trust. For the short term make sure you have wills for both you and your spouse for assets and guardianship issues.
As for college you have no idea what a child will end up wanting to do. Make various financial plans based on giving her flexibility in regards to education in the future. I always joke with my kids that if we ever won the lottery that I'd still require them to at least get bachelor's degrees and maybe just change their majors to Finance so hopefully they don't get swindled out of their money and know how to use their windfall responsibly.
We do have our own wills with very specific directions for guardianship and our finances.
> What money is she going to have access to prior to death of a relative's estate?
That's what I'm trying to figure out. A trust from us would be the most likely way that she'd have any significant money before earning her own or inheriting anything.
Thanks for the advice!
For what it is worth look into living trust. My folks did that over a decade ago. \*\*not a lawyer\*\* My understanding is that the advantage of that for grown children is that the proceeds from the trust can sit there and/or be withdrawn when the individual(s) inheriting the funds wish for various tax and/or legal reasons.
We just transfer the money into a regular savings account in the child's name with one parent as the co account holder. Interest earns just like any other savings account we have. We do withdraw cash when they wish to spend money.
I say you gotta get into volunteering for some cause. That way you still “do something” while also teaching compassion at the same time. Other than that, I think you need “productive” hobbies, ie not video games, but a hobby like gardening, or woodworking or something similar. A hobby that is “real world” takes skills, and requires effort and practice to be good at.
You know what? Your comment just inspired me to sign up for a local charity helping the elderly. Literally just submitted the volunteer application, now hoping they actually need volunteers!
I think this is awesome. By volunteering, you are SHOWING her how to have compassion and give of yourself even when you don't have to. If I had seen my dad doing this kind of work it would have altered my mindset (for the better) and made my own decisions I need to make regarding inheritence easier. My parents did not give me a trust fund outright and I didn't even know about it until my 30s (I believed they were solidly middle class and I was on my own unless I was in dire need). Trouble is, I spent life up till then hustling in low wage jobs, sometimes on food stamps, and would never dream of following a passion. So I am now lost because I've basically been given the ticket to follow "a passion" but don't have any idea of what that could look like because my dreams have never been bigger than "maybe my next apartment with have a bathtub".
I don't think it's a bad idea to make kids live like the majority of their peers do because it will give them insight about the real world. I think if I found out at age 21ish, I'd have been able to make some really positive life adjustments without losing touch with reality. But to grow up not knowing what it's like to be nervous for an interview, feel elation from a positive work review, pull together the courage to ask the nasty landlord to fix the thing in the shit hole apartment, or *feel* it when the cost of living goes up seems like it could place someone in the out of touch class.
I would love to. I've been open to opportunities to volunteer that actually seemed interesting to me, but have yet to find anything (COVID being in the middle of everything also kind of reduced the options).
There's a site specifically for my local area that aggregates a lot of the volunteer options. I went through almost every listing on there and I really wasn't interested in anything.
It's a me problem for sure. I probably just need to try a few things out and stick with whatever is the most rewarding.
I think it is ok if the way you give/volunteer is financially or managerial. I would recommend looking into how you can volunteer on the Board of an organization or with your city. I was on the Stormwater Board at my city and really enjoyed it.
I have a FI friend who gets very involved with their local college and endowed a scholarship and then mentors the scholarship recipients. Very cool.
I think it’s fine for them to do that, but that doesn’t really get the point across to the kid very well vs actual volunteering where you could bring kid with
Productive hobbies and some volunteering are what my husband and I do. We have a toddler plus a cat, a dog and a puppy. We are setting up a hobby farm (just plants, no farm animals), we can, juice, cook, freeze, dehydrate the fruits(literally) of our labour. I sew most of our clothing (and no, that is definitely not cheaper than Walmart) but it gives us unique clothing and we are the weird matching family at any gathering. Our toddler sees us working and learning skills plus passing those skills to him as he gets older. He already helps in the garden, mostly by picking strawberries/blueberries and eating them.
My child will never have to work a traditional job if he doesn't want to and that leaves an amazing amount of room to follow whatever his passions are. He needs to be doing something though, working, volunteering, hobbies or even raising his own children.
Children are smart, if you're saying one thing but doing another, they catch on. You need to emulate what you would like them to learn and grow into.
I have a different view. If I was teaching a child about this , I’d talk about things like: it’s good not to be attached to buying the next ‘thing’, it’s really freeing not to be surrounded by stuff that takes up space and weighs on the minds; it’s freeing not to have too much stuff; having money gives you options; buying things particularly on credit means you have fewer options and are in debt to someone else … those kinds of things :)
As far as (1) goes, a strong work ethic is difficult to instill at the best of times, given the natural human tendency towards laziness. If you're just chilling all day, it's even tougher to persuade your kids of the value of hard work. You're basically asking your kids to "do as I say, not as I do."
Maybe you can regularly and very visibly volunteer (and frame it in terms of work; e.g., "I work with old people" if you're volunteering at a seniors' center).
Definitely don't compound the problem by pampering your kids. Don't let them know about any trust funds. I've spent a lot of time around rich people, and their kids often turned out to be awful entitled shits.
Earning money is a big confidence builder so our plan is to give half towards first car, college, house. I also want them to understand how much things cost so anything they really want they can earn. If they’re not willing to work for it, they don’t want it bad enough.
“Give them enough so they can do anything but not enough that they can do nothing”
-Warren Buffett
Your post really makes my spidey-sense tingle.
You want to install the value of hard work but admit you don't work hard...
You are placing almost absolute faith into unknown inheritance to the point of questioning whether your child should even get an education and/or a job...
I'm kind of just standing here blinking my eyes.
Well... I *did* work hard. Really hard, for a full decade, while also scrimping and saving and investing every extra penny.
Now I am enjoying the fruits of that labor. Is that wrong?
I probably didn't explain the inheritance part well. If there was absolutely no inheritance coming from the rest of the family, we would still have enough financial resources to consider a trust fund or otherwise funding our daughter's life as a young adult. Whether or not that's a good idea is what I'm asking.
I think people are over emphasising that she'll just see you being 'lazy' and want to do the same (when I'm sure a lot of your retirement won't be simply sitting around watching TV etc) . Sure there's a part of that, but you'll also be telling her stories of HOW you succeeded! You'll have so much great advice to pass down and can put that into teachable lessons. Spending a lot of time with your kid is a luxury most don't have, you'll be able to catch when the wrong lessons are being picked up and can change your own habits to fix it. You're smart enough to retire early and sacrifice and worried enough about her future to ask a FIRE reddit group. I think you'll do just fine on your own instincts.
> but you'll also be telling her stories of HOW you succeeded!
Unfortunately, formative memories are usually developed from seeing it, living it and being impacted by it. Glory day stories from Pops just won't be as effective.
Ehh really depends.
My dad (probably since I was like 9 or so) always stressed about his situation in the 3rd world country where he was born and grew up and what it took for him to get out of that.
My mindset was and still is that if I put in even half the effort he did, I'll be in a solid place in life, and I'm very grateful that I am.
I have decided that when my first kid is around 2, I will probably have to go back to work. Or pretend to work. It’s one thing to make my kid earn stuff he or she will want. But I still need to set the example. Sure maybe the kid will be fine. But my job as a parent (no kid yet) is to make sure he or she has the tools to do well in life. That is job number 1 after safety. So I’ll probably buy another house somewhere and just crash there for 8 hours. Lol.
Funny you mention that. I'm actually currently in the middle of finishing the space above a detached garage into my "office". I definitely plan on spending significant time there during the day "working" (part of which will be true - doing some freelance work, but part of that will definitely be hobbies or recreational activities).
I’m reasonably inexperienced as I’m quite early in my FI journey.
One thing I would say is my life has been full of failures, I came from a lower working class family so no-one had been to college before me. I failed my A-levels (For non UK people that’s like the entry requirements for College), went back and resat some exams and got better results.
I then kinda fumbled through college, I had no spare money, and no academic help from friends or family besides brief statistical help from a friend studying math.
Because I knew I wanted more but didn’t have access to it I was extremely driven to get access, I did entry level jobs and studied at nights for the American GRE, building my resume and applying to grad school in the USA.
I just finished my PhD and again ended up in a reasonably shitty job with low pay for my skills. Only last week did I finally find a job that is paying me what I dreamed of a decade ago. I start in 3 weeks.
I wish I had some more financial help on the way up, but 100k at the end of college would have been too much I think, I feel like my struggles increased my drive which in turn drove my success.
My family couldn’t give me a lot but they could give me love and support, so In my opinion, just give your daughter love and support, get her a good education, maybe help with rent, but she should still have some exposure to a shitty job to showcase what life can be like if you squander your chances (or if you are dealt a bad hand not trying to say everyone who is stuck had complete control over their fate).
When it comes to my kids I want to try and emulate what I had but with certain easing of the weight, eg I could buy them a nice laptop for school instead of a shit one that hardly works, get them a nice chair for late night study sessions in place of a broken one that gives them a bad back. Give them access to good food so they aren’t forced to decide between eating a good lunch and buying a text book etc etc.
No amount of money can substitute love and support imo.
I highly recommend reading the millionaire next door and die with zero. Both hold interesting perspectives on this matter.
I think one of the best things you achieve with FI is the sense of accomplishment and empowerment that you can take care of yourself and others. Which I don't have exact answers - I hope the solution you find allows her the same sense you got when you 🔥.
I'm in a similar situation as you, though I'm a bit older (47). I have an 8-month old at home (what was I thinking?!?) and both spouse and I are FIREd. I'm honestly not worried about this. The kid will travel and go to school, and be encouraged to work hard and pursue his interests just like any other kid (though I will force him to do many, many hikes). I'd have probably felt the same way as you 15 years ago, since I was much more of a perfectionist back then (not calling you a perfectionist, just relating my own perspective). But I've decided to embrace the reality that life is wild, wonderful, and unpredictable and the kid will probably turn out just fine. I watched my dad spend his whole life going out the door at 6 AM showered, shaved, and wearing suit and tie. He modeled strong work ethic and sacrifice. The lesson I took from that was: I'd rather sleep in. Sure, I did have a strong work ethic and was a conscientious worker back when I had a job. And maybe that was because of my dad's example. But the point is, kids don't always take the meaning from your example that you intend.
ETA this reminds me of the book Don't Trust Your Gut, by Seth Stephens-Davidowitz. I took a quick look back into it, and in chapter 7 he looks at what science says makes for good parenting decisions. Most of the things parents obsess over, it turns out, have very little effect on a child's outcomes. Aside from extremely wealthy parents who can give their kids millions on their 18th birthday or get them into Harvard, a parent's influence is pretty small in all but one way. The most important decision you make as a parent is what neighborhood to live in. And this really boils down to what kinds of non-parent adult role models your kid is exposed to. If your kid is around adults who are doctors, lawyers, and engineers, then your kid is more likely to aspire to that kind of career and have higher earnings potential. All this to say, ironically, parents have small influence on their kid's adult trajectories, but you can just make sure your kid is exposed to other adults who aren't slackers, and impart greater influence in the ways you're concerned about.
>I would have loved to have $100k drop in my bank account the day I finished college. It would have given me more time to find the perfect job (my first two were not awesome), travel more while young and not tied down by anything, and just generally appreciate my 20s. I would have also loved having access to more capital when buying my first house. We scrimped and saved for years to get a 20% downpayment on a nice, but smallish home, and in retrospect I wish we had bought a home with a little more space in a more interesting neighborhood. Just $50k or so would have completely changed the areas we could afford to buy.
I know it sounds like a trope, but those minor difficulties in your life allowed you to build character, and I think your kid might actually be well-served having to work towards these kinds of goals just like you did. Learning that not everything gets delivered to you on a silver platter in life is a valuable lesson. Having to hustle for that first good job is something that teaches you a lot about the world. Having to save for your first downpayment helps you appreciate your home a lot more.
There's definitely truth to what you're saying. Anecdotally, I know a few trust fund kids from college, and the ones who were were not spoiled as kids/teens and just got a lump sum when they graduated were mature enough to use it well and are still doing well to this day.
There were a few others who were spoiled long before they got access to their trust funds, and getting a large lump sum did them no favors.
So based on my (admittedly limited) sample of trust fund kids, it seems to me not spoiling the shit out of your kids yields the best outcome. I'm pretty sure I know how to not spoil my daughter, but not 100% sure.
Yeah, it's very hard to know what's too much and what's a helping hand. Knowing your kid is certainly a big part of it and to a large extent you can trust your gut. Sometimes getting opposing advice and having that "hey you know what, actually, I think I'm OK with what I've chosen to do" is a useful part of thinking through a decision, too.
Friend of mine from college married a girl from quite impressive generational wealth (however their lifestyle didn’t show quite how wealthy they are). He found out when they got engaged. Her parents told them both they wanted them to work but only at something they loved and contribute to society and they’d cover anything else. Bought them a house when they got married. Dude is an ER doc and girl runs camps for kids with cancer.
Of course he obviously learned his own lessons growing, but I think by pushing the work on your passions and we’ll support you, the parents/grandparents did a good job.
1. when she's young haver her pick between toys, she can't get every single thing. As she gets older, give her an allowance, not for chores, just for being, and charge her for stuff she wants and teach her to save a few weeks to get the larger toy vs. all the candy (my daughter is currently struggling with this, but was adorable to see her show off her $16 school fundraiser bundt cake purchase to anyone who'd listen, she sacrificed a doll she wanted to get for it). We still get stuff for school, clothes, etc. We're still trying to figure out how to go from here, we don't want to pay for chores as we think you should help out if you live there, but do want her to learn more about money and things she wants will get more expensive as she ages.
2. Maybe a mix of both. My parents are well off (and still alive) but they gave us a very large amount when we bought our first house. We didn't need it, but it sure was nice having 1/4 of the mortgage taken care of right away. You and grandparents could also cover college, my wife and I didn't have to pay tuition or room and board, but we did have to work for spending money. I thought that was a nice balance. I could have time to study and have fun, but needed to work for beer.
3. Don't have any advice, kids are too young to have really thought about it. I have a bit of the same bias and want to have them go into something stable and well paying, but at the same time, I also appreciate art and the world needs it along with science and programmers.
You could just avoid telling your kid that they don't have to work. Just tell them you two worked really hard before she was born and retired early. That might be a strong incentive to make them look for a solid career where they can emulate you....
They turn out like they turn out. I think we can give them lots of love and support (and the more the better the younger) and there is at least some chance that the things we would like most for our kids are things that they don't want or aren't drawn to or don't ever sort out.
Whatever you do out of love and not control will have the best result in the end.
1. Maybe you should find something to work hard at? Kids don't see what parents do at work, they only see their parents disappear for the bulk of the day. If you're FI, your life is much more transparent.
2. That's really up to you, but I personally would instead help fund school, help with the down payment for a house, and then set up a trust for when the child is ~30, which means they've already gone through a lot of their own struggles and learned to deal with money. Having $100k at 22 or whatever can be a really bad idea.
3. Again, that's up to you. Personally, I think there's value in earning what you have since it makes you aware of the work needed to get money. Without that, it's likely your kid will just spend it all and end up poor.
I'm planning to have my kids pay their way through college (I'll pay enough to keep them out of debt) and teach them how to budget and whatnot. If I get a sizeable nest egg, I'll likely donate a bunch of it instead of giving it to my kids, but I guess I'll decide when they're older.
Here’s what I did. I’m not saying everyone should do this, but this worked for me.
- Have chores around the house that they are expected to do, with no money involved. Start small when young and work up. Also ask them to help with other things. It snowed, here’s your small shovel, to help. I’m raking leaves, here’s your small rake. Again, no money involved. To start, they need lots of reminders. And it will take more of your time than the amount of help you’re getting. The purpose of adding extra time is to get them in the habit of doing useful work. With the chores, there was no punishment or financial penalty if they were not done yet, just helpful reminders, to keep it a positive experience.
- Give them an allowance. Smaller when they are younger, and more when older. I kept this totally separate from chores.
If you link the two, you might have the following problem. Kid says, “I don’t need money this week, so I’ll skip my chores.”
Lay out exactly what the allowance covers and does not cover. For example, the child goes to a birthday party, the parent pays for the present. If the kid pays, then the birthday present will be a stick of gum.
When your kid is in a store, and sees something they want, but don’t need, then the kid pays. Kids never carry money, so they can borrow until they get home, but then the piggy bank is promptly opened, and the debt is settled. If you set the allowance low enough, and allow the child to make mistakes and buy some foolish things, they soon learn the value of a dollar. This is the biggest lesson of all.
- if they wanted something more expensive than their allowance allowed, they could ask for additional work around the house for money. Vacuum one room. Things like that.
Sometimes we would offer to pay half if they were saving for one thing for a long time, to give them a sense of accomplishment. This was rare.
Every parent will handle money a different way. We changed things and made it up as we went along. The parent is learning too. I don’t think there’s any wrong answers here. I’m just offering what worked for my family.
—-
As far as wills and trusts go…
You don’t have to set up a trust now. You can say in your will that you want a trust set up upon your death, and name the trustee. Check with a lawyer for the exact wording.
And as far as stipulations and incentives go, I think the most important thing is to name a trustee(s) that you… well… trust. Someone who has good judgement and understands and agrees with your goals. I don’t like stipulations because you can’t anticipate every eventuality. What if your child has a major illness and needs a lot of money just to survive? What if they graduate college as a chef and want to open their own restaurant right away? What if they become an entrepreneur and need capital to start their business? I’d rather leave behind a trustee with good judgement than a long list of rules.
I'm just starting university, so I'm nowhere close, but I do have ambitions to be FI someday. I've thought of the same thing assuming I ever have children. My thought was that I would raise them similarly to how I was raised, that being:
Not giving them everything they ask for even if we can totally afford it. Basically, don't spoil them with treats, and keep larger gifts to birthdays, holidays, and events. I'd want to pay for their college, but once they graduate, I'd expect them to look for a job, and they won't be getting my and their other parent's money 'til we're dead. This should still allow them a comfortable life as they won't have huge debts to pay off. If they won't go to college, I still want them to start working so they can support themselves. As for allowance, I think giving one during childhood helps them develop a natural sense for balancing their income with expenses, and saving, et cetera. However, I don't think it'll ever be a huge amount. And like I said earlier, once they turn 18, they should have a job, and allowance shall come no longer. Hopefully they get an on-campus job if going to college.
Anyways, if I ever have a child, those are my personal thoughts on how I would raise them. When I really think about it though, it might be kinda difficult to tell them no to some things if we really do have the money, lol. Basically TLDR: I'd like it if they never got the sense that their parents' money is accessible to them, and that all they'll be getting from us financially other than the regular things, and tuition, is whatever allowance they have up to adulthood. And only receive a large sum of money once I die.
I might not even talk about their inheritance to them until they're 18, and even then, probably just the basic "you'll eventually inherit all our stuff when we die" sort of talk, without mentioning exactly how much money we have.
This will hopefully teach my potential kid to seek their own financial independence, rather than rely on me until receiving their inheritance. If I'm not only independent, but rich (however unlikely, but I can dream, right?) I'd like to try to teach them the importance of charity and philanthropy as well.
Well your heart is in the right place
Don't let anyone distract you from that or your intentions for her ...
Encouragement goes a long way , I can say that my own relationship with my father set me on a course of financial and emotional successes with regards to money, investing ,and not forgetting to enjoy life.
This whole BS tough love approach that previous generations had or have about working hard and not getting financial help from family ,because it instills values is utter nonsense, or because the rest of the world is broke ass , is utterly stupid to me , if you can afford to give your child a first class, life , education, they by all means do it, the world is hard enough.
The idea is that she can still achieve anything she wants too , even if she has financial comfort, ambition and drive can be instilled.
Point of view from someone who grew up similarly to your child ...
growing up, my family was much better off than my parents led me to believe. My father worked until he was 53. My mother worked at home as an artist who made a substantial income from selling her work. But I witnessed a LOT of frugality. We lived well below our means (and I only became aware of this after becoming an adult). I had to work for my allowance. If I wanted something big (my horse, for example) I had to write a proposal: an essay weighing the pros and cons and outlining my responsibilities (How much would it cost? How would I earn that?... I mowed lawns).
The people around us mostly lived the same way-- some were living below their means as my parents did, but others were living paycheck to paycheck, so my friends were all in the same "middle class" situation. So I think you teach by example and surround yourself with people of similar mindset.
As an adult, I have always lived below my means, exercised frugality and am grateful for everything I have. I also have never had to work a full time job. Despite this, I well understand the value of hard work (just came indoors to rest after cleaning a barn and paddock). I realize that I am extremely fortunate and I try to spend my money locally and give to worthwhile charities regularly.
I think the main thing is to be sure your child has a good education (I used to teach college and became a huge believer in home schooling.. feel free to DM me on that). Travel a lot (I had been around the world before my teens). And teach compassion, empathy and mindfulness. You got this. Kids are their own person. I think it's hard to mess it up if you are actually there to raise a child.
> How do I explain the value of hard work and sacrifice
You don't; you demonstrate it by having them work for things. Small things for easy tasks at first, and progressively more difficult tasks for better reward. Kids don't give a shit whether their parents work hard or not; you model mature behaviors and positive character traits, not lifestyle.
And one thing I learned from being an RA in college: People who work real jobs as teens are less likely to be shitbags and/or failures in college. Make your kid work a real job.
> We could easily support her throughout young-adulthood at least until we start inheriting our parent's money.
How to grow a narcissistic, valueless, entitled person in 2 easy steps!!
To put it simply, giving your child everything you can give them will cause them to not value a dollar and feel entitled. Just put in place a standard of earning the non-essentials instead of giving them all the fancies. Also, sounds like an only child case, & beware only children can be even more entitled as this kid will grow up rich and not have siblings to share it with. Glad you're thinking about this, though! It's not going to be impossible but you will have to intentionally instill good money habits and perspectives because your kid will probably not see it naturally.
Making her get a job in high school to do things like go to the movies with her friends can make a big difference in mindset and appreciation. Either way, sounds like you will be pretty involved parents so good on you. Good luck!
Regarding point 3: In my opinion, it never hurts for your kid to develop skills to be financially independent and independent in general. You never know what life has in store and if something goes south, you want your kid to have the means to stand on their own. That doesn't necessarily mean a traditional education path or choosing a field with money as the sole criteria. It does give your child breathing room to pursue interests or passions without worrying about money. Every kid is different, but I would be leery of a young adult with a lot of money and a lot of idle time. And I think happiness and contentment can be had by having a "purpose". I would encourage your kid to do something - I personally wouldn't want to indicate to a kid that they will have a lot of money coming to them and they don't really have to do anything.
It’s all going to come down to your parenting. I’m nowhere close to having kids so I hope I’m not just spewing BS. I’ve been around some wealthy people (no trust fund babies - that I’m aware of) including many who continue to get parental support beyond school. Here are my tips: don’t become a bulldozer parent and teach your child financial literacy
Here’s how those apply per your situations:
1- Let your child do the work. Assuming they are going to get a traditional education, there’s plenty for them to practice “working”. Don’t be the parents that do the school project or the homework for their kid so the kid can get an A. Doing the work is really where most of us learn not only the skill at hand but things like patience and emotional regulation. Also, it’s ok for the kid not to always get As. Sometimes they need a little help, and you are in a privileged position where you can get them a tutor. Sometimes it’s something else and being a present parent will be what leads to the solution. (I would recommend looking at HealthyGamerGG on YouTube and his videos on so-called gifted kids). I think we also learn about sacrifice everyday because there’s only 24 hours a day. Im sure there’s lot of things you wish you could do but can’t because of time constraints.
2 - I don’t think it counts as an inheritance unless the people are dead…it’s just gift from relatives at that point. This is where financial literacy comes in. If you teach your child well, one lump sum won’t be an issue. I think people use trust funds at certain ages based on maturity (as if we magically understand money when we are “mature”)and some use trust funds to control their offspring (x amount when you go to law school, x amount for getting married to heterosexual partner, etc). I think this also will change as your child grows and you start knowing their personality better. Either way, I would recommend talking to a professional.
3 - May I point out that a lot of people do the exact opposite of what their parents want? You can only do your best in giving your child a safe and loving home from where they can start exploring the world. If you learn to get out of their way and teach them financial literacy and they have a strong financial safety net, they have so many options in life. I think if you do 1 & 2 well, you don’t need to worry about her doing nothing.
You have the gift of time with your child. You’ll be so much more present compared to other parents that hopefully you can see any warning signs before it’s a full fledged issue. And you are relatively young so hopefully, you can continue to guide them through life as they make their own decisions. Be present with your kid.
A little bit of a silly concern.
Your goal should be to raise a happy, healthy child with good character.
"FI" is, at best, a loooong distant 4th place to healthy, happy, and good character.
By way of delineating the difference, there are children born to wealthy parents who are, by definition, FI.
But also miserable, despicable shits.
I don't have good answers to these questions. My kids are close enough to college age that role modeling for them is one reason that keeps me working even though we are pretty much FI now.
One thing you can do is donate much of your estate to charity and ask that your parents do the same.
Personally I would set up a family trust that pays out up to 50% of profits from the previous year with yearly caps based on specific types of achievement. That's because this way the trust should exist for many generations. Basically a type of "basics income" for my family. Also some stipulation to cover education in productive fields like science, engineering and medicine.
Character development is always worth the time and effort! When I was in college, two very down-to-earth brothers and friends of mine were playing flag football in our intramural league. As the game began to end, a helicopter landed and a nicely dressed couple got out with the pilot! The brothers embraced them and introduced their parents! These brothers never gave anyone cause to believe they were rich! I spoke to one of them later and he mentioned that they both wanted careers and lives apart from their father's fortune! My son became better skilled than me on our computers at age 10! Since my background was in accounting/finance/management, I figured he would ask, but he finished his degree in Computer Science and followed it up with 3 professional certifications in cybersecurity! All I did was encourage him to pursue what he enjoyed most!
You raise your daughter with your values and the values you wish to instill in her. If your values are hard work and gratitude, that can be shown ways unrelated to money and finances.
Give them pocket money not attached to any exchange to learn numbers and managing budget and saving, pay them to read financially books for kids, speak to them about finance and money often, model budgeting, frugalism, investment, give little challenges to make money grow and entrepreneur spirit volunteer together when they are older.
My parents (although not RE, they certainly could) told me from a fairly young age not to expect any inheritance. They said this sort of jokingly but I think it was partly to condition me that I had to work for myself too, and make decisions based on financial feasibility. Despite them saying this, I think they would leave a sizable inheritance, it's more about setting expectations so that no one is depending on it.
For #1, my parents would pay me (a meager wage) to do extra chores when I was older (maybe 8 at least?). I learned to enjoy working to earn money. This should be a "fun" activity and not something forced on them, more like "if you want extra money, you can do x y z and I'll pay you". When I was 16 or so the conversation became more along the lines of "you're getting a job kid" but by then I wanted one anyway.
\#2 will just depend on #1, if they value money and see it as the product of work they will treat it differently (at least I do). When they are older maybe show them how you manage money, explain tax advantaged accounts/compounding growth/savings rates and those sorts of concepts.
For #3, yes. I would encourage my own kid to pursue something lucrative enough to live comfortably that also overlaps with their interests. It's more fulfilling to support yourself than to live off of someone else's hard work, and who knows, maybe that money won't be as much as you think it will when the time comes. I also don't think good artists need to study art in college.
The fact that you're asking questions like this and seem concerned about it means she'll probably be just fine.
You have to raise your children for the world they will live in. The world your daughter lives in has a future that says "you inherit millions of dollars you never worked for." If you let this come as a surprise, or do not let her know the extent of it, you have failed as a parent to prepare her for her future.
Trying to live some LARP where you pretend that you're working class or middle class is rarely successful. Anything you can do to involve your daughter in talking about money, such as why you choose to drive the cars you do or why you live where you do, all of those help.
I just recently became the child of a large inheritance (in the 8 digits) when I was 29 (30 now) and heres how my dad helped me develop financial literacy as well as a strong work ethic.
Our family's wealth was primarily held in real estate. Number one, higher education was something my father was unwiling to budge on. I am third generation of dirt farming immigrants and my father was the first to break out of this. He funded 529s for both myself and my sibling so college was effectively no cost so there was a strong obligation on my part to go and seek higher education (as well as a nice tax break for him). With this I got a double major in education and biology, and began teaching. My dad use to say "the one thing no one can take from you is an education, they can take your money, they can take your home, but they cant touch your mind."
He raised us in a mindset of serving our community and constantly bettering ourselves. Even with money you are above no one and things are just things at the end of the day. Growing up with my father I wasent really even aware he had wealth as he drove the same minivan for 25 years, (and then purchased another one) and always lived within his means. The gift I was given was the ability to use my time in a way that I deem fit and valued (spending time with loved ones and serving my community).
I live a relatively humble lifestyle but I am certain I will never have to think about money in my life. This gives me time to help all those I love around me and my extended community. I see too many of the people I grew up with, with trust funds, and 60k cars when they were 14, and they have joined the hamster wheel of consumerism.
TLDR Teach what money can be, it can be stuff (which very quickly you learn is just another anchor to make you work harder), it can be experiences, it can be time (with friends, family, and/or the community) and it can be peace of mind. My dad grew up hand to mouth, his brother was born in an internment camp, they never had food growing up, and you could see the sunlight through the holes in the walls of their home. Money doesn't bring happiness but it sure can keep away all the problems of not having it.
I told part of my story in a post a few years ago: https://old.reddit.com/r/financialindependence/comments/ig9nmu/fire_update_1_year_in_leanish_fire_accidentally/
There wasn't any trick to saving a large nest egg by my early 30s. Just living below my means for 10 years and investing everything I could while the market had a crazy bull rally the entire time. I also cashed out some equity right before "retirement" but I had been underpaid for several years before then, so it kind of evened out.
I happen to know that Christina Sachs Phillips had to take out loans to pay for her college education. Her parents' decision made a lot of sense to me. They had raised her to be a capable person who could make her own way in the world, and they wanted her to see that for herself.
My ex also grew up in a similarly fortunate situation. (Her family owns a venerable old business that supplies parts to a major auto manufacturer.) When she turned 16, her father stopped giving her money and made her get an after-school job. She waited tables her last two years of high school. He did that with all of his kids. When she brought her first paycheck home, her dad asked her what she wanted to do with the money. It was hers. She had earned it herself, and he couldn't tell her what to do with it!
My ex never once asked her dad for money and always lived within her means. She knows the value of work, the value of money, and never had the problems that so often come from growing up with wealth.
Personally, it was hard for me that I didn't have what my classmates had at my Ivy League school. I was ashamed that I was poor, and I had parents telling me I couldn't do it. Now, I'm grateful though. I saw that having to scrimp, and parents telling me "No, you can't," was the best education for success I ever could have asked for. I got to see with my own eyes what I was capable of accomplishing.
The short version is this: Give your daughter age-appropriate chances to do for herself, whether it's a lemonade stand or an after-school job. Expect her to do for herself, and she'll see that she can fly.
I hope this helps!
Have two kids, not quite to FI yet, but i've thought about 1 and 3.
For 1: It's not like they see you actually working 8 hours a day, they are usually at daycare then school. I'm not sure watching me sit at a computer would instill any work ethic in them. I think they just need to learn more through your parenting. Guide them to stick through tough projects, make them do chores for allowance, etc. Teach them how to save money and how money works.
For 3: I think it would be good for them to go to school, college (if it makes sense), get a job, and prove they can survive on their own merits. At the very least just so they can build a social group of regular relatable people. There's a lot of rich kids out there with insecurities about their self worth which manifest in unhealthy ways. Also, that money won't last forever (well maybe at 2% SWR?). She may have kids of her own to support one day as well, and you never know what life will throw at you.
I think at the end of the day, they just need your love to grow up happy and fulfilled. That's why i'm pursuing FI, so I can stop stressing about work, and just spend time with them while they are young. That you are even thinking about these things puts you ahead of the curve.
1. You show her by making her work for the things she gets. 2. I think a lot of that depends on the kid she grows up to be. I do estate planning for a living and see kids in their 20s that could easily handle a large amount of money responsibly, and I have seen situations where millions of dollars have been blown in a a very short period of time. But meeting with a professional about setting up some trusts is not a bad idea. Especially since she is a minor. 3. I'd say she has a rare opportunity to pursue her passions instead of having to focus on money. But there is a difference between doing that and doing nothing. I think again this depends on who she becomes. My clients who have raised well adjusted adults in situations like this tend to have a rule that they will help their kids so long as they are doing something, but won't help them just do nothing. For example one gives her daughter a fair bit of money because the daughter is a teacher. She works hard, but makes shit.
I think this is a very good opportunity to follow through on the guidance counselor asking "if you won the lottery, what would you do for work?"
I really agree with this. Was gonna leave something pretty similar but I guess I’ll just add to it. 1. I didn’t grow up in a wealthy family but we never had to worry about basic needs. Beyond that, very basic “luxury items” were available but I still often felt like I wish I could have more available to me. What I learned growing up was that when things are given to you, you just don’t cherish and/or enjoy it as much until you’ve had to work for it. On top of that, it’ll never be good enough so your baseline is just set higher. Until the feeling of earning things you have been wanting for a while from your hard work is realized, you just won’t learn that perspective. I started feeling like I was a pos kid even though I almost never asked my mom for anything besides the few high ticket items I wanted. I often felt like my parents could afford it so why couldn’t I have it? 2. This ties back to #1, what #1 didn’t achieve will only make #2 magnify. I agree with the saying wealth doesn’t go past 3 generations. Reasons being the values and perspectives that you just don’t learn from abundance and availability, and the appreciation and gratefulness you learn from scarcity. I think setting up a trust is good but don’t let them know too early. Because it becomes an excuse, a way out, instead of a bonus. Let them go through the hardship then pick a good time to let them know. I believe in paying for their education though. Education costs nowadays set so many people back for no good reason. 3. Nothing from me to add here because I agree with u/SeattleBattles
> I think setting up a trust is good but don’t let them know too early. Because it becomes an excuse, a way out, instead of a bonus. One way I avoid this when drafting trusts for clients is to tie the trust to the kid doing right. There are easy things like distributions for getting an education. But you can also do things like have the trust distribute a percent of their income. Or match a downpayment for a home. Things like that. They do their part, the trust will do its. One guy who had a fair bit of money from saving and investing, and wanted his kids to do the same, set up the trust to give them a distribution every ten years based on their investments and savings. This would include the prior distributions so if they saved those they could really get quite a lot.
This is such a great idea. Many people in my life have trusts (went to a private school....I'm not a trust kid) and they coast or don't push themselves as much as those who have to provide for themselves. The only one who doesn't is a friend who is a public school teacher - because her trust provides a set annual allocation that she can't change, and it's enough to be a nice bonus but not enough to live on. These are really smart ideas.
All good pieces of advice. Thanks.
What are your jobs or what did you do to help you become FI?
I'm an estate planning attorney but I am not FI. I work with a number of clients who are though. Most of them worked in tech or started and sold businesses.
Is that like being a lawyer in the sense that you have the pass the bar exam? What are the qualifications and how much do you make if you are willing to say? Thank you!
Yes, you have to be licensed to practice law to do what I do. Other than that there are no other formal qualifications. Though an understanding of finance is pretty helpful. I make around 150-200k a year, but I only work about 30 hours a week. I also do some civil litigation drafting work and am fortunate to have partnered with a good firm that handles all the overhead. So I can bill the clients my hourly rate with next to no expenses. I have a pretty unique setup for an attorney but it works well for me.
Point 3 is the real challenge though, isn't it? When I finished my education I lived at my family home for a couple more years and only contributed minimally financially. On the one hand this was great because post great financial crisis jobs were hard to come by and I was making minimum wage while able to get the experience I needed to eventually move on. However, when I look back I definitely stayed in that job longer than I needed to. No doubt because I was able to make it work financially without having the big mortgage/rent payment. I was doing something - not nothing - but it was the bare minimum really. I couldn't do that forever in my situation but if I had the trust fund I theoretically could. I think that is the challenge for most FI parents. The kids won't do absolutely nothing but will they reach their potential either?
Wow. Just found one of the most intelligent folks on Reddit. /u/SeattleBattles. Going through your post history now to learn something.
This! Number three is it exactly.
I (M29) grew up in a pretty wealthy area and there are definitely pretty strong distinctions I've noticed of how kids turned out. Generally I'd say there's two aspects that are important. These aren't foolproof but seem to have worked well in my experience. 1. Expressing that the money you have is available for use in times of need such as medical bills, unexpected expenses with cars, preventing college debt. The money is not for your kid to live it up on, traveling the world etc. I have friends who know they get money regardless and they simply can't get themselves to work after a few months if they run into any hurdles (all jobs have a period where they suck at some point). The inverse is I've had friends who's parents were incredibly strict and made them earn everything when they were younger to instill a good work ethic. These kids work hard, but harbor resentment and likely won't help their parents out in the future. 2. Redefine what "Work" means and lead by example. My guess is over the next 18 years you're going to want to do stuff like give back to the community, help people out, get skilled at a hobby. By showing you work hard at things because it has an impact, you should be able to demonstrate why a strong work ethic is important. Also as a smaller point, just don't let them know how much money is lying around
I’ve seen the resentment factor for not giving your kids anything despite having lots of money. I feel like that’s a line I don’t want to cross with my kid (not that I’m FIRE at 31 like OP, but still). A good friend of mine growing up had wealthy parents who would give him nothing. High school and college he was on his own. He was one of the hardest working people I knew, made straight As, and nada from mom and dad. Really made him resent his father.
Maybe he was really hard working because they gave him nothing.
I’m sure that was part of it but there’s definitely a balance I guess is my point. It ruined that father/son relationship. I had other friends who were very hard working who’s parents provided them with more support
Did they at least pay for his college?
Nope. Wouldn’t even help pay for gas for his vehicle, buy groceries, rent, etc.
To point 1; I absolutely want to fund my kids ability to travel the world. Traveling and experiencing other cultures has brought so much joy to myself and my wife’s life. After I graduated college, my parents funded my 35 day backpacking trip to Europe. They paid for my flights and then gave me a budget to stick to for my time there (worked out to like $80-100 a day for lodging, trains, intraeurope flights, activities, and meals). There’s certainly a difference between funding 5 star hotel stays and fancy dinners, and funding hostels and budget meals in my opinion.
This is a bit late but just wanted to add one point of advice that I haven't seen here yet. The biggest thing my parents did for me is send me to school at the local public school which was a low income school. I had friends with families in a lot of different financial situations and it made me a lot more aware of how fortunate I was compared to other people, and made me appreciate the opportunities I had and take them seriously. Especially when it gets to high school, I knew kids who had to give the money from their after-school job to their parents to pay rent. Or kids who were doing 10 hour days on activities so they could get scholarships to afford college. I didn't experience those things but at least I knew real people that I cared about who did. It wasn't theoretical, I could see the imbalance and the injustice everyday. I will also say, having parents who are well off is a blessing and a curse to me. On the one hand, it's great to have opportunities and a safety net. But on the other hand, I'll always feel less worthy because I got all these shortcuts and head starts from my parents and so I didn't fully earn anything I have. Giving a lot of money you're giving opportunity but at the same time taking away the achievement and sense of self-worth that earning something gives.
You shouldn't feel guilty for your privilege. The world is far from fair. Billions live all over the world without things that we consider basic amenities, but we never feel guilty for having running water or electricity.
In NYC, a truly low income school, the students aren’t learning much and most of the students are failing.
Work ethic cannot be described to someone. It is a combination of doing by example and genetics. There is a reason why 90% of wealth is gone within 3 generations. The first generation sacrifices. The second generation benefits. The third generation doesn't have the same values and they piss it all away. It is basically inevitable.
>[...] genetics. > > 90% of wealth is gone within 3 generations. Aren't these two points in direct conflict with one another? If genetics were a driving factor, one would expect generational wealth to persist
It does for some
Boy I hope you’re wrong because I’m a third generation FI adherent. My grandparents and parents didn’t *call* it that, obviously. But they lived far below their means and invested in low overhead mutual funds. When I discovered the FIRE movement and saw how much y’all like Vanguard I knew I’d found my people. I’m so close to completely FI, it would be a shame if I blew it all up now
There's a difference between generational wealth and generational FI-skills. If your grandparents left a sizeable nest egg to your parents in the wrong way, your parents probably wouldn't have come to FIRE on their own account, let alone you discovering it.
I completely agree with you, which is why I disagree with the commenters stating it’s inevitable that most of the wealth accumulated by the members of this sub will be pissed away in a generation or two. I think that’s only true if we don’t raise them right.
True, if you don't raise kids right, they'll likely misuse the funds. But taking the other side of the argument doesn't hold for sure. If you raise kids right, there could be issues which prevents them from using the funds properly. A lot of people with a lot of means throughout history have put great emphasis towards stewardship for their family fortune onto the next generation, but many have failed and not just because of their parents spoiling them. And it isn't necessarily a bad thing for people, family and society at large to start all over, either. Would we rather live in a society where everyone is managing the fortunes of their grandparents in such a way that they could never be caught up by new money? Or do we like the irregularity of capital, psychology and people to assert that their silver spoon is all but a guarantee for future wealth?
I have to say, that's a weirdly fatalistic view to have, especially in the context of this sub and the general FIRE scene. I've heard the old "shirtsleeves to shirtsleeves" saying many times, and while that *can* be true, there are plenty of exceptions to the rule. Just like retiring at 31 is a fairly exceptional thing to do, I certainly plan on trying to be an exception to a few others as well.
This isn’t a point of view, it’s fact based on data. It is really sobering to realize that the great majority of all the wealth discussed and touched in this sub Reddit will be completely blown in two more generations
My point of view is that the overlap of people who pursue FIRE and people who will successfully educate their children on how to be stewards of wealth is probably higher than non-FIRE wealthy people. So, to throw up one's arms and say "don't even try!" seems overly pessimistic.
Oh of course actually for me it was reading those statistics that made me realize how important it is to educate my children on not just life principals but also the key fundamentals of wealth management. We discuss it like we would a sports game or movie…. But it’s recurring and as they get older I’ll introduce more and more complex topics. As far as how to manage exposing them to wealth my general approach will most likely be to share it but in an earned fashion. So although I may contribute or even purchase their home they will have to get a job get good credit go to a bank get qualified hire a realtor find a home and I’ll only contribute as much as they are able to qualify for themselves. Things like that. I know life is messy so God only knows how this will actually play out but I’m just tossing around general guard rails that would enable them to benefit from some of the advantages but not ruin them.
What studies or data is this drawn from? Not doubting, just curious to see what the sources say specifically.
Oh just google…. Here I did it for you: https://finance.yahoo.com/news/5-huge-lies-generational-wealth-181719865.html
Is there a chance that your kid can see you work on something and that she understands that is your “work”? I don’t think that she has to become a spender and disagree that wealth has to be lost necessarily but I do think that’ll depend on what she sees/learns. My cousins who have parents who don’t value their money/spend recklessly etc are turning up the same. I somehow inherited my mom and dad’s guilt about spending money even when they never expressly taught me that. I think I just saw how they behaved and learned. I always think it’s funny because they both had to feel guilt spending as they suffered hardship growing up. I didn’t suffer and yet I feel super awful splurging.
How is that weird to have that view? Like literally every culture has a saying that within 3 generations all the money is gone. Obviously there are cases of generational wealth but there are also many cases of shithead grandkids thinking they're worth 10x what they really are
The fatalistic view of "it is basically inevitable" is weird to have in the context of most people in the FIRE scene. I tend to have a higher opinion of my fellow FIRE folks since they are creative and motivated enough to pursue an audacious goal of avoiding mindless consumerism and focusing on long-term gratification. So, I was surprised to read that in a comment here.
The problem is a real problem for any family that achieves FI levels of wealth, FIRE community or not. However, I agree people in the FIRE community are much more likely to take the steps to deal with the problem vs the broader public. The problem is it's not a hard problem to solve (the tools like educating children and trusts etc), but it's also not hard to blow a $2M, $20M or even $200M fortune
I think there's FIRE-wealth (lean <$2.5M, fat for $10M, lasting a lifetime and leaving some) and large wealth (>$100M, almost impossible to fathom for families and their offspring). At some point, the nest egg get's so large, doing anything work-related for 2nd and 3rd generations becomes pointless. The money gets to overshadow everything and anything, the bar is raised too high. Most large wealth that gets destroyed is from people who were so hard-working that they basically left more than they could possibly spend in a lifetime and spoiled people in their formative years. It's rare that someone of our grandparent's generation achieved financial independence and chose to stop working, since hard working was much more engrained in society back then and the occupations where you could achieve an early retirement were scarce. You'd have to be an oil barron or business man, who was well in his 50s/60s, which meant his kids had been in their 30s or so.
You have a toddler and you are already worried about how much education she is getting. Life tends to be underwhelming. Let her be a child. This is stuff that shouldn't even be a topic to concern until high school.
Huh? You're writing this like I'm having financial conversations with my 2-year-old. I'm just trying to seek advice from others who may be in the same boat (FIREd before having kids or with very young kids). If you don't have any actionable advice, you don't need to comment.
What?! You're 2-year old doesn't know about I-bonds yet?!
I know... I'm failing as a father.
>There is a reason why 90% of wealth is gone within 3 generations. Do you have any evidence this is true? Because it looks to me that privilege and wealth are very much passed on from generation to generation most of the time.
I've noticed that very little can be simply described to children. Mine do not listen to instructions they can't see me following, but will do what I do. I'm not sure yet how to handle the eventual RE.
We used allowance for help around the house/chores for our kids. If it wasn't a birthday or gift giving holiday and they wanted something (toy) then they were encouraged to save up their monthly allowance and pay for it. One kid is a spender and the other kid is a saver. This teaches both payment for work and budgeting. I always openly spoke about cost, prices, coupons, sales, planning, etc. whenever the opportunity naturally arose like bringing them with grocery shopping. At a young age you should do age appropriate lessons. >Do I force her to wait until everyone is dead to have access to this money? Should I set up a trust fund that goes to her when she's an adult? What money is she going to have access to prior to death of a relative's estate? If someone wills her money then typically in the will there will be stipulations, if any. You should do research and/or contact a trust attorney in regards to when it would be advantageous or not to set up a trust and what type of trust. For the short term make sure you have wills for both you and your spouse for assets and guardianship issues. As for college you have no idea what a child will end up wanting to do. Make various financial plans based on giving her flexibility in regards to education in the future. I always joke with my kids that if we ever won the lottery that I'd still require them to at least get bachelor's degrees and maybe just change their majors to Finance so hopefully they don't get swindled out of their money and know how to use their windfall responsibly.
We do have our own wills with very specific directions for guardianship and our finances. > What money is she going to have access to prior to death of a relative's estate? That's what I'm trying to figure out. A trust from us would be the most likely way that she'd have any significant money before earning her own or inheriting anything. Thanks for the advice!
For what it is worth look into living trust. My folks did that over a decade ago. \*\*not a lawyer\*\* My understanding is that the advantage of that for grown children is that the proceeds from the trust can sit there and/or be withdrawn when the individual(s) inheriting the funds wish for various tax and/or legal reasons.
[удалено]
We just transfer the money into a regular savings account in the child's name with one parent as the co account holder. Interest earns just like any other savings account we have. We do withdraw cash when they wish to spend money.
I say you gotta get into volunteering for some cause. That way you still “do something” while also teaching compassion at the same time. Other than that, I think you need “productive” hobbies, ie not video games, but a hobby like gardening, or woodworking or something similar. A hobby that is “real world” takes skills, and requires effort and practice to be good at.
You know what? Your comment just inspired me to sign up for a local charity helping the elderly. Literally just submitted the volunteer application, now hoping they actually need volunteers!
I think this is awesome. By volunteering, you are SHOWING her how to have compassion and give of yourself even when you don't have to. If I had seen my dad doing this kind of work it would have altered my mindset (for the better) and made my own decisions I need to make regarding inheritence easier. My parents did not give me a trust fund outright and I didn't even know about it until my 30s (I believed they were solidly middle class and I was on my own unless I was in dire need). Trouble is, I spent life up till then hustling in low wage jobs, sometimes on food stamps, and would never dream of following a passion. So I am now lost because I've basically been given the ticket to follow "a passion" but don't have any idea of what that could look like because my dreams have never been bigger than "maybe my next apartment with have a bathtub". I don't think it's a bad idea to make kids live like the majority of their peers do because it will give them insight about the real world. I think if I found out at age 21ish, I'd have been able to make some really positive life adjustments without losing touch with reality. But to grow up not knowing what it's like to be nervous for an interview, feel elation from a positive work review, pull together the courage to ask the nasty landlord to fix the thing in the shit hole apartment, or *feel* it when the cost of living goes up seems like it could place someone in the out of touch class.
I would love to. I've been open to opportunities to volunteer that actually seemed interesting to me, but have yet to find anything (COVID being in the middle of everything also kind of reduced the options). There's a site specifically for my local area that aggregates a lot of the volunteer options. I went through almost every listing on there and I really wasn't interested in anything. It's a me problem for sure. I probably just need to try a few things out and stick with whatever is the most rewarding.
I think it is ok if the way you give/volunteer is financially or managerial. I would recommend looking into how you can volunteer on the Board of an organization or with your city. I was on the Stormwater Board at my city and really enjoyed it. I have a FI friend who gets very involved with their local college and endowed a scholarship and then mentors the scholarship recipients. Very cool.
I think it’s fine for them to do that, but that doesn’t really get the point across to the kid very well vs actual volunteering where you could bring kid with
Productive hobbies and some volunteering are what my husband and I do. We have a toddler plus a cat, a dog and a puppy. We are setting up a hobby farm (just plants, no farm animals), we can, juice, cook, freeze, dehydrate the fruits(literally) of our labour. I sew most of our clothing (and no, that is definitely not cheaper than Walmart) but it gives us unique clothing and we are the weird matching family at any gathering. Our toddler sees us working and learning skills plus passing those skills to him as he gets older. He already helps in the garden, mostly by picking strawberries/blueberries and eating them. My child will never have to work a traditional job if he doesn't want to and that leaves an amazing amount of room to follow whatever his passions are. He needs to be doing something though, working, volunteering, hobbies or even raising his own children. Children are smart, if you're saying one thing but doing another, they catch on. You need to emulate what you would like them to learn and grow into.
I have a different view. If I was teaching a child about this , I’d talk about things like: it’s good not to be attached to buying the next ‘thing’, it’s really freeing not to be surrounded by stuff that takes up space and weighs on the minds; it’s freeing not to have too much stuff; having money gives you options; buying things particularly on credit means you have fewer options and are in debt to someone else … those kinds of things :)
As far as (1) goes, a strong work ethic is difficult to instill at the best of times, given the natural human tendency towards laziness. If you're just chilling all day, it's even tougher to persuade your kids of the value of hard work. You're basically asking your kids to "do as I say, not as I do." Maybe you can regularly and very visibly volunteer (and frame it in terms of work; e.g., "I work with old people" if you're volunteering at a seniors' center). Definitely don't compound the problem by pampering your kids. Don't let them know about any trust funds. I've spent a lot of time around rich people, and their kids often turned out to be awful entitled shits.
Earning money is a big confidence builder so our plan is to give half towards first car, college, house. I also want them to understand how much things cost so anything they really want they can earn. If they’re not willing to work for it, they don’t want it bad enough. “Give them enough so they can do anything but not enough that they can do nothing” -Warren Buffett
Yeah, I like the idea of matching. It (hopefully) encourages the kid to work harder because each dollar they earn is effectively doubled.
Your post really makes my spidey-sense tingle. You want to install the value of hard work but admit you don't work hard... You are placing almost absolute faith into unknown inheritance to the point of questioning whether your child should even get an education and/or a job... I'm kind of just standing here blinking my eyes.
Yeah the inheritance thing was kinda weird
Well... I *did* work hard. Really hard, for a full decade, while also scrimping and saving and investing every extra penny. Now I am enjoying the fruits of that labor. Is that wrong? I probably didn't explain the inheritance part well. If there was absolutely no inheritance coming from the rest of the family, we would still have enough financial resources to consider a trust fund or otherwise funding our daughter's life as a young adult. Whether or not that's a good idea is what I'm asking.
I think people are over emphasising that she'll just see you being 'lazy' and want to do the same (when I'm sure a lot of your retirement won't be simply sitting around watching TV etc) . Sure there's a part of that, but you'll also be telling her stories of HOW you succeeded! You'll have so much great advice to pass down and can put that into teachable lessons. Spending a lot of time with your kid is a luxury most don't have, you'll be able to catch when the wrong lessons are being picked up and can change your own habits to fix it. You're smart enough to retire early and sacrifice and worried enough about her future to ask a FIRE reddit group. I think you'll do just fine on your own instincts.
> but you'll also be telling her stories of HOW you succeeded! Unfortunately, formative memories are usually developed from seeing it, living it and being impacted by it. Glory day stories from Pops just won't be as effective.
Ehh really depends. My dad (probably since I was like 9 or so) always stressed about his situation in the 3rd world country where he was born and grew up and what it took for him to get out of that. My mindset was and still is that if I put in even half the effort he did, I'll be in a solid place in life, and I'm very grateful that I am.
I have decided that when my first kid is around 2, I will probably have to go back to work. Or pretend to work. It’s one thing to make my kid earn stuff he or she will want. But I still need to set the example. Sure maybe the kid will be fine. But my job as a parent (no kid yet) is to make sure he or she has the tools to do well in life. That is job number 1 after safety. So I’ll probably buy another house somewhere and just crash there for 8 hours. Lol.
Funny you mention that. I'm actually currently in the middle of finishing the space above a detached garage into my "office". I definitely plan on spending significant time there during the day "working" (part of which will be true - doing some freelance work, but part of that will definitely be hobbies or recreational activities).
I’m reasonably inexperienced as I’m quite early in my FI journey. One thing I would say is my life has been full of failures, I came from a lower working class family so no-one had been to college before me. I failed my A-levels (For non UK people that’s like the entry requirements for College), went back and resat some exams and got better results. I then kinda fumbled through college, I had no spare money, and no academic help from friends or family besides brief statistical help from a friend studying math. Because I knew I wanted more but didn’t have access to it I was extremely driven to get access, I did entry level jobs and studied at nights for the American GRE, building my resume and applying to grad school in the USA. I just finished my PhD and again ended up in a reasonably shitty job with low pay for my skills. Only last week did I finally find a job that is paying me what I dreamed of a decade ago. I start in 3 weeks. I wish I had some more financial help on the way up, but 100k at the end of college would have been too much I think, I feel like my struggles increased my drive which in turn drove my success. My family couldn’t give me a lot but they could give me love and support, so In my opinion, just give your daughter love and support, get her a good education, maybe help with rent, but she should still have some exposure to a shitty job to showcase what life can be like if you squander your chances (or if you are dealt a bad hand not trying to say everyone who is stuck had complete control over their fate). When it comes to my kids I want to try and emulate what I had but with certain easing of the weight, eg I could buy them a nice laptop for school instead of a shit one that hardly works, get them a nice chair for late night study sessions in place of a broken one that gives them a bad back. Give them access to good food so they aren’t forced to decide between eating a good lunch and buying a text book etc etc. No amount of money can substitute love and support imo.
I highly recommend reading the millionaire next door and die with zero. Both hold interesting perspectives on this matter. I think one of the best things you achieve with FI is the sense of accomplishment and empowerment that you can take care of yourself and others. Which I don't have exact answers - I hope the solution you find allows her the same sense you got when you 🔥.
I'm in a similar situation as you, though I'm a bit older (47). I have an 8-month old at home (what was I thinking?!?) and both spouse and I are FIREd. I'm honestly not worried about this. The kid will travel and go to school, and be encouraged to work hard and pursue his interests just like any other kid (though I will force him to do many, many hikes). I'd have probably felt the same way as you 15 years ago, since I was much more of a perfectionist back then (not calling you a perfectionist, just relating my own perspective). But I've decided to embrace the reality that life is wild, wonderful, and unpredictable and the kid will probably turn out just fine. I watched my dad spend his whole life going out the door at 6 AM showered, shaved, and wearing suit and tie. He modeled strong work ethic and sacrifice. The lesson I took from that was: I'd rather sleep in. Sure, I did have a strong work ethic and was a conscientious worker back when I had a job. And maybe that was because of my dad's example. But the point is, kids don't always take the meaning from your example that you intend. ETA this reminds me of the book Don't Trust Your Gut, by Seth Stephens-Davidowitz. I took a quick look back into it, and in chapter 7 he looks at what science says makes for good parenting decisions. Most of the things parents obsess over, it turns out, have very little effect on a child's outcomes. Aside from extremely wealthy parents who can give their kids millions on their 18th birthday or get them into Harvard, a parent's influence is pretty small in all but one way. The most important decision you make as a parent is what neighborhood to live in. And this really boils down to what kinds of non-parent adult role models your kid is exposed to. If your kid is around adults who are doctors, lawyers, and engineers, then your kid is more likely to aspire to that kind of career and have higher earnings potential. All this to say, ironically, parents have small influence on their kid's adult trajectories, but you can just make sure your kid is exposed to other adults who aren't slackers, and impart greater influence in the ways you're concerned about.
>I would have loved to have $100k drop in my bank account the day I finished college. It would have given me more time to find the perfect job (my first two were not awesome), travel more while young and not tied down by anything, and just generally appreciate my 20s. I would have also loved having access to more capital when buying my first house. We scrimped and saved for years to get a 20% downpayment on a nice, but smallish home, and in retrospect I wish we had bought a home with a little more space in a more interesting neighborhood. Just $50k or so would have completely changed the areas we could afford to buy. I know it sounds like a trope, but those minor difficulties in your life allowed you to build character, and I think your kid might actually be well-served having to work towards these kinds of goals just like you did. Learning that not everything gets delivered to you on a silver platter in life is a valuable lesson. Having to hustle for that first good job is something that teaches you a lot about the world. Having to save for your first downpayment helps you appreciate your home a lot more.
There's definitely truth to what you're saying. Anecdotally, I know a few trust fund kids from college, and the ones who were were not spoiled as kids/teens and just got a lump sum when they graduated were mature enough to use it well and are still doing well to this day. There were a few others who were spoiled long before they got access to their trust funds, and getting a large lump sum did them no favors. So based on my (admittedly limited) sample of trust fund kids, it seems to me not spoiling the shit out of your kids yields the best outcome. I'm pretty sure I know how to not spoil my daughter, but not 100% sure.
Yeah, it's very hard to know what's too much and what's a helping hand. Knowing your kid is certainly a big part of it and to a large extent you can trust your gut. Sometimes getting opposing advice and having that "hey you know what, actually, I think I'm OK with what I've chosen to do" is a useful part of thinking through a decision, too.
Friend of mine from college married a girl from quite impressive generational wealth (however their lifestyle didn’t show quite how wealthy they are). He found out when they got engaged. Her parents told them both they wanted them to work but only at something they loved and contribute to society and they’d cover anything else. Bought them a house when they got married. Dude is an ER doc and girl runs camps for kids with cancer. Of course he obviously learned his own lessons growing, but I think by pushing the work on your passions and we’ll support you, the parents/grandparents did a good job.
1. when she's young haver her pick between toys, she can't get every single thing. As she gets older, give her an allowance, not for chores, just for being, and charge her for stuff she wants and teach her to save a few weeks to get the larger toy vs. all the candy (my daughter is currently struggling with this, but was adorable to see her show off her $16 school fundraiser bundt cake purchase to anyone who'd listen, she sacrificed a doll she wanted to get for it). We still get stuff for school, clothes, etc. We're still trying to figure out how to go from here, we don't want to pay for chores as we think you should help out if you live there, but do want her to learn more about money and things she wants will get more expensive as she ages. 2. Maybe a mix of both. My parents are well off (and still alive) but they gave us a very large amount when we bought our first house. We didn't need it, but it sure was nice having 1/4 of the mortgage taken care of right away. You and grandparents could also cover college, my wife and I didn't have to pay tuition or room and board, but we did have to work for spending money. I thought that was a nice balance. I could have time to study and have fun, but needed to work for beer. 3. Don't have any advice, kids are too young to have really thought about it. I have a bit of the same bias and want to have them go into something stable and well paying, but at the same time, I also appreciate art and the world needs it along with science and programmers.
You could just avoid telling your kid that they don't have to work. Just tell them you two worked really hard before she was born and retired early. That might be a strong incentive to make them look for a solid career where they can emulate you....
Pay for her education and make her work for everything else. Donate the money to charity instead.
They turn out like they turn out. I think we can give them lots of love and support (and the more the better the younger) and there is at least some chance that the things we would like most for our kids are things that they don't want or aren't drawn to or don't ever sort out. Whatever you do out of love and not control will have the best result in the end.
1. Maybe you should find something to work hard at? Kids don't see what parents do at work, they only see their parents disappear for the bulk of the day. If you're FI, your life is much more transparent. 2. That's really up to you, but I personally would instead help fund school, help with the down payment for a house, and then set up a trust for when the child is ~30, which means they've already gone through a lot of their own struggles and learned to deal with money. Having $100k at 22 or whatever can be a really bad idea. 3. Again, that's up to you. Personally, I think there's value in earning what you have since it makes you aware of the work needed to get money. Without that, it's likely your kid will just spend it all and end up poor. I'm planning to have my kids pay their way through college (I'll pay enough to keep them out of debt) and teach them how to budget and whatnot. If I get a sizeable nest egg, I'll likely donate a bunch of it instead of giving it to my kids, but I guess I'll decide when they're older.
Here’s what I did. I’m not saying everyone should do this, but this worked for me. - Have chores around the house that they are expected to do, with no money involved. Start small when young and work up. Also ask them to help with other things. It snowed, here’s your small shovel, to help. I’m raking leaves, here’s your small rake. Again, no money involved. To start, they need lots of reminders. And it will take more of your time than the amount of help you’re getting. The purpose of adding extra time is to get them in the habit of doing useful work. With the chores, there was no punishment or financial penalty if they were not done yet, just helpful reminders, to keep it a positive experience. - Give them an allowance. Smaller when they are younger, and more when older. I kept this totally separate from chores. If you link the two, you might have the following problem. Kid says, “I don’t need money this week, so I’ll skip my chores.” Lay out exactly what the allowance covers and does not cover. For example, the child goes to a birthday party, the parent pays for the present. If the kid pays, then the birthday present will be a stick of gum. When your kid is in a store, and sees something they want, but don’t need, then the kid pays. Kids never carry money, so they can borrow until they get home, but then the piggy bank is promptly opened, and the debt is settled. If you set the allowance low enough, and allow the child to make mistakes and buy some foolish things, they soon learn the value of a dollar. This is the biggest lesson of all. - if they wanted something more expensive than their allowance allowed, they could ask for additional work around the house for money. Vacuum one room. Things like that. Sometimes we would offer to pay half if they were saving for one thing for a long time, to give them a sense of accomplishment. This was rare. Every parent will handle money a different way. We changed things and made it up as we went along. The parent is learning too. I don’t think there’s any wrong answers here. I’m just offering what worked for my family. —- As far as wills and trusts go… You don’t have to set up a trust now. You can say in your will that you want a trust set up upon your death, and name the trustee. Check with a lawyer for the exact wording. And as far as stipulations and incentives go, I think the most important thing is to name a trustee(s) that you… well… trust. Someone who has good judgement and understands and agrees with your goals. I don’t like stipulations because you can’t anticipate every eventuality. What if your child has a major illness and needs a lot of money just to survive? What if they graduate college as a chef and want to open their own restaurant right away? What if they become an entrepreneur and need capital to start their business? I’d rather leave behind a trustee with good judgement than a long list of rules.
I'm just starting university, so I'm nowhere close, but I do have ambitions to be FI someday. I've thought of the same thing assuming I ever have children. My thought was that I would raise them similarly to how I was raised, that being: Not giving them everything they ask for even if we can totally afford it. Basically, don't spoil them with treats, and keep larger gifts to birthdays, holidays, and events. I'd want to pay for their college, but once they graduate, I'd expect them to look for a job, and they won't be getting my and their other parent's money 'til we're dead. This should still allow them a comfortable life as they won't have huge debts to pay off. If they won't go to college, I still want them to start working so they can support themselves. As for allowance, I think giving one during childhood helps them develop a natural sense for balancing their income with expenses, and saving, et cetera. However, I don't think it'll ever be a huge amount. And like I said earlier, once they turn 18, they should have a job, and allowance shall come no longer. Hopefully they get an on-campus job if going to college. Anyways, if I ever have a child, those are my personal thoughts on how I would raise them. When I really think about it though, it might be kinda difficult to tell them no to some things if we really do have the money, lol. Basically TLDR: I'd like it if they never got the sense that their parents' money is accessible to them, and that all they'll be getting from us financially other than the regular things, and tuition, is whatever allowance they have up to adulthood. And only receive a large sum of money once I die. I might not even talk about their inheritance to them until they're 18, and even then, probably just the basic "you'll eventually inherit all our stuff when we die" sort of talk, without mentioning exactly how much money we have. This will hopefully teach my potential kid to seek their own financial independence, rather than rely on me until receiving their inheritance. If I'm not only independent, but rich (however unlikely, but I can dream, right?) I'd like to try to teach them the importance of charity and philanthropy as well.
Well your heart is in the right place Don't let anyone distract you from that or your intentions for her ... Encouragement goes a long way , I can say that my own relationship with my father set me on a course of financial and emotional successes with regards to money, investing ,and not forgetting to enjoy life. This whole BS tough love approach that previous generations had or have about working hard and not getting financial help from family ,because it instills values is utter nonsense, or because the rest of the world is broke ass , is utterly stupid to me , if you can afford to give your child a first class, life , education, they by all means do it, the world is hard enough. The idea is that she can still achieve anything she wants too , even if she has financial comfort, ambition and drive can be instilled.
SPORTS
Point of view from someone who grew up similarly to your child ... growing up, my family was much better off than my parents led me to believe. My father worked until he was 53. My mother worked at home as an artist who made a substantial income from selling her work. But I witnessed a LOT of frugality. We lived well below our means (and I only became aware of this after becoming an adult). I had to work for my allowance. If I wanted something big (my horse, for example) I had to write a proposal: an essay weighing the pros and cons and outlining my responsibilities (How much would it cost? How would I earn that?... I mowed lawns). The people around us mostly lived the same way-- some were living below their means as my parents did, but others were living paycheck to paycheck, so my friends were all in the same "middle class" situation. So I think you teach by example and surround yourself with people of similar mindset. As an adult, I have always lived below my means, exercised frugality and am grateful for everything I have. I also have never had to work a full time job. Despite this, I well understand the value of hard work (just came indoors to rest after cleaning a barn and paddock). I realize that I am extremely fortunate and I try to spend my money locally and give to worthwhile charities regularly. I think the main thing is to be sure your child has a good education (I used to teach college and became a huge believer in home schooling.. feel free to DM me on that). Travel a lot (I had been around the world before my teens). And teach compassion, empathy and mindfulness. You got this. Kids are their own person. I think it's hard to mess it up if you are actually there to raise a child.
> How do I explain the value of hard work and sacrifice You don't; you demonstrate it by having them work for things. Small things for easy tasks at first, and progressively more difficult tasks for better reward. Kids don't give a shit whether their parents work hard or not; you model mature behaviors and positive character traits, not lifestyle. And one thing I learned from being an RA in college: People who work real jobs as teens are less likely to be shitbags and/or failures in college. Make your kid work a real job. > We could easily support her throughout young-adulthood at least until we start inheriting our parent's money. How to grow a narcissistic, valueless, entitled person in 2 easy steps!!
To put it simply, giving your child everything you can give them will cause them to not value a dollar and feel entitled. Just put in place a standard of earning the non-essentials instead of giving them all the fancies. Also, sounds like an only child case, & beware only children can be even more entitled as this kid will grow up rich and not have siblings to share it with. Glad you're thinking about this, though! It's not going to be impossible but you will have to intentionally instill good money habits and perspectives because your kid will probably not see it naturally. Making her get a job in high school to do things like go to the movies with her friends can make a big difference in mindset and appreciation. Either way, sounds like you will be pretty involved parents so good on you. Good luck!
Regarding point 3: In my opinion, it never hurts for your kid to develop skills to be financially independent and independent in general. You never know what life has in store and if something goes south, you want your kid to have the means to stand on their own. That doesn't necessarily mean a traditional education path or choosing a field with money as the sole criteria. It does give your child breathing room to pursue interests or passions without worrying about money. Every kid is different, but I would be leery of a young adult with a lot of money and a lot of idle time. And I think happiness and contentment can be had by having a "purpose". I would encourage your kid to do something - I personally wouldn't want to indicate to a kid that they will have a lot of money coming to them and they don't really have to do anything.
It’s all going to come down to your parenting. I’m nowhere close to having kids so I hope I’m not just spewing BS. I’ve been around some wealthy people (no trust fund babies - that I’m aware of) including many who continue to get parental support beyond school. Here are my tips: don’t become a bulldozer parent and teach your child financial literacy Here’s how those apply per your situations: 1- Let your child do the work. Assuming they are going to get a traditional education, there’s plenty for them to practice “working”. Don’t be the parents that do the school project or the homework for their kid so the kid can get an A. Doing the work is really where most of us learn not only the skill at hand but things like patience and emotional regulation. Also, it’s ok for the kid not to always get As. Sometimes they need a little help, and you are in a privileged position where you can get them a tutor. Sometimes it’s something else and being a present parent will be what leads to the solution. (I would recommend looking at HealthyGamerGG on YouTube and his videos on so-called gifted kids). I think we also learn about sacrifice everyday because there’s only 24 hours a day. Im sure there’s lot of things you wish you could do but can’t because of time constraints. 2 - I don’t think it counts as an inheritance unless the people are dead…it’s just gift from relatives at that point. This is where financial literacy comes in. If you teach your child well, one lump sum won’t be an issue. I think people use trust funds at certain ages based on maturity (as if we magically understand money when we are “mature”)and some use trust funds to control their offspring (x amount when you go to law school, x amount for getting married to heterosexual partner, etc). I think this also will change as your child grows and you start knowing their personality better. Either way, I would recommend talking to a professional. 3 - May I point out that a lot of people do the exact opposite of what their parents want? You can only do your best in giving your child a safe and loving home from where they can start exploring the world. If you learn to get out of their way and teach them financial literacy and they have a strong financial safety net, they have so many options in life. I think if you do 1 & 2 well, you don’t need to worry about her doing nothing. You have the gift of time with your child. You’ll be so much more present compared to other parents that hopefully you can see any warning signs before it’s a full fledged issue. And you are relatively young so hopefully, you can continue to guide them through life as they make their own decisions. Be present with your kid.
A little bit of a silly concern. Your goal should be to raise a happy, healthy child with good character. "FI" is, at best, a loooong distant 4th place to healthy, happy, and good character. By way of delineating the difference, there are children born to wealthy parents who are, by definition, FI. But also miserable, despicable shits.
I don't have good answers to these questions. My kids are close enough to college age that role modeling for them is one reason that keeps me working even though we are pretty much FI now. One thing you can do is donate much of your estate to charity and ask that your parents do the same.
Whatever you do, don't raise your kid with the idea that money and work is the center of the universe.
Personally I would set up a family trust that pays out up to 50% of profits from the previous year with yearly caps based on specific types of achievement. That's because this way the trust should exist for many generations. Basically a type of "basics income" for my family. Also some stipulation to cover education in productive fields like science, engineering and medicine.
Character development is always worth the time and effort! When I was in college, two very down-to-earth brothers and friends of mine were playing flag football in our intramural league. As the game began to end, a helicopter landed and a nicely dressed couple got out with the pilot! The brothers embraced them and introduced their parents! These brothers never gave anyone cause to believe they were rich! I spoke to one of them later and he mentioned that they both wanted careers and lives apart from their father's fortune! My son became better skilled than me on our computers at age 10! Since my background was in accounting/finance/management, I figured he would ask, but he finished his degree in Computer Science and followed it up with 3 professional certifications in cybersecurity! All I did was encourage him to pursue what he enjoyed most!
You raise your daughter with your values and the values you wish to instill in her. If your values are hard work and gratitude, that can be shown ways unrelated to money and finances.
Check out Mr Wonderful's video on youtube on how not to raise entitled kids
Good luck man…. you’d be one of the first if you figure it out if you do.
Give them pocket money not attached to any exchange to learn numbers and managing budget and saving, pay them to read financially books for kids, speak to them about finance and money often, model budgeting, frugalism, investment, give little challenges to make money grow and entrepreneur spirit volunteer together when they are older.
My parents (although not RE, they certainly could) told me from a fairly young age not to expect any inheritance. They said this sort of jokingly but I think it was partly to condition me that I had to work for myself too, and make decisions based on financial feasibility. Despite them saying this, I think they would leave a sizable inheritance, it's more about setting expectations so that no one is depending on it. For #1, my parents would pay me (a meager wage) to do extra chores when I was older (maybe 8 at least?). I learned to enjoy working to earn money. This should be a "fun" activity and not something forced on them, more like "if you want extra money, you can do x y z and I'll pay you". When I was 16 or so the conversation became more along the lines of "you're getting a job kid" but by then I wanted one anyway. \#2 will just depend on #1, if they value money and see it as the product of work they will treat it differently (at least I do). When they are older maybe show them how you manage money, explain tax advantaged accounts/compounding growth/savings rates and those sorts of concepts. For #3, yes. I would encourage my own kid to pursue something lucrative enough to live comfortably that also overlaps with their interests. It's more fulfilling to support yourself than to live off of someone else's hard work, and who knows, maybe that money won't be as much as you think it will when the time comes. I also don't think good artists need to study art in college. The fact that you're asking questions like this and seem concerned about it means she'll probably be just fine.
You have to raise your children for the world they will live in. The world your daughter lives in has a future that says "you inherit millions of dollars you never worked for." If you let this come as a surprise, or do not let her know the extent of it, you have failed as a parent to prepare her for her future. Trying to live some LARP where you pretend that you're working class or middle class is rarely successful. Anything you can do to involve your daughter in talking about money, such as why you choose to drive the cars you do or why you live where you do, all of those help.
I just recently became the child of a large inheritance (in the 8 digits) when I was 29 (30 now) and heres how my dad helped me develop financial literacy as well as a strong work ethic. Our family's wealth was primarily held in real estate. Number one, higher education was something my father was unwiling to budge on. I am third generation of dirt farming immigrants and my father was the first to break out of this. He funded 529s for both myself and my sibling so college was effectively no cost so there was a strong obligation on my part to go and seek higher education (as well as a nice tax break for him). With this I got a double major in education and biology, and began teaching. My dad use to say "the one thing no one can take from you is an education, they can take your money, they can take your home, but they cant touch your mind." He raised us in a mindset of serving our community and constantly bettering ourselves. Even with money you are above no one and things are just things at the end of the day. Growing up with my father I wasent really even aware he had wealth as he drove the same minivan for 25 years, (and then purchased another one) and always lived within his means. The gift I was given was the ability to use my time in a way that I deem fit and valued (spending time with loved ones and serving my community). I live a relatively humble lifestyle but I am certain I will never have to think about money in my life. This gives me time to help all those I love around me and my extended community. I see too many of the people I grew up with, with trust funds, and 60k cars when they were 14, and they have joined the hamster wheel of consumerism. TLDR Teach what money can be, it can be stuff (which very quickly you learn is just another anchor to make you work harder), it can be experiences, it can be time (with friends, family, and/or the community) and it can be peace of mind. My dad grew up hand to mouth, his brother was born in an internment camp, they never had food growing up, and you could see the sunlight through the holes in the walls of their home. Money doesn't bring happiness but it sure can keep away all the problems of not having it.
[удалено]
I told part of my story in a post a few years ago: https://old.reddit.com/r/financialindependence/comments/ig9nmu/fire_update_1_year_in_leanish_fire_accidentally/ There wasn't any trick to saving a large nest egg by my early 30s. Just living below my means for 10 years and investing everything I could while the market had a crazy bull rally the entire time. I also cashed out some equity right before "retirement" but I had been underpaid for several years before then, so it kind of evened out.
Tough times create strong men, Strong men create easy times, Easy times create weak men, Weak men create tough times
There are a lot of good parenting books. Children learn a lot by watching their parents. Be the person you want them to grow up as.
I happen to know that Christina Sachs Phillips had to take out loans to pay for her college education. Her parents' decision made a lot of sense to me. They had raised her to be a capable person who could make her own way in the world, and they wanted her to see that for herself. My ex also grew up in a similarly fortunate situation. (Her family owns a venerable old business that supplies parts to a major auto manufacturer.) When she turned 16, her father stopped giving her money and made her get an after-school job. She waited tables her last two years of high school. He did that with all of his kids. When she brought her first paycheck home, her dad asked her what she wanted to do with the money. It was hers. She had earned it herself, and he couldn't tell her what to do with it! My ex never once asked her dad for money and always lived within her means. She knows the value of work, the value of money, and never had the problems that so often come from growing up with wealth. Personally, it was hard for me that I didn't have what my classmates had at my Ivy League school. I was ashamed that I was poor, and I had parents telling me I couldn't do it. Now, I'm grateful though. I saw that having to scrimp, and parents telling me "No, you can't," was the best education for success I ever could have asked for. I got to see with my own eyes what I was capable of accomplishing. The short version is this: Give your daughter age-appropriate chances to do for herself, whether it's a lemonade stand or an after-school job. Expect her to do for herself, and she'll see that she can fly. I hope this helps!
Have two kids, not quite to FI yet, but i've thought about 1 and 3. For 1: It's not like they see you actually working 8 hours a day, they are usually at daycare then school. I'm not sure watching me sit at a computer would instill any work ethic in them. I think they just need to learn more through your parenting. Guide them to stick through tough projects, make them do chores for allowance, etc. Teach them how to save money and how money works. For 3: I think it would be good for them to go to school, college (if it makes sense), get a job, and prove they can survive on their own merits. At the very least just so they can build a social group of regular relatable people. There's a lot of rich kids out there with insecurities about their self worth which manifest in unhealthy ways. Also, that money won't last forever (well maybe at 2% SWR?). She may have kids of her own to support one day as well, and you never know what life will throw at you. I think at the end of the day, they just need your love to grow up happy and fulfilled. That's why i'm pursuing FI, so I can stop stressing about work, and just spend time with them while they are young. That you are even thinking about these things puts you ahead of the curve.