How much are you willing to do for your kids?

How much are you willing to do for your kids?

“Let parents bequeath to their children not riches, but the spirit of reverence.” – Plato

Are you a helicopter parent or a lawn mower parent?  Believe it or not, these are actual terms to describe child raising these days.  When I was a kid, parents didn’t help you with your homework.  Instead, they watched over you like a helicopter to make sure you completed your work and asked questions to ensure that you knew what you were doing. If you didn’t do your homework, then you went to bed early and you didn’t get to ride your bike with friends.  Riding your bike was as important to a teen in my era as a cell phone is for kids today.  When we were kids you earned money because you did something to earn it.  Whether it was chores, a newspaper route or part-time job, money wasn’t simply put into your account without effort.

As baby boomers grew older, this same analogy stuck. When baby boomers got money from their parents, it was typically when their parents passed away. They worked hard, saved hard, and put off large purchases until they could afford it. Because of this, baby boomers prospered along with the escalating markets. Today, it’s a much different reality for young people starting out.  Due to the rising costs of real estate, the younger generation often questions whether they’ll ever be able to buy a home at all. Realizing this, many parents want to help and share some of their good fortune with their children (which isn’t a bad thing if you don’t need that money returned).

One thing that baby boomers don’t consider is that their parents passed away at a much younger age, so baby boomers’ good fortune may need to last them for many more years than they planned for.  Many parents may need more money in their later years due to divorce, health issues or even a job loss.  Parents are often co-signing for their children’s mortgages but fail to consider the ramifications that can occur if their children fail to meet those obligations, which now become the responsibility of a parent who may have retired. It is critical to sit down and consider the benefits and consequences to co-signing a mortgage or gifting money to an adult. This applies not only in financial situations buy also in day to day life.

A good example of well-off parents doing things they thought (without considering the legal implications), to help their kids is the recent university scandal in the USA (that involves Canadian parent connections), where parents paid $100,000 to $6,000,000+ to buy their child an entrance into their university. It’s hard to understand how they thought this was a good idea. The ramifications have been immense with one hedge fund manager having to step down and an actress losing her TV series AND the cast and crew of 100 people losing their jobs on the set as a result. Talk about collateral damage. And that is just the start of it as charges have also been laid on all involved.

Just because things have gone well, and you are in a great position in life doesn’t mean you can start making poor choices and escape the consequences.  When making those important financial and life decisions, ask yourself some questions. Does it make sense? What is the benefit?  Can we afford it?  Is there a better way of achieving what we are trying to do without the inherent risk?

When you get right down to it, life is about making the best decisions we can at the time with the best information we have and not just hoping that things work out. Make the best decisions you can for yourself, and if you need someone to bounce things off, we are always here to help.

We look forward to hearing from you.

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