How to Help Your Millennial Children With Money

Your kids are recently out of college and starting to make their way in the world. They have a mountain of student loans, an underpaying job, and are just making ends meet. How can you help them become prosperous? Should you help them financially?

Today’s recent grads face a tougher job market and a longer career path than previous generations. The cost of a college education has become staggering. Long gone are the times when you could put yourself through college by working a summer job or waiting tables on the weekends. Those jobs aren’t going to cover the $50,000 tuition bills at a private university today. Even students who work through college can finish with $40,000, $60,000, $80,000 or more in debt.

I’ve also seen parents go too far and give their children million dollar homes, creating unreasonable expectations and a total lack of drive and ambition. Why work if you’re just going to be given whatever you need? Parents risk having adult children who don’t value money and have no interest in developing their own financial success.

There are, I think, a number of creative ways to help your children financially without simply writing them a blank check. Parents want to prevent their children from falling on their faces, but we have to remember that challenges often teach us the most important lessons. Children often copy their parents’ money habits, and not talking about money isn’t going to help your kids become responsible adults. Here are ways to help.

1) Rent to Roth. If your kids are going to move back home after college, consider charging a nominal amount for rent, based on what they can afford. If that’s only $200 or $300 a month, fine. Then, take that money and put it into a Roth IRA in their name. Give them the account after they move out.

There is an enormous benefit to starting early for retirement saving. If they save $3,600 at age 23 and 24 ($300 a month), and earn 8%, they’d have over $175,000 at age 65 just from those two years! But they have to not touch this money – to leave it invested and not spend it on student loans, or a car, or a house, or a wedding. It’s got to be off limits!

2) Give them this book. It is a gem. It’s short and they could read it in one afternoon. If they read it, they will know more about money than 99% of their peers. (And if they don’t read it, you’re only out $12.)

3) Mom and Dad’s Matching Program. Rather than making an outright gift of cash and hoping they use those funds wisely, offer to match their funds for goals like student loans, buying a used car, or funding an investment account like a 401(k) or IRA. This at least requires that they also contribute towards their financial goals rather than making everything a free-bee. Support financial needs which will make them more self-sufficient, rather than inadvertently making them more dependent on their parents for living expenses. Ask if this support is empowering or enabling?

4) Sign them up for my Wealth Builder Program, which is specifically designed for their needs. I will work one on one with them on their financial goals, including loan repayment, risk management, savings strategies, and investing. They get advice from their own fiduciary, which they may accept more readily than advice from a parent! Your cost is $200 a month. Alternatively, if you’re working with another financial advisor, ask if they will include your adult children as part of your household, but meet with them separately.

5) Encourage Entrepreneurship. Working families think that an education is the key to financial success. And to some extent, it is. But wealthy families know that owning a business is the real path to financial independence. Consider how you can encourage, support, and invest in your children starting a business.

Just remember before sinking your whole nest egg into their yoga studio (or whatever) that 80% of new businesses disappear in less than 5 years. If you are going to commit money to an idea, then it should be a sensible investment – either equity in the business or a loan with specific terms – and not a gift. It must be in line with your own investment strategies and not represent a substantial change to your risk profile.

An estimated two-thirds of parents are financially supporting their children over the age of 21. While this may be a new reality, it is also wreaking havoc with many parents’ finances and their ability to save for retirement. In some cases, we also need to be candid about what the parents can or cannot afford and what these sacrifices may mean for the parents’ finances. This is where a financial planner can provide an independent, objective point of view to make sure that your generosity is not going to jeopardize your own goals or become a permanent need for support.

Financial Planning for the Sandwich Generation


Nearly every day, I talk with someone who is a member of the “sandwich” generation. No, this isn’t a group of people who like peanut butter and jelly. The sandwich generation refers to people, primarily Baby Boomers, who are caring and providing for both their own children and older family members, most often their aging parents.

This can create quite a strain, emotionally and financially, as adults have to prioritize their time and money to care for their own children as well as their aging relatives who may be dealing with health issues, financial problems, and sometimes declining mental faculties and decision making abilities. Needless to say, given these competing demands, their own retirement planning is often the casualty. Some become full-time caregivers and may be out of the workforce for years while they care for an ailing family member.

In recent months, I’ve heard many sad and difficult situations, including:

  • An 89-year old Grandmother who decided to have cataract surgery only when they said if she did not have surgery, they would take away her driver’s license. No one wants to lose their independence, but maybe her driving isn’t such a great idea, both for her own safety and for others on the road.
  • A relative’s 90-year old mother fell and could not get up. She was unable to reach a phone and spent more than four hours on the floor before someone found her. This was not her first fall incident, and still the children had to go to great lengths to convince their parents that they needed to move to a retirement home. The parents are nearly broke, so the bills will be paid by the son, who is also providing for two college-aged children.
  • A friend’s mother went into hospice and passed away shortly thereafter. He spent the whole summer sorting through her belongings and trying to ready her home for sale. Given her vast collection of items, there are still many months of work ahead.
  • A friend’s older sister was diagnosed with ALS this week. She lives alone, but recently suffered a nasty fall which resulted in a large gash to her head.
  • A statistic from the MIT AgeLab: for people over the age of 70, a broken hip has a 50% mortality rate within 18 months. This is not usually a direct result of the injury, but from a rapidly declining health situation if they become wheelchair-bound. It’s use it or lose it, when it comes to our mobility and health.

We are living longer today, which is a great blessing. However, it also means that many of us will live to an age where we may eventually need some assistance. This is a good problem to have. If everyone only lived into their 50’s, like we did in the 1800’s, we wouldn’t need to address these issues! We should be thankful that medical advances have so greatly extended our longevity over the past century.

While there are many difficult emotional aspects to these conversations, there are many financial considerations as well. If you are part of the sandwich generation, we can help you navigate the difficult decisions you face with your aging parents while making sure that you are also managing your own financial goals.

People who have these conversations with their financial planner in their 60’s may save a great deal of stress and burden on their children in 15 or 20 years. We can help you plan better to make sure that your future doesn’t depend on your children’s finances and generosity. Here are some thoughts about how you can remain healthy and happy as you age:

  1. Create an income plan that budgets for rising health care costs. You do not want to run out of money in your 80’s and have to spend down your assets to qualify for Medicaid. That may be a safety net, but it is a lousy plan.
  2. Work on your home to create a physical space which will allow you to “age in place”. A safe home can not only help prevent injury, but can allow you stay independent for longer.
  3. While no one wants to be in a nursing home, if you live long enough, it is almost inevitable that you will eventually require some help with the Activities of Daily Living. Some are in denial about their abilities in this regard, and it is only a major event, like a broken hip, which eventually prompts a move.
  4. A Long-Term Care insurance policy can pay for home health care. Rather than thinking of an LTC policy as a “nursing home” policy, think of it as the policy which can keep you out of a nursing home.
  5. Today’s retirement communities offer a wide range of services, from truly independent living to round-the-clock skilled nursing. There are many benefits to being part of a community and spending time with friends who have similar interests and backgrounds. Health care professionals are beginning to recognize the significant impact that a social network has on healthy aging.
  6. Create an estate plan which will not create an unnecessary burden on your heirs. Don’t leave a mess for your children to have to clean up.
  7. Reduce taxes on your estate and your heirs. I saw two unfortunate tax situations this year which could have been avoided with better planning. In one situation, an elderly aunt made her nephew the joint owner of her home. The result: no step-up in cost basis on this out-of-state property! In another situation, a father made the beneficiary of his IRA a trust. The IRA was distributed to the trust and was not correctly established as a stretch IRA. As a result, the entire distribution is taxable in 2015. And since the beneficiary was a trust, the applicable tax rate will be 39.6%!

If you are already retired, we can make sure you have a retirement income plan, health care funding, and an estate plan to carry out your wishes. Don’t wait. Our cognitive abilities decline slightly each year, so it’s best to make these decisions in your 60’s or early 70’s and not wait until your 80’s or 90’s.

Men, especially, seem to be in denial about the importance of this planning. Typically, the husband does die first and most retirement homes I have visited are 60% to 90% women. So gentlemen, if you don’t want to plan for yourself, plan for your wife. If you fail to plan for her, sorry, that’s just plain irresponsible. And hopefully you agree she deserves better.

Whether you are in the sandwich generation or just want to make sure you aren’t going to make your children part of the sandwich generation in the future, financial planning can help.

Five Financial Planning Steps When Getting Remarried

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For couples getting remarried, there are often additional financial complications and concerns compared to a first marriage. In a second marriage, there may be assets, income, and children which require special consideration. There are many ways to address these thorny issues so that you can focus on moving forward with your relationship and not let financial worries hold you back. Here are five financial planning steps to help: 

1) Redo your financial plan. By working with a financial advisor who holds the Certified Financial Planner designation, you can create a comprehensive financial plan and know that your advisor is not just there to sell you investments or insurance. An advisor is a neutral, third-party expert who can help with your budget, savings, and spending goals as a couple. Your advisor can facilitate this conversation and create an objective plan that considers your joint assets, income, and expenses.  

Specifically, your advisor should help you:

– Prepare a net worth statement detailing all your assets and liabilities.

– Determine when you might be able to retire and what income you should plan for in retirement.

– Evaluate your income and expenses. If you are working, we can determine how much you need to save to achieve your retirement goals. If you are retired, we can calculate how much you can safely withdraw from your portfolio each year. Use this information to develop your joint budget.  

2) Discuss and recognize your differences. Often, couples do combine their finances, and there are some reasons and potential benefits from doing so. However, in many cases, adults who have managed their finances independently for many years will want to keep their finances separate.  This can work well, especially once you decide on the logistics of how to split joint expenses like housing. While you could choose to continue to work with separate financial advisors, we can manage your portfolios separately based on your individual needs. This is increasingly common today, and does not pose any significant difficulty to manage two portfolios and sets of objectives. The benefit of working with one advisor is that you are making sure that your separate finances will be adequate to fulfill your individual and joint financial needs.

3) Update Beneficiaries. Redo your estate plans and be sure to update beneficiaries on 401(k) accounts, IRAs, and insurance policies. It is surprising how often this vital step gets overlooked or only partially completed.

4) QTIP Trust. When couples have grown children from a previous marriage, things can get complicated. There can be a tension between the kids and the new spouse about finances, as well as a concern for the parent that their kids could be excluded from an inheritance if their spouse should outlive them. There are risks when a couple sets up their estate plan to leave everything to their spouse. The surviving spouse might get remarried or choose to exclude the children. Sometimes, there is a concern that spendthrift children could manipulate the surviving spouse and get their hands on the a lifetime of savings.

One solution to this is a QTIP trust, which stands for Qualified Terminal Interest Property. A spouse leaves his or her individual assets to the trust. The surviving spouse, then, is a beneficiary of the trust and will receive annual income to pay for living expenses; they can access principal of the trust only under very limited circumstances, such as for medical needs, as proscribed in the trust instructions. When the second spouse passes away, the remainder goes to the heirs of the first spouse, under an irrevocable designation. This way, the first spouse can be assured they have provided for their spouse and that the remainder will absolutely go to their children. When you establish your estate plan and QTIP trust, by all means, tell your kids what you are doing and what they can expect. Even if they have never said anything, they may be wondering or concerned about your estate plan, and knowing that you have taken care of them will make it easier to accept your new spouse.

Besides establishing a QTIP trust, there are a couple of other ways to set money aside for children or grandchildren. If there are sufficient assets, a simple approach is to leave property and joint assets to the spouse and use beneficiary designations from life insurance or IRAs to leave money to children. For grandchildren, consider setting up 529 college savings plans and naming children as successor participants to manage the accounts after you pass.

5) Maintain Separate Property.  In Community Property states (AZ, CA, ID, LA, NV, NM, TX, WA, WI), assets acquired during the marriage are generally considered to be jointly owned regardless of title.  Only assets which pre-date the marriage are considered Separate Property, along with inheritances and gifts received. The challenge, however, is that assets are deemed to be community property unless you can prove that they are separate. If funds are commingled, contributions received, or dividends and interest reinvested, you may inadvertently cause the separate property to become community property. When a couple is getting remarried, it is important for both spouses to understand their separate property rights and take steps to ensure that these assets maintain their separate property character. For details on how to do this, please see my post, Community Property and Marriage.

Second marriages are increasingly common today, and each one has its own unique set of financial details. Smart financial planning can help provide solutions to these complex issues and ensure that both spouses are protected and able to accomplish their goals as a couple as well as individually.