[quote=flu][quote=EconProf]Sorry to veer way off topic here, but I differ with flu’s approach to money entanglements with one’s offspring–or any relatives or friends for that matter. He described a scenario that may be economically optimal or tax-wise, but that interferes with the kids’ taking full control and responsibility for their own financial affairs. If the parents have taught deferred gratification lessons, required budgeting of their children, and not bought their affection with material goods, the kids will do just fine once on their own. And if they go through lean times in the process, all the better to learn from. Above all, they need the pride of accomplishment that comes from earning their way on their own. Parental help can rob them of that experience.
I admit I have been overly generous at times with my own kids, so I don’t always practice what I preach.
The financial advisor Dave Ramsey points out that once you loan money, give money, or form a partnership with a friend or relative, you change that relationship forever. At the outset, everything seems fine…but then things change, events intrude, outlooks start to differ as the future unfolds. Partnerships are especially treacherous, and are notorious for ending friendships and gaining an enemy.
In sum, give them the right financial tools while they are growing up, then get them out of the nest. If they come back, charge them rent, even if only a token amount.[/quote]
I completely disagree here.. What I have learned is
1. A good % of americans are spoiled and self entitled….Those who try to take the higher ground by not giving their kids an sort of advantage is pretty much putting their kid at a disadvantage since, well, everyone else seems to try to put their kids at an advantage.
2. It has been proven that if you save and try to leave your money to the kids in the end that our government will just about make everything up to try to redistribute it to everyone else anyway (so that they can piss it away), because most every other person in this country have no sense of fiscal responsibility and expects everyone else to pay for things. So your only chance of making sure your money is spent responsibly is by taking matters into your own hands, teaching your kids about fiscal responsibility and having them work for the seed (unlike other families who would just piss it away).
This will be more so, because more people will end up being in the category of having less, so more of them will end up expecting more of the fiscal responsible people to pick up the tab…
3. IF you kids ends up having an entitlement issue, he/she is no worse than the majority of others is this country. And your kid won’t need to worry about the small percentage of remaining people that would be more fiscal responsible them them…The government will take care of those people by penalizing them with ridiculous taxation rules to ensure everyone else is “made whole”.
4. The loan to kid is no different than IF the bank was to loan your kid any money. The only difference is you get your 3-4% interest versus the bank (which is a win for you), and your kid probably can avoid coming up with a 20% down and avoid bending over getting an FHA loan (which is a win for your kid), and his/her mortgage interest deduction he/she can still claim on schedule A (provided the government doesn’t try to take that one away, which it is as part of the wealth redistribution plan,again…)…
…In fact, since most FHA loans will probably default anyway (since many people who get them have bad credit or unable to otherwise afford a home), you’re actually doing the rest of us a favor by ensuring your kid isn’t one of them that gets an FHA loan and possibly later defaults, resulting in the rest of the taxpayers being on the hook for… So it’s a win for taxpayers too.
Come on… Look around at what’s going on. Do you really think the old way of thinking about saving and working “hard” is really going to work moving forward? Do you really think the government is gonna start “rewarding” people to be more fiscally responsible? Look around. Look in asia. Where the majority of the younger generation who “work hard” can’t even afford a simple basic home…because things are so out of wack… We’re headed down the same way….
The government is gonna encourage even more people to try to spend to oblivion. Home prices aren’t gonna crater. They’ll weaken the dollar and inflate everything else and keep rates low or lower to try to keep this shame system running…
Is it really “fair” your kid should try to come up with all that “fiscal independence” to come up with “hard earn” 20%+ down and compete with the likes of say Blackrock which directly or indirectly is using other people’s money or worse part of the taxpayer borrowed money to purchase SFH and directly competing with little guys/gals like your kid(s)?
Psss… No one is at the same playing field..Some people/organizations have “seed money”, they just like to pretend they don’t…The only difference is they have better connections than you do. Government and companies have the largest connections there is…[/quote]
I don’t normally include this much of prior posts in my comments, but i think both of these comments have a lot of merit. Getting involved with loans and business transactions with family is loaded with possible problems. But that doesn’t mean they should always be avoided. Sometimes they do work.
But your point #2 here flu is pretty much BS. It has never been proven, in fact there is no evidence that it’s been true at all for the last 10 years. I’m guessing that since your kid(s) were born, you have never been in a position where you and your wife would be subject to estate taxes, or if you were, it would mean that the vast majority of your combined net worth would still pass on to your kids, free of any estate taxes.
