To Help The Kids Or Not To Help The Kids? The Human Side Of Money presented by Client Care

These days many of us struggle with the decision on whether we should help our children financially or not. It’s difficult to see family struggle financially, especially if we are in the fortunate position to have more than we will need to live our best life. Afterall they will in most cases end up inheriting our wealth anyway?

 

Let Our Hearts Guide

Perhaps we should approach this firstly from a non-emotional stance and then let our hearts guide us. Let’s look at some facts:

1. In 1994 the average home cost 2.5 times the average annual salary, in 2024 the multiple is 4.5 times.
2. The cost of medical aid and medical services has been rising at a rate of 3-5% above normal inflation for many years now which means it constitutes a much greater proportion of today’s salaries. My 4 siblings and I were all born in government hospitals, nothing more needs to be said about the current state of these institutions.
3. Many essentials that we cannot do without these days did not exist 30 years ago such as smart phones and TV’s, data contracts, tablets (the computer kind), music subscriptions and so the list goes on.
4. Schooling for children has changed drastically and while 30 years ago the average government school delivered a great education, today this happens more at expensive private schools.

Our children roll their eyes when we talk about how tough it was for us growing up, but the truth is that while in some ways we had it hard, when it comes to setting up a life financially these days, it is definitely more challenging than we had it.

To help the kids

So then, how do we assist in a way that does not produce spoilt entitled brats? (our worst fear) The type of financial assistance we can give may vary in many forms and should depend on the level of assistance we can afford and the family members unique situation.

I believe an easy one to start with is assisting with our grandkid’s education. The great Greek philosopher Aristotle once said, “Give me a child until he is 7 and I will show you the man.” Helping pay for a proper and safe education is probably the most valuable way in which we can help our children and their family.

Expensive Debt Traps

Educating our children around finance can make sure that they do not fall into expensive debt traps which end up putting pressure on their marriages and causing general stress and anxiety. I know a gentleman who assists his children by paying off their home but then gets them to redirect what would have been their bond payment into investments which ensure their long-term security. This is a smart way to advance the inheritance they would have gotten one day much later while teaching financial discipline and creating long term wealth.

The first step in knowing if we can assist our children is to have our own house in order. This can only be done with proper and thorough cashflow planning which shows us the cost of the ideal life we want to live into retirement. Once we have clarity on this, we can restart the rewarding process of parenting our grown children.

What in life is more important than that?                            

 

Dirk Groeneveld, Certified Financial Planner.