Thursday, February 01, 2007

Unpacking "Financial Independence"

So, one of my financial-emotional sore spots is that my parents give me money.

When this practice is discussed in the personal finance blogosphere, it is generally in the most scathing of terms. One particularly revealing snippet of rhetorical subtext: "financial outpatient care" is a common borrowing from canonical personal finance text The Millionaire Next Door, which assures readers that adult children who accept money from their parents grow up weak, waffling, and ultimately unsuccessful--it compares accepting money to illness. The implicit message of this phrase is that those who do not accept money are healthy--walking out of childhood on their own strong two legs--whereas those who do accept money are sickly, being pushed along in a wheelchair to the hospital gates by a coddling nurse-mother.


My sister and I haven't turned out so badly, if I do say so myself. We're nice kids, not too spoiled, both hoping to spend our careers "giving back," and not unaware of the privilege our parents' financial situation has offered us. We're appreciative of the educations we've been given (or, in my sister's case, that she's currently getting) and we've met (or are meeting) the high bars it's set us. We volunteer. We budget. We save. And we both get money from our parents.

Why does our family work this way?

Is it a difference in values? For me (and for my family), success isn't measured in money. My parents could have pushed me towards a higher-paid job; they didn't. They paid for me to major in English at an expensive school and they occasionally do a little light bragging to their friends about the company for which I work, not because it pays me lavishly, but because it publishes good books. I'm not saying there isn't a status-consciousness; I'm saying it's measured differently in different social circles and socioeconomic demographics.

Is it a difference in politics? This week, The Simple Dollar did a series of posts on financial independence, all of which seemed to me to carry a thinly-veiled ideological undercurrent: the question "Should I expect my parents to rescue me?" all but answers itself, even if the first heading isn't "Don't expect anything." Try substituting "the government" for "my parents," and suddenly you've got a classic argument against welfare: fail or succeed under your own steam, buddy, but don't expect a handout. Here we hear echoes of a beloved trope: that rugged individualism is what made America great, that people fail or succeed on their own merits, that the great rise to the top and the bad sink to the bottom. My parents' politics, however, tend more towards thinking that the Invisible Hand of the Marketplace is waiting for a kickback from Halliburton.

Is it a difference in financial situation? My parents can afford to offer me financial help. An amount of money that seems huge to me doesn't represent a major sacrifice for them. If they were scrimping and pinching to come up with retirement money, it would be a very different story, but my father recently retired with a substantial pension and a healthy portfolio to supplement it (he also still teaches a couple of classes, which is supplemental income). They can afford to travel, take art classes at NYU, shop at Whole Foods. Those are all great things that they want to do with their money--another thing they want to do with their money is help me as I grapple with my life today and in the future. When they offered me money, my parents were very clear that it was both for sensible and "frivolous" things, that they wanted me to save, but they also wanted me to have fun, and if I can't afford to have fun on my earned income, they're willing to make that possible. In a way, it's another luxury for them--to be able to give me the opportunity to go out with friends and have a few drinks when I might otherwise have had to stick to water, or not have gone at all.

I guess I have to conclude that, insofar as they are inextricably entwined, it's some of each. It's about politics and values and finances and relationships and personalities. It's not about how much parents love their kids: parents who don't have enough money to give still have plenty of love to give, and parents who believe that offering money will hurt their kids' development are doing what they think is best for their children out of love.

So is it okay? Though it's self-justifying, ultimately, I have to say yes. Yes, it's okay, if your parents can afford it and it doesn't make anyone feel bad and you can handle the extra money responsibly and you can all sit down and discuss how things are going and you remember to appreciate the gift and it doesn't come with too many strings attached. That's a lot of caveats, but with them met, I think it's okay to accept money from your parents.

I'd love to hear what you think.


S/100/30 said...

I've said in a few places that what makes Tired But Happy such a great blogger is that she's both open about the money she's received from her family *and* doesn't just give lip service to the effect of that help (and I've commented as much on her blog).

I actively avoid bloggers who have received and continue to receive a lot of financial help from their parents, but then speak in moralizing tones about what they've bought/accomplished with that money, i.e. they have a home and are therefore more mature, they travel a lot and and therefore more adventurous and open-minded, they stay home and thererfore are more dedicated to their children than working parents, etc.

English Major said...

Please kick me if you catch me failing to acknowledge the impact of my family's contributions on my future prospects and lifestyle. I hope I don't do it already.

Even if my parents never gave me a dime after college, the fact of my upbringing--of the education I've gotten and the people I've spent time with--would shape my life forever. Fail to acknowledge that, and we fail to acknowledge the system of class in America.

Wil said...

There's nothing wrong with accepting money from your parents, as long as they are willing to offer it. There's nothing wrong with them offering it for as long as they want to. The problem that I (and probably a few other PF guys)have is that young people start expecting it.

The question is, what happens when the well dries up? You seem to have your head on pretty straight, but how many young people do you know who consider gift money from their parents to be limitless and would be devistated if it were to stop?

Generally, young people who live off their parents' dime don't know how to strive for something different (again, you may be different). There is a lot to be said about being hungry (not for food, but like in the "Rocky" sense) and overcoming it. In my opinion, something earned is always better than something given.

Wanda said...

My parents will pay close to $100,000 out of pocket for my private school education, and for that I am very grateful. They have said that if they are able, they will contribute some small amount to my business school tuition or first down payment. So this is self-justifying too, but I think it's okay to take money from the parents if they are willing to give it and are not harming their own retirement, especially for something like a college education. Maybe it's the way I'm brought up, but I do feel that parents do have a responsibility to save for college - at least part of it. I hope to be able to afford the bulk of tuition for my child.

S/100/30 said...

Please kick me if you catch me failing to acknowledge the impact of my family's contributions on my future prospects and lifestyle. I hope I don't do it already.

Yeah, my comment wasn't meant as a clumsy dig at you, although I realized later that the travel reference might have made it seem that way...

If I really felt that way about your blog, I wouldn't be reading it ;).

English Major said...

Wanda: I totally agree. Especially because my parents paid for my education, I consider myself to have incurred an obligation to pay to educate any children I may have. Even if they hadn't: isn't the point of that whole American Dream thing sort of to give your children the advantages you never had? I do not understand refusing to pay for your children's education to the greatest extent possible, and probably never will. I do not understand it. It boggles my mind. My mind, it boggles. (Incidentally, I agree on another point, as well: it's astronomical, the amount my parents have paid: between me and my sister and the two liberal-arts schools and the no financial aid, it must be pretty close to $400,000 (!!!!), though I cut them a teeny, tiny break by graduating a semester early.)

s/100/30: Whew!

WH said...

If I may echo Wil's sentiments: An unhealthy financial dependency exists when one comes to expect financial help from his/her parents, and even more drastically, when their lifestyle would be very different were they to stop receiving that aid.

One could argue (for the big picture as well as the small) that, it is a good practice for parents (or "the gov't") to help kids (or "welfare recipients") who seem to be making a good faith effort to establish/help themselves (e.g. Giuliani's Workfare Program). But ask almost any parent capable of giving help, and s/he'd probably tell you the same thing: s/he wants to give his/her kids the most financial support within his/her means. I know I would!


English Major said...

Wil and WH: Thanks for your evenhanded explanations. One question: do you know any of these entitlement-junkie twentysomethings yourselves? I've known a lot of college students getting educated on their parents' dime(s), and a few recent graduates whose parents help them in some way or another (whether it's by paying for health insurance, or leting them live rent-free, or whatever), and I don't know anyone who's ungrateful to the degree that they'd buy a plasma-screen television or something with their parents' money and be angry if their parents turned off the tap. Similarly, I don't know anyone who receives money from his/her parents and who's not making a genuine effort to pursue personal, professional, and financial goals. I wouldn't discount the possibility that I just know a bunch of nice kids, but is it also possible that the entitled slackers of my generation are largely chimerical?

I do know a bunch of kids who don't have the best sense of perspective on the degree to which they're privileged, but I think that's largely due to inexperience with the realities of other people's lives. A nicely varied group of friends usually sorts that out, I find.

Wil said...

Actually, I do know quite a few. In fact, when I was younger, my parents paid for my college. I appreciated that they were doing something for me, but I didn't take the education as seriously. I took useless classes, dropped classes, screwed around, and pretty much everything except study. When the well ran dry, I was pretty pissed, but looking back, I appreciate them cutting me off even more than them helping me. When I decided I wanted to finish the my degree, I had to pay for it, so passing and finishing became so much more important. It's also a huge feeling to know that I have a pretty good life, with everything that I want or need, all based on the merits of my hard work (well, my wife's and my hard work).

I think that parents should help their kids through school as well, but I personally believe it is at least equally important that they teach children the value of hard work and of surviving failure. After all, they won't be able to be there forever, and we all fail at something.

Anonymous said...

I don't accept cash from my parents. But, when we go out for a meal, they will still generally pay for it. They still buy me much more generous birthday and Christmas presents than I buy them. I would be more likely to accept money from my grandparents, or rather I would find it difficult to refuse.

Living in a country with a welfare state which is a great deal more generous than in the US, I agree that politics affects to some degree whether you think that its ok to give/receive money. One of the reasons that I agree with tax is that I want to live in a country where people that can't work are not left to rot in the streets (I'm not suggesting that happens in your part of the world by the way).

Anyway, its reasonably common over here for parents to help their adult children with a first home purchase, up to and including providing a deposit. This is ok, just not something I want to do.

HC said...

Actually, if I recall correctly, the authors of TMND specifically excluded college education from the "outpatient care" scorn.

Education is an investment, which will hopefully redound to the parents' benefit in retirement (at which point the children may well be supporting them). Now, I personally expect that any potential future kids would pay for some of their schooling, through a combination of scholarships, work study, and (hopefully not too much in) loans. That's what I did.

But if there is still a shortfall, then the parents should either step up or give AMPLE notice that they won't do so. And anyone who says that a kid won't value their education if they get some parental assistance is generalizing to an absurd degree. Yes, there are anecdotes about kids slacking off, but the plural of anecdote is not data. My parents took out a loan for me, and I still managed to do my job at school.

For proof, I have a very thick book with my name in it that says I took my education VERY seriously. People who try to tell me otherwise make me want to use it for thwacking purposes.

Anonymous said...

Where I live you need a car. My parents paid for mine. They have also matched my IRA contributions for as long as I have had earned income. They offer additional financial assistance on similar points. I live independently and pay for my day to day life. But thanks to them I have a retirement fund started and I've been putting money that would have been a car payment into savings. Because I'm just a couple of years out of school and supporting a significant other who has gone back to school, this has really helped us get started in life. This isn't an allowance or frivolous and I hope to be able to offer the same support to my future child if I am ever a parent. I frequently suggest the IRA matching to parents of teenagers because I think it's a great thing to do if you have the financial ability.

English Major said...

Wil--I can see where you're coming from, and as a parent, I'd probably do the same thing. If a child isn't getting the benefits of an education, there's no reason for him/her to be there, and certainly no reason for his/her parents to pay.

hc--thanks for the clarification. I've actually never read the book, only about it. And I very much agree that I, too, deeply appreciate my parentally-funded degree. For me, too, my (undergrad) thesis is my proudest achievement, and not just academically.

anonymous (#2)--I would do something similar as a parent. I think matching an IRA is a great idea. And that's also pretty much what my parents do for me--they provide support that makes it possible for me to save for my future. Because they're well-off themselves, they also choose to provide support that puts a little slack in my budget that lets me have some frivolous fun while saving for my own spending goals (travel). Based on my own ambitions, I may not have the ability to be quite so generous with my own Hypothetical Kids, but I certainly hope to be able to help my kids get started laying firm foundations for a financially stable future, like yours are doing.

Madame X said...

all very well said... interesting comments too!

Stingy Student said...

While I think it's acceptable to accept money from parents, especially for educational expenses, if you're going out and buying plasma TVs and expensive cars, it gets a little unacceptable. I realize not many of us would ever imagine of doing such a thing, but many students at my college lived like they had already "made it" and felt entitled to the finer things in life. Personally, I think being given too much money becomes a handicap in life because you never learn the true value in working hard for your money or saving for a big purchase. Perhaps this is an unqualified assumption, but it seems to me that many of the richest people in the world are from poor or modest backgrounds and learned the value of hard work and saving.

Stephanie said...

I think the general consensus here in the comments is that there's a difference between parents contributing to their children's lives, and supporting their adult children. In my particular situation, the fact that my parents were able to contribute basically nothing to my education means that I may be robbed the opportunity to finish at the school of my choosing. If I have children, I would like to be able to help them go to any school that they can get into, as long as they are passionate about it.

The only thing that ever annoyed me about it was when I was leaving school, many of the other students didn't understand that my parents had no money to give me. They were completely clueless to the idea of someone having to leave because they couldn't pay the bills. To me, this signaled that they took for granted the support they themselves were receiving.

moneymonk said...

"parents who don't have enough money to give still have plenty of love to give, and parents who believe that offering money will hurt their kids' development are doing what they think is best for their children out of love"

Well said. Very good post.

It's okay to accept money from parents. As long as they did not have to suffer or borrow the money to give

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