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How do we get children to use their own resources to “truly fly on their own?” This is an important question, for those who want to keep their kids from “blowing up” their retirement, or for high net worth families who want to develop children that can lead meaningful, productive, and independent lives.

It helps to start children on the path of self-sufficiency in their early years. Allowances with a portion that goes to savings, required household chores, and no easy withdrawals from “the bank of Mom & Dad” teach kids to rely on themselves to purchase what they “cannot live without.”

Our kids drove an old beat up 1988 Volvo Station wagon for dates in high school. They shared this car, leather seats with the seams splitting. When youngest son needed a car to drive to internships in college, we got him a Smart car. At the same time, “to make his older brother whole” but who was perfectly content without a car in metro DC, we provided funds for him to contribute to his Roth IRA account. We were conveying a message on what we think is important. Obviously, we could afford this and wanted to avoid having our younger son go into debt for the car. In our family meetings, we stress to our children that the only good debt is mortgage debt and no, that statement does not carry over to home equity lines of credit.

I think where people get in trouble is in funding lifestyles for their children or picking up the rent for their apartments. This is especially dangerous, if these expenses jeopardize your own retirement. So, what is the fine-line parents should walk when they see their role as providing for older children.  The approach we have taken in our household is to be transparent with our children in our annual family meetings. This year after reviewing our family mission statement and values (which by the way focus on the contributions we can make in the workplace and the community), reviewing our assets and total net worth (which has scared my wife in that our boys may feel that they may not need to work), and reviewing how our estate documents work; we took the boys through a medical rejection we had for a Long Term Care policy which in our minds was an asset protection plan for their inheritance.

Their reaction was a pleasant response. They both felt the planning to acquire Long Term Care insurance was nice, but they were not counting on inheriting any of “our money.” It was very gratifying to hear. Sometimes, I read our family mission statement and think it sounds corny, but when I think about their response, I think this document is very helpful. It also reminds me the time we spend in these meetings and the topics we discuss is time well spent.

Other ideas to keep your children from seeing you as a constant income stream:
• Set up trust account with a set amount, tell your children when they use it up, there are no other funds. And stand firm.
• Set up a formal loan with interest and a repayment schedule. Stay on top of the loan repayment or let your child know the loan balance will be deducted from their inheritance.
• When they ask for money; ask them when you will be able to move in with them when you run out of money and need to sell your home. That will be a “wake up” call!

My belief is the best way to approach this is to stop any unnecessary gifting you currently have in place with your children. Start having family discussions around money, wealth, and what role it has in your family. For younger children, limit cash “handouts” and have them develop fun and activities with the stuff that is already available at home vs. filling that void with consumption. If their need is so great, let an allowance generated by chores at home be the source of cash.

Do not let your children’s needs and wants threaten the retirement you have worked so hard for.  Looking for assistance? My contact information is listed below.

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Peter B. Smith is a Family Wealth Advisor at Planning Solutions Group in Fulton, MD and is an Annapolis resident. He can be reached at 301-543-6008 or by email at