I inherited my first slice of our fading family fortunes at 21. I remember sitting with my father in the sunroom. The rattan furniture was covered in a burnt orange, batik-ish fabric. I was reading a book, he his mail. Then he said something like, “Aha.” Or, “Well.” One of those exclamations that indicate a shift.
He explained that one of his mother’s sisters had died, without heirs. Of the four girls, only two had children. One of them, my father’s mother, had only him. As a result, he would inherit some of his aunt’s estate. But, rather than take possession of the assets, he was going to pass them down to us children, right away.
Generation-skipping, I think it’s called. Favorable tax implications, I think. Generous in any case. So there, unexpectedly, at 21, I had more money in the bank than I could have earned in several years at any job I was likely to find.
The full story of my inheritance, as I have said, is long and full of socioeconomic and gendered landmines. I understand that it’s fairly unique, and do not want to natter on about such a specialized experience.
But there is something more useful than my personal history to be derived. A reader asked me what I thought about kids, and trust funds, and financial resources in their early years out of college. A question to be asked both by those who have always had money, and those who by dint of great talent, or luck, or both, are newly well-to-do. Maybe by everyone with children.
Here’s what my experience tells me, at the highest level.
Finances At The Family Dinner Table
- For all families, discussing money clearly, and revealing the realities in a timely manner, is probably the single most helpful thing a parent can do. More valuable than money itself.
- In trying to get children to understand the value of money we might consider denying kids access to resources all around them in the family. This tends to feels like lack of love and is not recommended.
- The best way to learn about money is to get a job and experience money in and money out. However, forcing kids to work just to “show them what it’s like,” often joins a long list of “dumb things my parents say,” removing all chances of lesson-learning.
- Modeling financial behavior + child’s temperament + all the rest of simply being alive = end result. Money is very intertwined with our emotional foundations of need and response. It’s difficult to teach financial responsibility in a completely dispassionate way.
- As a result, money discussions become all the more important in families with resources. Yes, it is embarrassing to talk about money when you have it, and kids don’t have the context to understand what the numbers really mean. But shame in this context is not useful. A demystified process of financial education should be well underway well before anyone turns 21, or graduates from college.
- These discussions are complex, requiring a sensitivity to what kids are ready for, and when. I imagine this is true for all kinds of families, but would not want to speak, in ignorance, for anyone else.
To Trust Fund Or Not To Trust Fund
- So if you have financial resources, when do you make them available independently to your children? Let us deconstruct.
- Families in a position to set up trust funds will almost certainly have afforded their children a debt-free college education. This is enormously fortunate in and of itself.
- At the end of said education, kids will either have a vision of what they want to do or not. A trust fund will not be useful to someone in the latter situation. In a few cases, those who do know what they want to do could make good use of an infusion of capital, but having to request or qualify for that capital provides a better learning experience than having it in hand.
- A period of survived life uncertainty can be useful, in 2011
- We, in America, are experiencing an inexorable lengthening of youth, as our life expectancies extend. The period of experimentation is longer than it was a few decades ago.
- Even those who take on fully-fledged, traditional adult jobs, may find themselves shifting careers over time. Again, survived uncertainty grounds one.
- Life comes as phases. 21-25 is often quite different than 25-30, and certainly different than 30-35 – if only because women will often want to have children before they reach 35-40
- The vast majority of young people, in the demographic with which I am familiar, will spend the years 21-25 bouncing about
- Those who do not will be gainfully employed, possessed of health insurance, and often saving for a goal. They are apt to calculate future inheritances in, quite rationally, to their plans.
- If you are going to bounce about, you might as well do it broke as rich.
- Turns out that not HAVING to do anything doesn’t solve the problem of what you WANT to do. Or SHOULD do. The greatest cure for anxiety and uncertainty is often a job, a task into which to throw oneself.
At the end of the day, in our early 20’s we all ought to learn what we are capable of, if we don’t know already. Test ourselves. Understand the value of money, not in some moral sense, but transactionally. Understand our own functional worth in the world. Trust funds, excuse the word play, can in fact get in the way of understanding and therefor trusting oneself.
Instead of funding the 21-year old’s portfolio, let that money accumulate until he or she is 25, or even 30. The capital-intensive part of life begins later these days. While it would be disingenuous to say that a chunk of money that allows you to buy a house is a bad thing, the work of one’s early 20’s is perhaps best done on a limited budget.
My professors always brought up the sonnet form when explicating the value of constraints in art. The same applies to life. All of this is as true as I can make it.