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Q&A: How Much Should You Help Your Kids Financially?

By Family OfficeNovember, 2022March 18th, 20242 min read
Q&A How Much to Help?

Q. How much extra financial support should we give our children?

A. This is one of the great balancing acts parents need to perform. Too much and kids might end up spoiled or entitled. Too little and the wealth is not there for them when they actually need it (and if it’s not, then what’s the point of it?)

We all have a particular psychology of money, and these attitudes are formed in our early years and deeply ingrained, sometimes on a subconscious level. Children who see parents always fighting about money might end up feeling money is a source of conflict, and find themselves unable to hold on to it. Some wealth creators feel their children should struggle financially like they did because it made them tough and resilient. I’ve used the word “feel” deliberately as these views are more based on emotion than logic.

Warren Buffet famously said “enough that they can do anything, but not so much that they can do nothing”. Given this discussion is about additional support (rather than wealth transition), the bigger risk is around “doing nothing”.

My view is that children in wealthy families ought to learn an important life skill: making financial trade-offs. While at some point in the future, they may not have to, it’s a good thing to know as it’s healthier to treat money as a finite resource.

A financial trade-off means sacrificing some of X to get more of Y. That could mean a better vacation at the expense of a nicer car, or a restaurant dinner at the expense of an outing. Note that you may want policies to ensure your children do not make certain financial trade offs, such as for medical expenses.

It’s also important not to set policies in stone, and continue to monitor (while respecting our children’s autonomy) and adjust as needed.

Consider This: Does your family have formal policies on distributions to family members? How flexible are these policies? Do you have open discussions with children about money and spending? 

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