I plan to talk to a financial advisor. But still looking for thoughts on this to make sure I'm considering everything.
I have about $250,000 to use to help my daughter. She is 22, single, no kids. A very good, responsible worker but doesn't make a lot (~$40,000/yr). She currently lives with a roommate and makes ends meet, but not a lot left over.
My first thought is housing. I could put $250,000 towards a house, but the average home price in our area is about $420,000. She'd still need a roommate or two, which to me isn't ideal. (I'd prefer if she WANTS a roommate but not NEED a roommate).
Also, I'm not sure she could cover maintenance that comes with ownership, or if she'd keep up with normal maintenance, like yard work. 🙂
I could chip in a little more and outright buy a townhouse/condo, but same problem with maintenance and she'd still need to pay monthly HOA, insurance and taxes.
Second thought is investing and letting her take a monthly distribution. I can go into a lot of numbers and all that, but to keep it very simple, if I let her draw $750 a month that should last at least 20 years. In this scenario, she'd still rent and, in the end, own nothing.
If all goes well, when I die, she will inherit quite a bit more. But I don't want her to count on that because there's no guarantee, and hopefully that's several years from now.
I'm also aware she could get married, have kids, go back to school, get a higher-paying job, and many other things that would change her circumstances. So, let's keep it simple and assume nothing changes except her age.
Thoughts on anything above, or other suggestions?
How can I help my daughter?
byu/Top_Childhood_8101 inpersonalfinance
Posted by Top_Childhood_8101
13 Comments
Have you considered a living trust that gives her $10-15k a year? Invest the money in the trust, so it should not run out any time soon.
Maybe talk to her about her 5, 10, 20 year plan? Where she hopes to be career wise and family wise. Figure out when she thinks she needs the money. Go from there.
What did your daughter say when you asked her how you could help?
Start there.
Talk to her and ask what her financial goals are, if any.
You could pay her tuition for graduate or professional school. You could assist her with setting up a brokerage for a longer-term down payment fund (while advising her of any investment risks, of course). You could set some or all of it aside in a trust.
Help her by taking care of yourself financially so she doesn’t have to worry about you in your old age.
Does she really need assistance? That age is a great time to have roommates and learn how to live frugally while making it on your own. I’d be wary of inflating her lifestyle beyond what she could support herself with if the parental money tap ever stopped.
Teaching your kid to be reliant on herself is so much better for her long term well being than giving extra money to have fun with.
Offer support if she wants to further her education, but otherwise it’s a great time for her to learn and develop frugal habits.
Why isn’t education in here? Pay for a good degree so she can make a living on her own.
$40k is poverty in most cities in the country.
Your first goal should be to make sure you are set up for retirement and then support her. Why does she need assistance she is already making money and will eventually make more. You have to first create a stable income stream for yourself using your savings
You guys should both read “the simple path to wealth” by jl collins together. He wrote it for his daughter. It’s a good book.
Help her contribute to retirement accounts?
$40k and living with a roommate is par for the course in your early 20’s. It’s an important rite of passage and she’s doing just fine for now. It’s awesome that you want to help, but at this point she doesn’t seem to need it yet. So my recommendation would be to open a brokerage account and invest the $250k in a solid portfolio of index funds as outlined by the wiki. Make sure she is set as the beneficiary of the account, in case of any unforeseen circumstances, and then just forget it. Leave it alone until she shows signs of being at a point in life where that money, which will have grown nicely, will be of use to her. It’s no surprise she wouldn’t be able to handle a house now, but in 10 years she might be wishing she could afford a downpayment, and then in you swoop with your generous gift.
You could also, if she’s not in a position to max out her IRA, max it out for her every year, either out of that $250k or out of other funds you might have available. These early years of longterm growth are priceless, and putting away $7,500/year is a challenge when making $40k. I *wanted* to invest at that age but just could not afford it, much as I regret it now. This would have been a game-changer for me. (See if you can arrange to contribute it directly… 22 year-old me could not be trusted with large sums of money 😬)
I think a condo or home is a good idea, but do it when she’s ready. You could just buy CDs or put it in VTI depending on how long you think she will need to get ready.
Like maybe just throw it in a CD for a few years while you observe the situation then give it to her when she needs it or is ready for home ownershipÂ
She’s only 22. In my experience, a big gift like that right now disincentivizes her. It’s better to fund ongoing education and have her work for what she earns.
Maybe look into education and cover her housing to get out of this pay grade?