So I put $5k in to a portfolio for my daughter on her second birthday. I plan to manage it for her and use it as a tool to teach her financial literacy as she grows up. It is all in my name and I plan on maintaining primary control till she is in her 30s and can be trusted not to squander it.
My father in law put $18k in to a 529 for her when she was born, so this portfolio was never intended as a college fund. It is to teach her about compounding interest and the difference between money and wealth.
I recently came across an article describing a college educated child being angry at their parents for helping no college child with Mortgage down payment. DP was similar sum to tuition. Tuition did not cover full expense of college, but DP did not cover full cost of Mortgage.
Who do u guys think made the better financial decision? Does this seem like the parents were fair to their children? If my daughter did not have the 529, would you suggest I offer her this choice at that time?
Hypothetical situation: Let my child choose between mortgage vs student loans
byu/Positive_Wheel_7065 ininvesting
Posted by Positive_Wheel_7065
7 Comments
I’d put it to whatever was going to be the highest interest % debt.
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Unless AI really ruins the white collar job market, college education almost certainly better investment long-term. Certainly fair that some people just aren’t meant for college though, and I don’t really see anything wrong with passing on an equivalent sum for house down payment.
Just decide together when she’s in high school. She might not need college. You might die when she’s 18 and will her your house. If your goal is to help her financially, it ultimately won’t matter which one as long as it sets her up for a secure future. If your goal is to push your expectations on her then only you can decide if you would support her financially with stipulations
The best financial decision will be paying for college. This will help them invest in themselves and depending on the degree will pay off many time over. This will also set them up with no debt so that they can easy afford a home when they are ready.
Some people don’t want a home. Some single people don’t want to own a home before they are married. It could be a while before that money is useful to her.
You raise your kids to be rational, emotionally competent adults with examples set by you- their parents. Your kids should be thankful for any monetary support they get from you after they turn 18. Not everyone gets that, and not every parent can afford to even if they wanted to. So that article is irrelevant- the kid who got mad is a little idiot crybaby. Of course creating this account and letting is grow for 30 years is a good thing…but you are far over-estimating how much that will go toward their financial literacy and independence. Even 20 year olds have a hard time thinking 10 years into the future, and a 15 year old will think some random account they can’t control for another 15 years has no meaning to their life. You will still have to teach them lessons about the reality of YOUR financial situation, and how the decisions they make will have real impacts down the road. Personally I don’t think you should be so hard and fast about giving it up when they are 30. Perhaps they marry and want to buy a house before that? You will have to adapt to what the market does and whether you think they deserve it…30 seems very random.
My wife did really well in high school and got a free ride at college. Her parents had been saving money for her college without using a 529 and they told her that she could use some of that money for our wedding and whatever was left we could use as down payment on a house, emergency fund, or whatever. While I understand there are things you can do with a 529 in a case like that like roll it to a Roth IRA, but it’s still limiting in how you can use it without penalty. I opted for custodial accounts for my kids instead of a 529. ETFs therein don’t seem to generate that much tax noise so far. It’s possible I’m underestimating the tax break and the impact it would have to just eat the penalty in a situation like that, but I just feel better having complete say now and a clean handover. As I see it, that’s their money and it’s not my place to dictate its use. I am happy to give them my recommendations but autonomy is part of the journey.