Join Paul and Garrett as they discuss practical strategies to strike the right balance between helping the younger generation and safeguarding your financial future. They explore various financial and non-financial ideas to assist children without sacrificing retirement goals.
Key Topics Covered:
By the end of this episode, you'll gain valuable insights into how to assist your children or grandchildren without jeopardizing your own financial security. Tune in to discover practical ways to support the next generation while ensuring a stable and comfortable retirement.
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Hello and welcome to your investment partners with Paul and Garrett, where we talk about all things financial, focusing on helping you plan, keep and grow for a successful future. If you're new to the podcast, welcome. And if you're tuning in again, welcome back and thank you for listening.
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Hello and welcome to your investment partners with Paul and Garrett. Today we are talking about how to help your children or grandchildren without breaking the bank or setting back your retirement. As we work forward, there's a lot of considerations and many people want to help their children recover things. Is helping with school or maybe even getting into a home, as well as gifting limits and other things that you can do.
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Non-financial ideas that may be helpful for them as well. If you have any questions about any of the items discussed today, please reach out by email or phone. My name is Garrett Smith and we look forward to having you with us today. Well, here we go again.
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Awesome to ramp one up again. This is kind of an interesting one.
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It's a common question we get comes up time and time again, Help in helping a kid out. Yeah. You know, helping a child out.
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Should I? Shouldn't I?
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How should it be done?
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And how do you do it without messing up your own kind of financial goals, particular particularly retirement. You know, you can help your way. Help your kids into the poorhouse, and you know, put yourself kind of in a rough situation. Yeah, it's not. And when they're your own children, it's. It's hard.
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Yeah, it's hard for with kids and and it's hard with grandkids, too. From from what I've witnessed, you know, sometimes grandkids have more pleading eyes than kids do just by watching, you know, clients. And and so sometimes it's, you know, you just have to be careful.
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Yeah. So they're the most common ones that often come up is usually car home school. These are probably the biggest ones, are the biggest expenses in most people's lives. You know, other ones are just things that come up out of nowhere, you know, medical emergencies or, you know, other situations where it's just kind of this was out of the blue or maybe it was brought in by poor habit or poor choices of a child.
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And those are you know, those are tough. Those that kind of come out, come out of nowhere or kind of are brought upon themselves in the last minute. But, you know, setting those aside for now, I kind of wanted to talk through, you know, best ways to help with school first and then kind of talk about how to help in a car and a home and maybe some ideas around those.
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Yeah, I think from a from a high level thing, the first the first thing people need really need to look at is, is how does the math look. Right. We we like to do retirement cash flow planning schedules for people and and you know, if people are kind of below the safety line, you know we really just encourage them to say, sorry, I can't you know, I just I mean, you have to you have to if you're going to do this, you've got to you've got to approach it from the side of being, you know, really solid and strong financially.
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And you really don't want to risk your financial future by helping somebody else because, you know, if you're in that position, normally you don't have a lot of time to recoup. You know, when people are younger and they make financial mistakes, hey, we've got time. We can, you know, kind of work this out and figure figure things out over time.
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But if you get up there in years and you make a, you know, too much of a financial blunder, it you know, it can you can run out of money before you run out of life. And that's our goal is to not do that so well.
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And you make those poor choices and you kind of go backwards financially or you end up becoming a financial burden on someone else. Right. You know, so it turns into kind of a domino problem. And that's why you have to make sure you kind of go below that, you know, whatever the flaw is on those cash flow projections and and your retirement safety net because you kind of start tipping through that and dipping back into the principal of your savings.
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And, you know, it's just can be a quick road down downhill And yeah, but, you know, you got to live somewhere and you got to be able to eat. And and so if you don't have enough dollars, take care of yourself that's got to come from somewhere. Right? And so that's the last thing we want to see is is somebody compounding a problem because it's tough for them to say, for them to say no.
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And we tell our clients to all the time, look, if you feel like you should say no, but you can't, for whatever reason, blame it on us. Yeah, just just say I talked to my financial advisor and, and he said, and we've, you know, we've recently had discussions with people about that. Yeah. So, you know, blame it on us and we're happy to kind of take that chore on if it's, you know, emotionally it's, it's a, it's tough for you to say I can't do that.
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Yeah, we're always, you know, we get hired to, to work in your best interest. Right. And so we're happy to help and take some of the blame. And that's probably one of the things I guess we can touch on that right now is one thing that you can do is is get somebody on your side, you know, hire somebody or work with an advisor that kind of can help you, protect you from yourself, because we've seen that a lot, particularly if you're you know, if you're grandma, grandpa and you're on your own in a Graham child needs help, You kind of don't have that support person that you're used to having all your life.
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And and now it's just you making the decision and and your grandchild starts saying, Hey, grandma, Grandpa, can you help me out? It it gets tough because you want to help them.
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And so having somebody on your side, you know, particularly a professional, can really make a difference.
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And I think the most important people who should seek that out is people who are windfall candidates. So, you know, lawsuits, you know, you win the lottery or, you know, something like that where you're not used to, you know, handling a lot of dollars. The first thing those kind of people should do is just get a, you know, get a fiduciary on their side to just look out for their best interests.
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Yeah. And it's not only winning the lottery, but it's also something I've seen. We've seen it in the case of somebody inheriting. Yeah. When they're you know, they've never inheritances they've you know, they've been okay savers and all sudden they get this big inheritance from mom and dad and and it's you know awesome They can now they actually had the flexibility maybe help some kids it it can go really fast and you just burn right through it right back where you are.
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Yeah. And it's you know, it can be as small as, you know, a few thousands or hundreds of thousands, if not millions. You know, this happens at every stage. You can kind of burn through that windfall really, really quickly if you're not careful. And, you know, instead of using it to open doors, you're just kind of right back to to where you were.
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Yeah. So it was a lottery or inheritance. You know, working with somebody in your best interest, it will go a long way. And that's like you said, that's the fiduciary standard. Yeah. When you want to make somebody who's working up to that standard to not just, you know, and is required by law to do so, and that's that's what you're looking for.
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So but if you do, you know, let's see, there is room in the budget in the savings to help schooling. There's also there's there's a few account options. But really, I think the best thing to go through is how much room is there in my financial plan to help, you know, setting setting a limit of how much you can help monthly or yearly or, you know, maybe you're saving early instead of, you know, just saying, hey, you know, I'll pay for all of college and just open up a blank check, you know, just saying, okay, how much is reasonable given my current situation?
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Well, and not only that, it really does come down to the it always comes down to the math when you're talking about finances, because, you know, let's say you're going down the road of helping grandkids. Well, how many do you have? So if the first one comes through and and you're like, oh, yeah, I want to help my grandkids, you know, you got to look at, well, do I have, you know, five grandkids or do I have 30?
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And what's it going to cost if I you know, because you know how families work, everybody wants to be treated fairly and, you know. Yeah. Oh, helps Susie. So you got to help Johnny, too. And so again, mathematics come into play and so you have to look at what's what's going to happen. And then the other part on schooling is what's good for the kid, right?
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You know, there's there's a lot of evidence that that it's it's good for kids to kind of work, you know, 10 to 15 hours through school. It just it's so they have some some buy in to it and that's, you know, personal philosophy. But but you know, how much can the kids help themselves and and what you know, government grants and things like that what's available.
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I'm not I'm not really big on student loans. I don't really like those because they just tantamount like candy. And then people have a hard time paying them off. So I discourage you from from having kids go down that road, if at all possible. But you just have to look at what resources are available and then how much can I you know, how much can I lend to this?
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Yeah. And a note on student loans. Oftentimes we see people living off those student loans and not just paying for school.
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So then you're racking up living expenses along with schooling expenses, and that can get out of hand pretty quick.
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Very, very quickly.
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So, yeah, you know, Yeah, you have to keep an eye on that. But I think that is a good thing to consider, is there are a lot of options to pay for schooling outside of school. Loans are a gift from grandma, Grandpa, mom and dad. Sure, there's scholarships and grants and obviously you want to tap those areas first and then there's tax advantaged savings.
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If you got young grandkids and you want to start saving ahead of time, you know, that's obviously a great way to do. You know, you can collaborate with their parents and start saving a few hundred dollars a month or whatever it is that fits into the budget to kind of prepare for those. Then you can kind of you can start getting the the growth in the compounding interest on your side and whether it be in a tax advantaged account like a 529 plan or even just a, you know, just a trust account that you're holding in your name, that you can gift to them.
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You know portions of it later. Yeah. So there's there's lots of options there. And like any planning option, the sooner you start, the more flexibility you have. You know, if this is if this is last minute, you know, hey, we need help tomorrow. Yeah. Makes a lot tougher than, you know, looking down the road. So schooling is schooling the best option.
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You know, start early if you can. And then and then the other option we give you is just to have a limit of, you know, particularly if you got a lot of grandkids, you know, might just be we give each your grandchild a certain amount of money and that's what we plan for and that's what we're budget for.
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But it's it's just no more, no less. And that seems to work out really well. And and then, you know, parents and the children kind of plan on that in their schooling and work towards that. Yeah. What about this one comes around it seems like a couple times a year, you know, a child wanting to buy a home and it's usually a home that's anytime you buy a home, it always feels like it's a little out of reach.
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It's a little.
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Bit of a stretch.
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And and so obviously mom and dad want to help. And and you know, what are kind of some of the best tips or suggestions that you've seen in the buying the home camp?
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You know, this one's really tough because homes especially now they're they're just so expensive. And, you know, I look at this generation of kids coming up and and I you know, I do wonder how how are we going to how are we going to get these kids into homes? Because starter homes are, you know, I mean, 300,000 for for condo type.
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Yeah. Around this area.
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Is just so this one this one really is tough and you know I don't know that there's right or wrong answers for this. I'm just glad all my kids are in homes and I'm like, are my grandkids thinking, man, how are we going to get you guys in homes? And I think, again, it's just this is one that is is if we're going to go down this road, you really have to kind of plan early on this one and and get some money saved up because, you know, down payments are you know, 50, 60, $80,000.
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And that is that is a chunk. And and, you know, so you have to look at the kids and, you know, you don't want to put money in a home that the kids are going to lose anyway. That's one of the the big warning flags is sometimes, you know, people have a bigger appetite for a bigger home than they can really afford.
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And you don't want to put people in a home where it just consumes all of their income and, you know, they can't afford to eat or vacation or, you know, go out and get a soda because it's all going into the home. You just don't want to you don't want to enable that. And so you just have to use, you know, good, good financial judgment.
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And if they need a little bit of help and and but they they're going to be able to, you know, easily handle that payment going forward, then then that's probably that's probably a yes. But again, how does the math look on your side of it before you make that decision?
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Yeah. And I think sometimes looking at it too, is is helping monthly can sometimes be easier than a lump sum. You know, maybe it's helping a little bit. It's sort of buying a home. You find a place to rent and and you can and it fits in your budget. You want to you can, you know, Chip in a $100 a month is oftentimes a lot easier for somebody than trying to get a big lump sum for, say, a down payment is I think if you're looking to help you, you've got to be as creative this as you can.
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And I always like to look at, well, what have they saved for the house? Sure. You know, I mean, somebody comes comes to me and it's like, well, what have you, you know, what have you done so far? Not just, hey, I want to buy a house and I need 30 grand and I don't have anything. Well, go say 15 and then come and talk to me again.
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Right. Right. And.
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