​Don’t Do Me Any Favors

By Brad Thomason, CPA
 
As the rapidly-passing summer is now more or less in the past, many of us have started to reorient to our young-uns being back in school.  So I thought now might be an opportune time to tell you about an interesting conversation that I had a while back.
 
The general theory that a lot of us operate on – me included – is that the cost of getting a kid ready to go live his/her life is a cost that Mom and Dad (perhaps with some assistance from the Grandparents) should be picking up.  Or to say it another way, it is not the ideal situation for a young person to have to pick up the tab for his/her own education.  They need to be focused on getting the education, not finding the means to pay for it. 
 
Up to a point, by the way.  My kids have been told quite clearly that they can have all the extra majors and Master’s degrees they want.  But Daddy ain’t payin’ for ‘em.  You get one Bachelor’s degree on your package deal of being raised.  After that, it’s on you.
 
But as I alluded to earlier, a year or two ago I had a conversation with a fellow which I thought was particularly interesting, because it offered some perspective on the down-side of this philosophy.
 
Essentially this guy had gone to college and his parents had paid for it so he wouldn’t have to work or end up with a bunch of student loans putting drag on his ability to start building wealth once he got out.  Which he appreciated.
 
But they did so at the expense of saving enough for their own retirement.  Then, due to medical reasons, one of his parents had to stop working at a younger age than had been originally planned.  The net result was that he was pretty sure that at some point in the next few years he would have to start helping them to keep the bills paid.  Because the balance of the retirement accounts never grew to the heights they had hoped for, it wasn’t going to last as long as it needed to.  And although it wasn’t the only factor, the prime factor was the reduced amount of principal which was added in the first place.  Principal that paid for his education, instead of endowing their retirement portfolio.
 
The person who was telling me this story seemed genuinely grateful for the fact that his parents wanted him to have smooth sailing, and that they cared enough about him to put their money where their mouths (hearts?) were.  But he also pointed out that from the very start of his college years he was on track to enter a well-paying field; and that while he acknowledged that not having to pay off student loans was nice, it was something that he reasonably could have done.  Significantly, he said that the cost of doing so would have ended up being less than what he felt like he was in store for, in terms of having to supplement his parents’ income. 
 
The whole situation had naturally put strain into the relationship, and was causing him to rethink what he would do when his own young children got to the point in their lives that this set of issues would resurface.  He did not want to propagate the problem into the next generation. 
 
Frankly, the whole thing was not a lot of fun for me to listen to, either.  Even though I know how important it is to properly fund the retirement need, and needed neither an example nor a reminder to make the point, hearing about a real world cases of not doing so still bummed me out.  I felt bad for the guy, and I felt bad for his parents.  But what could you do?  Which was sort of the whole point.  The actions were in the past, and all that was left now was the future effects; which unfortunately didn’t seem reversible.  He concluded by saying, “Sometimes I wish they hadn’t done me any favor.”  
 
 Food for thought.