Fertilize The Family Tree?

The personal finance radio host Dave Ramsey often talks about creating ‘generational wealth’ as the final step in his Total Money Makeover. He encourages people to think about how they can fundamentally “change their family tree” by building an uber portfolio that allows them to pass money on to their kids and even grandkids.

I like to listen to Dave Ramsey and think he generally gives good advice. That said, I’m uncertain how committed I should be to this goal of generational wealth.

We’ve done our best to get our son off to a great start by funding his college costs, having him live at home rent-free during the pandemic, and giving him my wife’s old car. He has a great-paying job, savings in the bank, a Roth IRA, and a brokerage acount he started when he was 19. He is very responsible with his money and is building a good career in software development.

I don’t really think there is anything we need to do to further help him and would worry a bit if we were paying his bills beyond this point. It seems that he is more than ready to fly – he has in fact been financially flying on his own for some time.

We have some friends whose kids are a few years older than our son that have decided their kids are on their own. With good jobs and bright prospects, they have made the call that they don’t need to hold any wealth back to help their kids any more. Instead, they are investing a big chunk of their $$$ in a dazzling, new vacation home that will upgrade their lifestyle instead (will also be a great vacation spot for the extended family).

I noticed too that Bill & Melinda Gates – who are splitting their $130B estate – have previously ‘only’ pledged to pass on $10 million to each of their 3 adult children. I guess that amount of $ – and the ‘Gates’ name – is surely enough to guarantee them security for their whole lives and probably their kids, too. Still, they are not locking up much of their wealth in their family’s future the way the Vanderbilts and Rockefellers did a century ago.

We’re young enough that there is a lot of uncertainty as to how much our estate will be worth at our passing. The strong market over the last 5 years has put us way ahead of our FIRE (financially independent & retired early) plan, so I’m guessing we have more than we need should even a significant economic downturn or severe inflation come our way.

We’re certainly not spending at a rate that would use up our wealth in our baseline plan, so I’ve always figured we’d pass on “whatever is left” to our son. Perhaps before that time we’ll be able to help him with his first house or put some aside for his kids’ college. At the same time, I’m starting to think we might want to invest in some luxuries for ourselves – like a Florida place – with our current financial cushion.

How are you thinking about generational wealth?

Image Credit: Pixabay

10 thoughts on “Fertilize The Family Tree?

  1. I’m going to break with tradition here. I think it’s wise to put money into the hands of good people, they do good things with it. Leaving your son with a lot of money could potentially benefit the community in all kinds of ways. He would probably do good things with it. Ask him what he’d do with a lot of money.

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    1. We’re certainly willing to help our son however we can for any productive purpose. If he or his family don’t really need it, then I would rather use in the community as I see fit, not him. Afterall, we all have different causes we are more or less passionate about.

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  2. I agree with Carol. Involve your son in the conversation at least. My father withheld financial resources from me and my sister after we declined to go to an American university. Instead, we took out student loans and pursued our post-secondary educations in Canada, where our single mother raised us. I will never forget how he used money as a weapon against us because we wouldn’t do what he wanted us to. We both graduated within four years and went on to have fulfilling careers and families, so why was he so awful to us? My husband and I have already saved enough for our girls (12 and 10) to pursue Bachelor degrees without loans. They are good kids. If your son was raised well – as it sounds like he was – there’s nothing wrong with supporting him or your future grandkids, if there is an opportunity. If there isn’t and he’s good on his own, all the better. And it goes without saying that the best financial gift you can give your kids is to not be a financial burden on them, which you’ve done. If you can enjoy your retirement and look out for your family, that’s a dream come true.

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    1. Yes – we have and will continue to support our son for any productive purpose he might have. That would extend to his family when that day arrives. We often say, “our money is your money” and let him know where we are at and what we are thinking.

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  3. I personally never liked Dave Ramsey and have some issues with some of his advice. (not knocking it if it works for others, but I would never recommend him)

    I think it is more important to teach your kids how to be smart with money and be able to use money in a way it doesn’t control them. That knowledge on how to use and accumulate money is more valuable then giving them money.

    That said I don’t see anything wrong with helping your kids out financially. We started investing in secondary school funding when the kids were born. It will be enough to help them avoid school debt. If they also live at home for free. Although I know that paying my own way through school meant I had skin in the game and didn’t waste it. Hopefully giving my kids a free pass doesn’t bite me/them in the butt.

    For me generational wealth is something along the lines of hoping your kids are better off than you are.

    As I am finding in this journey of FIRE “money” is not the most important part of being wealthy. After the basics of food, shelter, security is covered the other more important things are:
    Time with friends/family
    Health physical/mental
    Making a difference
    Fun experiences, and happiness.

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    1. That is absolutely true – the financial side of FIRE is pretty straightforward. It is relatively easy to figure out if you have enough $$$ to early retire or not. If you do, then comes the hard work of building a new lifestyle. The things you mention are the things that really drive sustainable happiness – not money in the bank or new stuff.

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  4. “Paddle your own canoe.” This motto was essential life-advice from my dad. His mottos, other life-advice, and personal integrity are priceless inheritances. Financially, dad had nothing to leave me. But his character-legacy engendered the man, husband, father, and grandfather that I became. I passed dad’s canoe motto onto our children as words to live by. They have embraced the motto’s intention. We raised our children through advanced education; they paddled their own canoes after that. I do not plan to leave generational wealth that comes from me. (It may well happen, but I do not plan for it). I do plan for pan-generational wisdom that comes from our family who came before me.

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  5. I think all of us want our children to become adults that are positive, contributing members of society. What that is — a ceo, plumber, software developer, stay-at-home mom involved in the community, an artist, etc — is sort of up to them to decide.

    However, I am a strong believer in them owning their independence and having the pride that comes with that. I don’t that “Economic Outpatient Care” (to quote the Millionaire Next Door) is healthy for them. What I do think is helpful is two things:
    1) passing on ones values and offering them a solid education so they are starting from zero (not deep in debt)
    2) them knowing that you’re there as an insurance policy if things go really bad. This should allow them to take smart risks and not be too conservative.

    I will leave with a cheesy quote that was on a wall in our house when I was a kid that comes to mind: “There are two things we should give our children: One is roots, the other is wings.”

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    1. Cheesy quotes like that one are often the most profound. I agree whole-heartedly with your approach. The college student loan debt trends in this country have become a debacle. Few are able to start at zero. Glad that we could provide that for our son.

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