Dear Dave,
My mother passed away recently, and I received $200,000 as an inheritance. I’m a single dad, and I’d like to share some of the money with my 28-year-old daughter. But I’m worried about doing this, because she’s sometimesimpulsiveandimmature with money. How do you think I should approach the situation?
Jimmy Dear Jimmy,
I’m very sorry to hear about your loss. God bless you and your family during this hard time.
I’ll be honest with you. I don’t like the idea of just handing your daughter money when you already know she’s impulsive—especially if you’re considering giving her a large amount. I’ve learned over the years that gifting money to someone who’s financially irresponsible is not a good plan. So many people think everything would be better if they only had more money. But this isn’t generally the case. I urge you to stop and ask yourself if you believe you’d really be helping this young woman by simply giving her a bunch of money.
In my mind, you’ve got several options here. I mean, it’s your money now. But considering what you’ve told me about your daughter, I’d recommend attaching a few strings to her getting anything. Set up guidelines designed to improve her behavior in some areas. Then, you could give her the money if she meets the requirements. Don’t make her jump through a bunch of hoops for no reason, though. I’m talking about things that will show her how to live a more productive and responsible life—financially and as a mature adult, in general.
I think this is fair to you both. It’s also a way to create good teachable moments between a father and daughter. And, if she takes an attitude or flat out refuses to accept your offer, you can always just hang on to the money until she grows up a little.
— Dave Dear Dave,
My husband and I are trying hard to pay off debt and get control of our finances. The other day, my dad called and asked if we could give him $400 to take care of an overdraft at his bank. My dad’s a good man, but he has never managed money well. There have even been times he has gone to friends or my grandparents for money, and he’s 60 and has a job. What do you think we should do? We’re living on a really tight budget, and I’m not sure we have $400 to spare.
Melissa Dear Melissa,
I understand feeling an obligation to help your dad. I mean, he’s your dad, right? But it’s a hard place to be in when you and your husband are working hard, short on cash and being disciplined in order to gain control of your finances.
But there’s a lesson here that dad needs to learn, and it’ssomethingthatgoesmuch deeperthanmoneyorhelping out a family member. You have to do the right thing, no matter how dad reacts to this. And now, the right thing is takingcareofyourfamilyand not putting your household in jeopardy. So, my answer to dad would be a loving and caring“no.”Explainwhatyou and your husband are trying to accomplish, and that you simply don’t have the money to spare.
Another thing that needs to happen is for the family definition of the word “help” to change. When you say he’s never handled money well, giving him $400 when he’s in another jam really won’t help. Plus, it will make you and your husband enablers. The hard truth is handing him the money will do more harm than good, because it will give him the idea he can continue being dumb with money and hit you up for cash anytime.
Like I said, I really do understand the pull of helping a parent. If you feel this is something you absolutely must do, and you can manage to do it without harming your own financial situation, I’d recommend making the $400 contingent on him beginning, and completing, a good financial counseling course. Be gentle when you talk to him, and let him know it hurts you both to see him struggling.
But let him know, too, it’s his responsibility to make some changes and take care of his own finances.
— Dave Dear Dave,
My husband and I have been married for a couple of years. In that time, we’ve received several gifts of cash from our parents. Each time this happens, my husband and I talk about what to do with the money. I came into the marriage with some debt, and we still have about $8,000 in credit card bills and student loans to pay off. During our last discussion, I told him I felt like we should keep paying off debt with the money, but he said he wants to treat it like found money this time. He wants to have fun with it. How do you feel about this?
Simone Dear Simone,
In my mind, unless the giver has very specific wishes on how they’d like you to use the money, then it’s up to you guys. It’s a decision you two should make together. I assume, since you didn’t mention otherwise, you’ve made a habit of using these gifts to pay off debt. If that’s the case, I can understand how it may have thrown you for a loop.
I’m proud of you two for being so diligent in using your parents’ gifts to help pay off debt. On the other hand, I understand it can become tiring to feel like you’re working and sacrificing day after day in pursuit of a goal. I’m not sure how much you had in debt originally, but $8,000 really isn’t that much when you think about it. If you have a decent household income, you should be able to pay off the remaining debt in less than a year!
It sounds like your husband just needs a little pep talk. I’m sure he’s a good guy. And the fact that he’s been right there with you on this journey to gain control of your finances tells me he hasdisciplineanddetermination, too. Try sitting down with him and having a good heart-to-heart talk. Ask him why he changed his mind about how to use the money this time. Remind him of how close you two are to becoming debt-free. Let him know how proud you are of him for everything he’s done.
If there’s something you need, you agree on it together and choose to buy it as a couple, that’s fine. I’ve got no problem with that. But you shouldn’t go out and blow a bunch of cash—gifted or not—on toys and other fun just because it was handed to you by mom and dad. You’ve got bills to pay, and those obligations should come first. At this point, you can see the finish line, Simone. Please, don’t slow down now. I promise this last little grind will be worth it!
— Dave Dear Dave,
My wife and I make about $180,000 a year combined. We’re also debt-free, and we have no kids. We’d like to start planning to buy a nice piece of land sometime in the near future. Do you have a rule of thumb when it comes to determining what percentage of our savings we should put toward a large purchase like this?
Daniel Dear Daniel,
Honestly, I’m not sure there’s necessarily a specific percentage for this kind of thing. Since you guys are already debt free—and congratulations on that, by the way—I’d advise first making sure you’ve got a fully loaded emergencyfundofthreetosix months of expense in place. I’d also recommend you have some sort of retirement savings plan going before buying a piece of land.
You two have done a great job with your money, so in your case, it sounds like any other cash you might have sitting around is just wealth. So, if you’ve got an extra $100,000 sitting in a savings account in addition to all these other things, and you’d rather have $100,000 worth of land instead of that bank account, I’m good with it. Do you understand what I’m saying, Daniel? In my mind, it’s more a matter of ratios than percentages.
Now,thiswouldallchange, of course, if your household income was $50,000 a year instead of $180,000 a year. AndIwouldn’tadviseanyone to put building an emergency fund or saving for retirement on hold while they saved up to buy a piece of land. There needs to be a sensible balance. Andthatmeansmaking mature, grown-up decisions, and ensuring you have the really important things in life covered first.
Great question, Daniel!
— Dave