How I’ve Decided to Financially Support My Kids and to Motivate Independence….Not Undermine it

I’m really proud of our 21-year-old daughter. Despite a tempestuous high school experience and very serious ADHD and anxiety, she is gainfully employed.

This is more than we ever dreamed possible at this stage, but despite her huge success (in our eyes), financial independence still seems impossible. So we’ve come up with a brilliant solution (modesty aside) based on a book I read by Thomas Piketty, the Nobel Prize-winning economist.

So, our daughter…

She’s just had her one-year anniversary as a line cook at a local high-end restaurant. It was never a no-brainer that this would happen.

Both my wife and I, and her therapist, were prepared for at least a few years where she would likely not work a full-time job or do full-time studies, as she allowed her brain to mature and transitioned to adulthood.

We were anticipating, at best, part-time work and, more likely, a series of jobs she would start and leave as her temperament played out.

We’d also been anticipating her probably living with us at home for at least the next few years.

But she’s working full-time (about 30 hours a week). And, surprising us in a great way, she’s living on her own (with her girlfriend) in a small apartment near us.

By all accounts, she’s doing well — a regular paycheck, excelling at work even as she manages her mental health (always a struggle), and doing her best to pay her expenses.

Doing well, but….

But here is — of course — the rub. She makes a little bit more than minimum wage, as does her girlfriend.

Between the two of them, they can’t afford their rent, bills, and basic living expenses. Recognizing this, as soon as they decided to live on their own, we agreed to pay 1/3 of their rent, and said we’d see if this was enough to keep them going.

It clearly isn’t. They don’t live extravagantly. They may spend more on Uber Eats than I would like, and they often want to buy little knick-knacks for their pets that are unnecessary but not ridiculously expensive. They each work hard, and I feel they deserve these little indulgences.

But even with their modest living standards, I’m constantly saying I’ll foot the monthly Uber bill, or I’ll take over the pet expenses.

It seems unfair that they both work hard and earn wages commensurate with their work, given that they have no post-secondary education and are early in their working lives.

My enlightenment…

I was reading Thomas Piketty’s book, Capital in the 21st Century. It’s a book about how wealth and capital accumulation have changed over the past two generations, and it was heralded as explaining why the ultra-wealthy are getting so much wealthier while the working class is stagnant or in decline.

Not to bore you with the details, but tax and investment policies that started in the 1980’s and have continued over the past 50 years have allowed those who already own capital (the rich who own businesses and investments) to see exponential growth in their wealth. The workers who do the work, meanwhile, are seeing stagnant wage growth, don’t have enough money to invest, and are therefore left out of the huge growth in capital and real estate markets that are making the rich richer.

Piketty proved why the rich get richer and everyone else gets poorer.

This is exactly the situation our daughter and I are in. My wife and I — we have investments which have increased in value over time, and we, despite retiring early and not working at all, are quite literally set for life. Our daughter, on the other hand, works hard and can’t make ends meet.

(finally), the solution …

My wife and I have known for a while that our kids will get a substantial inheritance… when they are about 65 years old!

We’ve struggled with this. They could get so much more enjoyment from having money early in life. But our mantra, like our parents’, was that our number one job as parents is to make sure our kids are self-reliant. So, aside from paying for their education and a little rent assistance, we give them very little money.

But they struggle. As I’ve described, our daughter’s situation is that two working young adults are not able to meet day-to-day expenses.

But as Piketty says — it’s not their fault. The deck is stacked against them. In order for me to get rich from my investments, she remains poor because her employer won’t can’t pay her a decent wage.

So, our innovation. We’ve just decided that we would top up every hour our daughter works with a $ 5 ‘intergenerational wealth transfer’ (we need to work on the name).

So if she works 120 hours a month, we would give her an additional $600 on top of her paycheck.

It’s not a fortune, and she needs to work to access the money. In fact, the more she works, the more we would give her. But with that extra money, we think she could cover all her own expenses and even save the 10% recommended by my financial-planning hero — the wealthy barber.

My wife worried a bit that this would feel like we were subsidizing her and make her feel she couldn’t make it on her own.

I strongly disagreed. We are not subsidizing her. The economy subsidizes us. More specifically, young workers subsidize us. When Regan and Thatcher and the neo-cons decided to bust the unions and give massive tax breaks to those of us who invest in stocks and real estate, they took the money from the working class and gave it to those of us who could afford to invest.

By topping our daughter up to a living wage (or at least closer to it), we are simply giving her something approaching the value of her work. Or at least some of the value that government policy and rich fat cats like us have taken from her.

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This post was previously published on medium.com.