Are you planning to leave a legacy to your children? I haven’t thought of it that much because this is a deeply unpleasant subject. It ranks up there with long term care and life insurance. Nobody wants to think about what happens when you get old and die. Normally, I prefer to write about the sweet spot in life between quitting work and death. 😀 However, Lily @ The Frugal Gene mentioned that leaving a legacy was a nonnegotiable condition for getting married. Wowza! That’s very surprising to me because she is young and doesn’t have kids. Leaving a legacy wasn’t on my radar at all when I was her age. Mrs. RB40 and I were too busy having fun to think about our nonexistent kid in our 20s. Inheritance isn’t even a big consideration now. Yes, I’d like to help our son out, but that’s the least of my concerns on my long term personal finance goals. I’m not leaving him with nothing, though. Read on…
My experience with generational wealth
First, let me share my personal experience with generational wealth.
My dad was orphaned when he was just 5 years old. His parents were poor so they didn’t leave him anything. It was a struggle, but he managed to graduate from college on his own. He was a natural entrepreneur and he hustled hard all his life. However, he never had any financial support. He started many businesses, but they rarely worked out because he didn’t have a solid financial foundation. It’s hard to start a business on borrowed money. Also, I think he expanded his businesses too quickly. That usually doesn’t work when you don’t have solid financial backing.
My mom’s side was a bit different. Her family was actually pretty well off at one point. Her parents built a successful fabric business from nothing and sent all 9 kids to college. This was pretty amazing for Thailand in the 60s. Unfortunately, my grandfather made a bad investment in the cinema business and went bankrupt before I was born. I don’t know all the details, but this was devastating for him. He lost everything and didn’t have any money to leave the kids. At least, they were all college educated so they could get good jobs.
Fast forward to today and my parents are older with minimal assets. My dad is still hustling in his 70s to make spending money. This is good for him. He is very restless and if he has too much money, he’ll spend it frivolously. My mom has no income and not much retirement savings. She lives with us 9 months/year and spends the winter with my brothers in California. My parents won’t have any inheritance for us except a few pictures. That’s fine with me, though. They put me and my brothers through undergraduate studies and I’m very grateful for that*. I graduated with no student loan debt and it was a great starting point in life. That’s a lot better than most kids these days.
*Actually, one of my brothers is a doctor. He had student loan debt when he graduated, but I think that’s almost unavoidable for medical school. Doctors are in school for so long. He got through undergraduate without debt and that’s pretty good.
As you can see, my experience colors my feelings on legacies. From my point of view, a good college education was what I needed to get a good start in working life. Sure, an inheritance would have helped, but I didn’t need it. I’d prefer they spend money on themselves instead of trying to save something to pass on. That’s why legacy isn’t high on my list. I’m not getting any and our son shouldn’t expect anything either. We’ll take care of ourselves first and consider the ramifications later when we’re on the way out. However, that doesn’t mean I’m not leaving RB40Jr nothing. Let’s see what we’re going to do to help him get a leg up on life.
1. Formal Education
My parents helped me graduate from a college with no debt and I’d like to do the same for our son. If you have children, you already have nightmares about the cost of college. RB40Jr will graduate from high school in 2029 and college will be even more expensive then. I’m planning for about $50,000 per year, which is what public in-state college will probably cost. If he wants to go to an expensive private university, then he’d need to get scholarships or student loans. On the other hand, he would get a nice graduation cash bonus if he chooses to live at home and save some money. I think it’s important for kids to have some choices and deal with the consequences themselves.
The good news is that we have a head start on college savings. We saved extra in his 529 plan in the first few years to front load his college fund. The stock market has performed very well since he was born so his college fund is worth $75,000 now. We’ll continue to save about $4,000 per year in his 529 and it should continue to build. By 2030, his college savings fund should be close to $200,000 if all goes according to plan.
If he receives scholarship or other aid, we can always gift the leftovers to our nephews and nieces. I’m not worried about having too much money in the 529 plan.
I think helping RB40Jr graduate from college with no debt is the best legacy we could leave him. This will be our #1 priority as far as inheritance goes. Everything after this is gravy.
2. Personal Finance Education
Okay, I was wrong about the gravy above. Personal finance education isn’t gravy, but at least it won’t cost a lot of money like college. Everyone needs to learn about personal finance. However, most young adults don’t know much about it. The only thing I knew when I graduated from college was how to live frugally and save money. I had to learn about budgeting, investing, debt, passive income, lifestyle inflation, maxing out my 401k, financial independence, and early retirement on my own. I’ll make sure our son learns all about personal finance by the time he graduates from college. Hopefully, we’ll be around to advise him personally after college as well, but you never know what’s going to happen in the future.
3. Retire by 40
Another thing I will leave to my son is this blog. Today, there are over 1,200 posts on Retire by 40 and he’ll be able to learn from my experience. I hope to teach him all I know about personal finance in real life, but it might not stick. You know how hard it is to listen to your parents. I still have a hard time following any of my dad’s suggestions. Reading this blog will be less confrontational and he can learn from all the comments too. I think Retire by 40 will be a nice legacy to our son.
In addition, Retire by 40 probably will continue to generate passive income if he puts some effort into it. He can learn about online advertising and take over at some point. It’ll be a great side hustle for him once I can’t run this site anymore (laziness.) It’ll be Retire by 40 2.0!
4. Not being a burden
This next one hits close to home. As I mentioned, my parents don’t have much retirement savings and we will need to help them out as they age.
It’s okay right now because my dad is still active, healthy, and independent. He lives in Chiang Mai, Thailand, so the cost of living is relatively low. I’m not sure what we’ll do when he needs more help. We could send money, but that might not be enough if his health declines. There are a few nice retirement communities in the area. We visited one retirement resort in 2016 and it felt like a low key all inclusive resort. Back then, it cost $1,300/month for one retiree. That includes accommodation, food, activities, and first aid care. Retirees pay extra for healthcare if they need to visit the hospital. However, I’m not sure if my dad can handle living in a retirement community. He’s always on the go and I doubt he can slow down.
My mom lives in the US. She slowed down a lot over the last few years. Recently, the neurologist diagnosed her with mild cognitive impairment (MCI). This isn’t too bad in the grand scheme of things, but she can’t live independently anymore. For example, she puts the laundry in at 2:30 pm and the washing machine takes 45 minutes. She can’t figure out when to go get it. It really sucks because she taught math when she was young. It’s affordable to have her live with us for now. I can take her to the doctors and help with other stuff because I’m not working full time. If I was working, I wouldn’t have time to help out.
So I’m officially a part of the sandwich generation now. It’s hard to raise a kid and care for my mom at the same time. At least my dad is still independent. That’s where I hope to be when I’m 70. Mrs. RB40 and I will live independently so our son won’t be burdened with much. If we need help, we’ll have enough money to hire helpers or move into a retirement facility. So this will be another gift from us. RB40Jr can focus most of his energy on his family and won’t have to worry so much about his parents.
5. Anything left
We live a modest lifestyle and I don’t think that will change much as we age. If we don’t go bankrupt from medical care, there should be plenty of money left over when we’re gone. See, I knew this was a depressing topic. Well, who knows what the future holds. RB40Jr can have whatever is left provided that he’s a good person. If he turns out to be a jerk, then any money left can go to charity.
A good start in life is more than enough
So that’s why leaving a legacy is low on my priority list. We’ll try our best to help him finish his undergraduate degree with no debt. That will give him a leg up on life and he can make his own fortune after that. It’s better to build wealth on your own so you can appreciate how much work it takes. Winning the lottery or inheriting a fortune sounds nice, but it seems people don’t appreciate it. It’s much easier to squander money that you didn’t work hard for.
What about you? Are you building a legacy for your progenies? What are you planning to leave to your children?
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For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.