A recent study says children are earning less than their parents at the same stage of life. While this may be true, you might not want to do anything about it. Sometimes the best answer is to do nothing.
This USA Today article, “Millennials Earn 20% Less Than Boomers Did at the Same Stage of Life,” speaks for itself. Millennials (born between 1980 and 2000) are earning less while taking on higher college debt, living a lifestyle that is slightly below where the Baby Boomers (born between 1946 and 1964) were at this point when they were younger. What is not discussed in this article is what to do about it, if anything. There are political and economic trends that affect each generation differently. But is different bad?
Our Role in Our Children’s Success
Our children have a role in their own success. As I have written before, if our children (or grandchildren) don’t achieve their own milestones in life, they will slowly lose the will to be self-sustaining. If we generally accept that tenet, then we have to ask ourselves, is it OK to let our children have less? This is an interesting question because we often project an answer that is ours, not our children’s.
I have found that many children are not asking their parents to bail them out of tough spots. Parents are volunteering to do it. In some cases, that is good. For example, it is good to help build a family’s intellectual capital by paying for college. But in some cases, it can be bad—for example, sending them to college with a $40,000 car they can’t afford. We parents can subtly influence a dependence that can take years to form. But once we bail them out, one thing after another, that dependence becomes a part of our monthly expenses and a part of their monthly income. At that point, our children’s success is tied to our success. (For related reading, see: Should Parents Pay for College?)
The funny thing is, we know how this ends.
Does It Matter if Your Children Are Earning Less?
If our children and grandchildren are earning less, does it truly matter? Obviously nobody wants them to have a life lacking in joy, but if their reality is slightly less income, should we as parents step in and bolster that?
My answer, until your children or grandchildren are about age 35, is “no.” No, less income doesn’t matter because they aren’t used to a higher income as long as you haven't been subsidizing them. They will not only get used to their reality but will start to thrive in it by reaching their milestones on their own. If you subsidize them, they will grow to expect it, and they will no longer appreciate the hard work that you put in to earn your money or the hard work they should put in to earn theirs. (For related reading, see: Why Your Retirement Depends on Your Kids' Choices.)
After 35, feel free to begin giving your children some assets to help them as they get into the most expensive part of life: children. But by that point, they will have built up a pattern of spending that will make the dollars you give them go further and have more family impact.
(For more from this author, see: How You Invest Now Can Affect Taxes in Retirement.)
The opinion of the author is subject to change without notice and must be considered in conjunction with relevant regulation, as well as subsequent changes in the marketplace. Any information from outside resources has been deemed to be reliable but has not necessarily been verified. Each individual has unique circumstances to which this information may or may not be relevant. Under no circumstances will this information constitute an offer to buy or sell and it does not indicate strategy suitability for any particular investor.