
We have decided that we're not going to leave anything to our kids after all. “Why?” you may ask. We are worried that we are ruining their lives.
It all started last year on a spring break vacation. My son discovered that his seat on the plane was back in the “cattle car.”
You see, when he went out with me on a speaking gig to San Francisco last year, we were upgraded to first class (I now have Gold status on Delta), and we sat in the very first row. He had never been the first one off the plane before. Now, he thinks that's normal and complains when he doesn't get to sit in first class, much less the first row of first class. The other kids are just as bad. We took them to Great Wolf Lodge for one night of the trip and visited their indoor water park. The next night? Motel 6. They didn't even want to go to the pool. The 16-year-old doesn't want to have to drive a “hand-me-down” car now that the oldest has gone off to college. And the oldest is mad she didn't get to take the car with her. There's always something.
“The boat isn't big enough to take all my friends.
The car isn't Tesla enough. My friends have Teslas.
The theater seats don't recline enough.
He touched me.
She gave me a dirty look.
We're out of my favorite treats.
Why do I have to move out of my room when company comes?”
Well, we're sick of it. And we're going to do something about it.
Economic Outpatient Care
Personal finance enthusiasts have long been aware of the concept of Economic Outpatient Care. This comes from a chapter in The Millionaire Next Door which demonstrated that adults who were given significant money by their parents actually were far more likely to become “Under Accumulators of Wealth.” Well, if it is bad to give them money as adults, it's probably even worse to give them anything nice while they're still minors. But we don't want to have to suffer. So, we've implemented a two-level standard of living in our house. Some examples:
- We have a door with a lock on it. They no longer have doors on their rooms.
- We eat filet mignon and shrimp. They eat mac and cheese.
- I eat Life Cereal and Crispix. They eat bagged cereal, but we only buy it past the expiration date.
- We fly first class on vacation . . . and then pick them up at the train depot when they arrive.
- We ride in luxury cars. We hired a chauffeur with a 1982 Chevette to bring them and meet us at their soccer games. (They now have to earn the money to pay the fees for soccer.)
- We wear $200 jeans. Their jeans have rips in the knees. (This doesn't seem to bother them much, for some reason.)
- We have house cleaners come over every couple of weeks. But they don't clean their rooms or bathrooms. In fact, they empty the dirty mop buckets into their tub, toilet, and sinks and throw the collected garbage from the rest of the house into their bedrooms.
- We send our clothes out for a laundry service. They wash their own. On washboards in a bucket of cold water in the backyard.
Disinheriting the Kids
As you can tell, we've had it with our spoiled kids. It isn't that we don't love them. It's that we DO love them. And we think it's impossible for them to adopt our lifestyle and still turn out as good people. But we're going beyond just making them artificially suffer in their youth. We're also basically disinheriting them. That turned out to be harder than we thought.
Decanting the Trust
As you may recall, part of our estate plan is a Spousal Lifetime Access Trust. While Katie is the main beneficiary of the trust, the kids were secondary beneficiaries. That's a problem, especially if we keel over any time soon. If that happened, they were going to get a bunch of money at ages 40, 50, and 60. No more. We have decanted that trust into a new one. We still had to keep them as beneficiaries, but now they don't get their inheritance until they're 90. And then only if they can pass an almost impossible personal finance exam.
Killing the 529s
We also have saved up sizable 529 accounts for college. They have even put some of their own money into them from time to time. Our college freshman didn't seem very motivated to apply for scholarships last year. We think part of it was that she thought she was on a parental scholarship. Well, no longer. The fun thing about 529s is that the beneficiary can be changed at any time. We actually own the whole thing. So, we changed the beneficiaries to their cousins. Now our kids get nothing, and we can ruin our nieces and nephews instead. Just kidding. We don't want to ruin them either. Remember, we love these kids. We've taken the money out of the 529s completely, even with the penalty for doing so. Most of the money was spent on a new wakeboard boat and a truck to pull it.
Charging Them Rent
We thought it would be beneficial for those kids to start really learning how life is. Not only are we making them prepare their own tax returns, but they're getting an adult-style budget. They pay for their own cell phone bills, their own gasoline, their own clothing, and all their own entertainment. No more allowances. It's called a job, kids, and we both had them.
But we had to go above and beyond that. You see, they've got sizable UTMAs (their 20s funds) and Roth IRAs. Those are both technically their money, so they can only be spent on stuff that benefits them. Well, we've got a lot of expenses that benefit them. Room. Board. Their share of the health insurance. They're now paying us for all of that using their UTMA and Roth IRA money. And they're not getting any discounts either.
Whitney was appalled to find out that room and board at home this summer was going to be twice what it was at college. But why shouldn't it be? She doesn't share her room at home. We figure the 10% early withdrawal penalty on those Roth IRAs is well worth the lessons learned. There are no more big fat modeling paychecks from WCI either. If they want to work for WCI, they can come to the conference and scan badges for minimum wage. If they don't want to do that, they can go get a real job. I know those UTMAs were supposed to be their “20s fund,” but we think using them to pay for their teens will teach them a lot more about life.
We expect by the time the younger ones leave home, they won't have anything left in their UTMAs or Roth IRAs at all. Perfectly disinherited and ready to achieve on their own. Now, they can donate plasma for their grocery money, like I did in college. If they even get in, that is. We're not giving them any application tips anymore, much less reading their admissions essays or paying for ACT study courses. Those days are over.
Overall, we expect these changes to really help our kids be solid achievers and take their appropriate place in this great society of ours. They'll be so much more proud of themselves when they realize how much they can achieve on their own.
What do you think? Have you disinherited your kids yet? Why not? What did you spend the money on? How else are you celebrating April 1? Comment below!
😉
Via email:
April Fool’s. I knew you wouldn’t do that after I saw the cleaning part.
Reactions from our kids:
# 1 “Had to laugh because I’m wearing these jeans right now, lol” and includes a picture of her holy-knee jeans
# 2 “I did NOT say that about the car.”
# 3 “I thought it was pretty reasonable except the rent part.” He apparently made it all the way to the comments section before he realized it was April 1st.
I don’t think it’s fair to say that disinheriting your kids will ruin their lives or make them better people. In fact, there’s evidence that suggests the opposite. According to research I’ve seen, children who receive an inheritance are more likely to start a business, invest in education, and have higher levels of wealth.
Moreover, the way you’re treating your children seems overly harsh and could potentially backfire. Research has shown that children who grow up in overly strict households may become more rebellious and less likely to develop a strong sense of self-discipline. Instead of completely cutting them off, it might be more helpful to instill values of hard work, responsibility, and financial literacy through open communication and setting reasonable expectations.
It’s also worth noting that the experiences you’ve described, such as complaining about not sitting in first class or having a hand-me-down car, are not unique to your children. Many kids from middle and upper-class families may have similar complaints. Instead of taking drastic measures, it’s essential to teach them gratitude and the value of money.
Ultimately, while it’s important to prepare children for the real world and teach them responsibility, completely disinheriting them and enforcing extreme measures may not be the most effective way to achieve this goal. Teaching financial literacy and providing them with the tools they need to succeed on their own may be a more effective and compassionate approach.
You didn’t read any other comments before making yours did you? I’m actually amazed you got through the whole post and still thought it was a real post. Every year I think I’m making these April Fool’s Day posts so over the top that nobody can possibly get to the end of it and still think it’s real, but here we are…..
Don’t feel badly. There are still WCIers that write in and ask me serious questions about my Tesla.
https://www.whitecoatinvestor.com/my-new-tesla/
and it’s been two years.
I wonder how many people still really think we made payroll last year by shorting ethereum.
https://www.whitecoatinvestor.com/how-shorting-ethereum-helped-us-make-payroll/
I’ll try to go even more obvious next year. I’ve got a couple of great ideas I’m deciding between.
I know its just a joke, but this post does have like 98% truth to it.
I love this post. I’ve been struggling how to manage my spoiled nephews recently, I don’t like being known as Auntie moneybags. While they aren’t my kids, I think my sister might take some of your suggestions, April Fool’s joke or no!
The best jokes always have a little bit of truth in them.
Can we have more articles about kids? Would greatly appreciate your perspective on parenting. Appreciate your satire on this one!
Blog post on a Saturday?! What a joke.
Lol. On a serious note, I have given careful consideration to inheritance for my three children. I’ve decided to put it in a trust that pays each of them and eventually their descendants proportionally 1% of the trust value each year. The catch is that they can only receive an amount equal to their income for the year. Income may include passive income, for example, sell of stocks and bonds. I have preached to each of my children about the benefits of financial independence and I’m glad to say that they are all on their way, and will reach it at a much younger age than I did. I would love to read posts about how others are handling their inheritance for their children.
My kids attend an affluent school, with tuition north of $30k +. I make it clear to them that we spoil them when it comes to education but nothing else. I remind them weekly that I could have already retired if we weren’t spending so much on tuition each year.
One of my son’s classmates asked us if we could join them on their private jet for vacation:
My Kid: Can we go with so and so on their private jet to Maui?
Me: What are you talking about?
Kid: Seriously, so and so’s dad has a private jet and they invited us to go with them. Can we go?
Me: Definitely not.
Kid (outraged): Why not?!?!?
Me: The E family does NOT fly on private jets. We fly coach.
Kid: But!……
Me: Thank you for your question. Now go clean your room.
I sometimes can’t believe the amount of wealth we see on display. Nearly everyone drops their children off in a Tesla (or more expensive), and most families seem to take the vacation of a lifetime during every single break. This paraphrased quote from Morgan Housel really resonated with me: “When people say they want to be a millionaire, what they really mean is that they want to spend a million dollars. Which is actually the exact opposite of being a millionaire.” Let’s get Morgan back on the Podcast. It’s been a few years.
With regards to my kids and their exposure to financially exuberant schoolmates/parents, we feel like we have to actively work to undo a sense of entitlement and keep our kids grounded as best we can. April fools or not, there was an awful lot of wisdom in this satire. I really enjoyed it.
I often wonder, for a situation such as yours, if the tuition is worth it? Are you truly gaining $30k/yr worth of “better” education? I get it if the public school in your area is bad… but then maybe just move houses? I guess what I wonder is if your children being around these “rich kids” will create for children who expect to be wealthy and will therefore achieve to be in that sphere or create children who have a chip on their shoulder/lower self esteem being the “poor kid” in their peer group…. Especially now with social media. Same kind of question comes up for state vs expensive college.
No good public school options in the entire state, especially for middle and high school.
Whether or not we are getting our money’s worth, I’m skeptical. But I’d rather err on the side of spending too much on education than too little. We will have to wait another 20+ years to see how it all shakes out.
Make sure they remember to add a 20% tip to the rent.
Hi, first time to your site and I thought this was a real post. I am such an idiot! I was thinking it was a bit harsh and how will they pay for college? I was also thinking I am too soft, psychiatrists like me are too soft, I could learn something from emergency medicine doctors. Ha.
But honestly, some good points here. Hard to raise kids who understand the value of money if they have everything. Thanks. Enjoying your site and looking forward to your book.
What a shock to have this be the first post! Much harder to identify it as an April Fool’s Day post that way I suppose.
5 messages in the email box this morning:
I love this. Amazing 4/1 work.
Hmm…what day is today….April 1? Clever.
LOL you got me last year with the “putting it all in crypto” thing so I was ready this year. Ironically unlike last year’s I don’t completely disagree with a lot of the messages here. A less severe and heartless version of it of course, but there are some pearls in there if taken to a lesser extreme!
omg good one, i was like oh i agree with some but man hes being extreme and then i forgot april fools
Per below, I can’t believe it has been 6 years since we met … but I have been following your WCI newsletters intermittently. I have to say, I just ‘loved’ the one that came out over the weekend regarding ‘Why (and How) We’re Disinheriting Our Kids’… I immediately forwarded it to my kids (17 and 19) and cc’d my husband … and said Peter and I aren’t above doing the exact same thing … I hate the sense of entitlement and ‘effortless life’ (for lack of better word) that goes along w/ the kids not having ever lived circumstances where every single penny counts. I sometimes think, in retrospect, the hardships I endured were gifts and one that we have deprived our kids of having. Nonetheless, I did wonder, since it came out on April 1st, is there a part of this that is an April Fool’s prank to your kids or your readers… or did you and your wife really push through so hard core?
Hilarious! But I must admit I was taken in at first. Still, some good ideas.
Still getting emails a month later about this one. Had to chuckle when I saw today’s:
“I hope you are doing well. I recently read your post on how you plan to disinherit your children and took out everything of their 529s. I debated whether I should ask you this question since it is a personal one but figured I would ask anyway. Since you faced hardships in getting to where you are, wasn’t one of your goals to ensure your children don’t face the same harships in their lives? I understand the need for them to appreciate the value of money but your approach seemed irreversible. Is there a more two-way-door approach you could take? “