You're hanging out with other parents at the playground when you overhear someone discuss their kid's recent birthday party.
You smile and nod, but you're secretly wondering, "What are they thinking paying $1,500 for a bouncy house and a three-foot 'Frozen' cake ... for a 4-year-old?"
Welcome to modern-day parenting -- and indulging. And it doesn't necessarily end when kids leave the nest, either.
Just read what these financial planners across the country have to share.
We asked money pros to share some of the most outrageous things -- from plunking down serious dough to buy siblings his-and-hers convertibles, to bankrolling a tanking business -- they've heard parents do for their grown (and nearly grown) kids.
"I'm Buying Convertibles for Both of My Children."
I had a client who received $1 million in a divorce settlement some 10 years after the marriage had ended.
She only made $35,000 a year, so this windfall was all the money she would probably ever have in savings.
Shortly after she came into the money, she told me that she wanted to buy each of her kids a car -- a new convertible Mustang for her daughter and a BMW convertible for her son -- because she felt bad that they'd done without for so many years.
I told her I understood her desire to give her kids a treat, but she'd be better off buying them used Hondas for $10,000 each, getting a house in the $150K to $200K range and then putting away a significant chunk for her own retirement.
After telling me, 'I really want to do this for them,' she purchased the convertibles, anyway -- and burned through about $240,000 instead of investing it.
--Karen Lee, CFP®, Karen Lee and Associates
"I'm Taking a Home Equity Loan and Doubling My Workload -- So My Kid Doesn't Have Student Loans."
I recently worked with parents who didn't want their child to take out any loans for college. While the sentiment is understandable, they weren't in a position to do it.
I tried to discuss with them why I thought they should take advantage of the financial aid package they were offered, which included subsidized student loans and a work-study award.
But they didn't want to do either -- or even let their child work part-time.
Instead, they decided that the mother would double her workload and they'd take out a home equity loan to help pay for the private school.
While the situation isn't disastrous, letting the child shoulder some of the responsibility of college tuition would have given the kid a sense of ownership over costs -- and served as a confidence builder for their post-college years.
--Marguerita M. Cheng, CFP®, Blue Ocean Global Wealth
"I Want to Give My Daughter $250,000 to Save Her Restaurant."
A few years back, one of my retired clients came to me because her child was in a desperate situation: Her daughter and son-in-law owned a small seaside restaurant that was going bankrupt.My client was living on Social Security, a small pension and the earnings from her savings, which were around $300,000 at the time. She wanted to lend them $250,000 -- and the interest they'd pay on the loan would fund her retirement.
I strongly cautioned her against the move, explaining that if the 'investment' didn't work out, she would not have enough monthly income to live on.
The bottom line is that you should never lend money to your children -- unless you can afford to lose it, because you're not always guaranteed to get paid back.
Unfortunately, she did it, anyway.
As it turned out, her daughter couldn't make the interest payments -- and my client ended up moving to Seattle to live with them, since she didn't have enough income to pay her bills. She now also works at the restaurant to earn extra money.
--Les Szarka, CFP® and CEO, Szarka Financial Planning & Investments
"I Support My Grown Daughter ... and Her Entire Family."
I had a situation in which the parents of a grown woman were helping her to cover most of her family's six-figure lifestyle costs -- including vacations and schooling costs for her two children.
Fortunately, right on the cusp of receiving yet another big infusion of cash, the daughter came to me and admitted that she knew she needed to make a change.
So I ran financial models that illustrated how her family's cost of living was unsustainable. I also helped her see the toll the situation was taking on her self-image -- and her relationship with her parents.
She had to make significant changes -- and work to earn more money, rather than be subsidized by her parents -- but she is well on her way to being on her feet.
For parents like hers, treating their children as though they are unable to earn their own living may end up creating exactly that result.
--Colin Drake, CFP®, Drake Wealth Management
This post originally appeared on LearnVest.
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