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Tuesday, September 14, 2010

Financial Gifts from Parents and Relatives

Have you been the recipient of a financial gift or series of financial gifts?

I stumbled upon the blog of a GenY girl (Meg) living in Texas who receives a financial gift of $24,000 and now $26,000 per annum from her grandparents. She's not the only one receiving monetary gift. It turns out, each of her parents receive $24-$26,000 (approx $52k/annum) and so does her aunties, uncles and all grandchildren! That's some serious wealth sharing practiced by her grandparents indeed.

Although no-one really likes to mention that they've received financial gifts, it does exist and as long as you don't really boast about it, you can fly under the radar unobtrusively without some people resenting you and being jealous.

It did provoke me into reflecting back on the gifts that we (meaning myself, family + friends) have received. Some more substantial than others. The amount depends on how affluent our respective parents are. The gifts aren't always monetary. You've been a recipi
ent if any of these other 'gifts' reasonate with you: dinners paid by parents, cars, jewelleries, holidays paid by your parents, rental/study/living allowances, bills or weddings paid by your parents....

Because I blog and write using my name and not some 'fake' name or anonymous identity, I can't reveal names when it concerns myself. Otherwise I'd be drawn and quartered if anyone knew I was posting up their private financial lives up on the web for the world to read about.

Meg from the 'World of Wealth' blog provides a pretty tasty break down(for those who are interested in snooping about other people's financial health) of her assets and the gifts that she's received. I'd estimate that she's received about $300,000 in monetary gift via the form of trust funds, cash and loans (that are forgiven). Not to mention her family subsidising her travels.

Friend A: Financial gift received $300-$350,000
We all got various birthday presents for our 18th. When we asked her what her best present was, she mentioned that her uncle gave her a house that was worth about $300,000-$350,000(ish). Strangely, I don't think anyone was surprised. A few of us received cars from our parents when we first got our driving licence at 17. We were young and it didn't really mean too much until we attended university.

It turns out that the rental income that she received from her house was paying the fees on her law degree, clothes, entertainment and also with savings to spare. With the two property booms that we've had in 2003 and 2009, the house is probably worth around $500-$700,000 not to mention she's probably earning a significant 100k+ income from practicing law. Not bad at all for a GenY.

Friend B: Financial gift received $300,000
Friend B: He bought a $500,000 house when he was 22 years old. None of us ever explicitly talk about money, income or savings. So we didn't question him about the financing arrangement or anything. I'm not sure how we got talking about property investing but he told me that the $300,000 deposit was a loan from his parents. And now it's a loan that is 'forgiven' so he does not need to pay it back. They were probably waiting to see him mature a bit and behave a bit responsibly with his funds, to stop drinking and partying so much before they let him know he didn't have to pay the loan back. Now the house is fully paid off so that's $500-$600,000 worth of equity that he can pull out to fund future property acquisitions.

He's on the hunt for another property now with his fiance. With a DINKS status and high income for the pair of them, they will probably easily end up in excess of $1m net wealth before their mid thirties.

Friend C: Financial gift received $250,000
Friend C: Same thing as above. $250,000 'loan' that is 'forgiven' and probably was never really a 'loan' in the first place. Between this gift and his own savings, he is another GenY who has amassed $500,000 in net worth and is looking for another property to buy.

Friend D&E: Financial gift received $150,000
Friend D&E: A married couple, one child and stay at home mother. It seems everytime they bring up 'financial issues' to the parents, money is gifted. Both are GenY and have about $360,000 ish in net assets. Not sure what type of 'financial stress' can be felt with assets behind them, but I imagine that if you find yourself spending all that you earn or saving just a small amount, you would feel 'financial stress' regardless of your net asset amount.

Relative A: Financial gifts?? Not sure but the assets sure stack up to a rather significant figure.
My cousins also have affluent parents. And although we never discuss anything too personal between ourselves, occasionally parents like to brag. One proud set of parents induces other parents to start listing their kid's achievements. Family jaunts are always interesting in terms of finding out who is up to what in terms of their investing activities.

Relative A and his wife have accumulated three properties between them. They're both GenY and between the values of their three properties, I'd estimate their gross assets to be $1.44 million. Pretty good. Although I'm not sure if their net assets are also high or whether they're geared up to the eyeballs.

Relative B: 31 years old and has four properties with gross asset values estimated to be about $1.26 million. I would hazard a guess that Relative B is also a recipient of a monetary gift as well.

I could probably go on and on about the friends, relatives and friends of friends that I know who has significant assets. Also, the ones who has received significant monetary gifts. I don't know anyone who is irresponsible. Almost everyone has interesting investment allocations.

Some of my friends aren't as fortunate to have affluent parents and they manage just fine. Without a more invasive discussion though, it's hard to differentiate between the ones that have a massive net wealth and the ones that are massively geared. So on the surface, almost everyone appears to be rather affluent. In summary though, I'd rather ask no question and have no-one asking me questions too. It's a rather private matter really and none of anybody else's business.

Of course, it is an interesting subject :) Financial gifting is a bit like the lottery, except it's usually a lot more reliable. It does open up the question of what a person who is the recipient of the gift will do with the gift. Most friends/family that I know who has received monetary gifts feel guilty if they spent the money on hobbies and holidays. They have used the funds as a deposit for property and to invest and used their own hard earned income to fund their guilty pleasures.

Would you spend or invest if you received a monetary gift of $200,000 or more?

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