Personal Finance

Does giving kids money really help them?

I recently read and reviewed Andrew Hallam’s book, The Millionaire Teacher. As I read the book, there was one message that really hit me about the relationship between parents and children and the issue of helping kids financially.

I see so many parents today who feel it’s their responsibility to pay for their kid’s education, provide the down payment on their first home and even pay for their multiple weddings. Maybe that’s the reason why so many boomers are heading to retirement with debt and stressed about the fact they have not saved enough for retirement. Worse yet, maybe that’s also the reason why many have labeled this generation of young adults the generation that feels entitled and lacks the work ethic of previous generations.

Here are a few messages from Hallam’s book:

  • Wealth doesn’t last more than three generations. There’s a generation that builds wealth, a generation that maintains it and a generation that squanders it.
  • It’s natural for parents to want to help their children. But the Chinese have known for thousands of years what happened to the money that is given to youngsters who had no hand in building that wealth. It gets squandered.
  • Adults who received “Helpful” financial gifts from their parents typically end up with lower levels of wealth than people in the same income bracket who don’t receive financial assistance.
  • It’s a tough concept for parents to grasp. They feel they can give their kids a strong financial head start by giving them money. Statistically speaking, easy money is wasted money.
  • Those that receive financial help were more likely to have less wealth in the future than those that never received financial help from their parents. Receiving financial handouts hinders a person’s ability to create wealth.
  • Giving money promotes weakness and dependence. Teaching money lessons and encouraging the struggle promotes strength, independence, and pride.

Parents have a big responsibility

One of the problems I see is there are no formal venues for financial education. It’s not taught properly in schools (if at all) and it’s not common in the workplace. Most financial education comes from the financial industry, which can be highly product biased and self-serving.

Most financial education is informal and as a result, happens at home. But how many families don’t talk about money? How many parents are lousy with money and are actually bad examples for their kids? How many parents may be good with money but don’t know how to teach it to their kids.

I don’t have the perfect cookie-cutter solution. I wish I did because I could make a lot of money with it. I know it’s a topic that is very important to me with four young boys. Obviously I want to help my kids financially where needed but I think financial education is key. I teach money to strangers so I better teach my kids so they can have a financial advantage over others. What I do know is that it’s important to teach kids about money but also teach them about work ethic.

What do you think about giving money to kids? Good or bad? Any circumstances where it’s good and others where it’s bad?


  1. CV

    All very well put. The same ideas about giving money to children not being in the children’s best interests in the long run is also brought up in The Millionaire Next Door. When my kids were growing up I simply didn’t have the cash to help them out with post-secondary education and their wedding gifts were a cheque for $1,000 but it was post-dated to their first anniversary so I could put aside the money for it over the course of that year. And what do I have now? 3 grown daughters who are doing a fantastic job of making their way in the world.

    Unfortunately though, I came from a family where my parents believed and taught me that it was rude to talk about money. Therefore absolutely zero life lessons from them about money management during those growing up years. I’ve been learning now through the school of hard knocks myself. I think at 50 I’m at last getting a clue!

    I’m so thankful to you Jim, and others like who who write such great material that I can access through the wonders of the internet. Information = education = prosperity.

    • Jim Yih

      Thanks CV!
      You made my day. If you could have a do over, would you try to talk more openly about money? Do you think it would have helped or hindered?

      • CV

        I do wish my parents had been more open talking about money but they obviously had very different ideas from each other about it and weren’t a team on budgeting and financial planning. I know my mother kept a ledger about the finances because I saw her using it once (but only the once! she would have kept it out of sight from us kids.) Our family dynamic was pretty divided in terms of children in one camp and adults in another so no amount of asking would have changed my parents ideas about the topic of money being off-limits. I really do wish my parents had talked to me about money, well, my mother anyway because she’s got a far better head for finances than my father.

        For my own kids: A basic budgeting/money doesn’t grow on trees life lesson would come when we were clothes shopping for my girls. If they needed new jeans or shoes, I would say I had up to $30 for the item because I felt that would cover basic jeans or footwear. If they wanted something fancier they would have to come up with the extra. I wanted them to feel secure that their needs would be met but to be ready to contribute too. In their teens I also gave them a budget for school supplies in September. They would have, say $40 each, and could figure out how to spend it on their own. They got good at it and would pool resources like buying a pack of pens together and then splitting the pack.

        I talk to my kids more about financial planning in terms of figuring out what something’s going to cost ahead of time like when they were planning to move out on their own. They know that personal financial planning is a real hot topic for me and that I want to see them be financially independent in terms of not relying on a partner to support them.

  2. retirebyforty

    I also think giving money to kids is not helpful. We are contributing to the 529 education plan and that will probably be all that we’ll give the kid. My parents helped paid for my education and I’m very grateful. They also made clear that I won’t get much if any inheritance. I’m fine with that and will try to do the same for my son.

  3. Hank Lu

    It has good value

  4. stan osoriasoria

    Everyone was once a kid, what and how we spent those times are impotant to what we become a financial discipline and independent adult started somewhere i bet it from when he/she was a kid.

  5. Nina

    Awesome article! There are benefits for both sides I guess and all depends on the circumstances. Sometimes it literally saves the kids, sometime it does nothing but harm.

  6. Parental Unit

    Having put myself through three degrees with zero parental help, I know how hard that is. My parents definitely could’ve afforded to help me but chose not to – not a cent – and I confess to a lingering sense of disappointment in them, particularly as higher education was always hugely valued (overvalued?) in the family. So, yes, I did help – a little, to the extent I could afford – towards my child’s education. He’s now in his mid-20s, studying for a master’s while also working full time. Coincidentally, I’m at last debt free. So – I chose to reward his diligence & self-sufficiency, not to mention excellent fiscal responsibility – he’s debt-free and saves 10% of his take-home – by contributing to his RRSP a sum approximately equivalent to one year’s tuition at a Canadian university. Eventually my additional contributions will not only have paid back all his tuition, but built up a nice little future inheritance. This also locks the money away for when he’s older, wiser, needier…. There are many ways to help kids.

  7. Jan

    Five children from25-35 inherited a good deal of money from grand parents. The 27 yr old had been married since 18 and had struggled financially. All others were married, but had regular jobs and income. All had recieved private secondary school and the opportunity to attend university.

    They are now 49-59. The 27 yr old is a multi millionaire with several businesses (parents were small business owners). Two are solidly middle class women retirees with older husbands. The oldest and youngest are both broke, waiting for the parent to die so they can inherit-and spend again.

    So far, three of the ten children of children are doing well. The others await with their hands out. Should be interesting when only two recieve inheritances.

  8. Financial God

    Happy New Year! I personally believe that the best way for parents to nurture their children is with love and by example, and not by handouts.

  9. Calgary Realtors

    I wish I had been provided with better ‘tools’ to handle and manage money. My parents did not spend any time helping me prepare for managing finances. I will be spending much more time on this subject with my son and daughter. I don’t have the blueprint for an amazing financial education for my kids, but that’s where guys like you come in Jim.

  10. Mr. Rene

    Great topic, I believe given money to kids would only spoil them in the long run, espescaily boys because if there taught how to fish they’ll catch there own. and also teaching them about credit and how it works, so it can work for them instead of them working for it.

  11. Mr V

    My parents didn’t have much money when I was a kid. We’d go out as a family often to socialise, have annual holiday abroad, and birthday and xmas presents. It was always on a tight budget though. I never had the “trendy” clothes that all the cool kids had, instead, my parents would buy me the basic stuff (unbranded/no big names). I remember feeling slightly embarrassed during my last few years at hight school due to not having the cool stuff.

    Fast forward to my 18th birthday (in 1995) when my parents gave me a cheque for £500 (approx US$650). Not a massive amount, but enough to make me go “wow” at the time. I bought myself a good computer (having always been interested in computers throughout my childhood and teens).

    I used it to learn new things and within a couple of years I started working in the computer industry as a software developer. My career has has improved a hell of a lot from then until now (in 2020).

    That 18th birthday present definitely helped me. Without it, I’m sure I still would have saved up and bought a computer but it would have taken me longer.

    Within a few years my own kids will be approaching 18 years old, and I’ve been saving for them. It’s a lot more than £500. Am I doing the right thing?

    I’ve been starting to wonder if giving them a load of cash is a good idea. Do I give it as a lump sum? Do I approve all purchases? (e.g. to pay for deposit for house, or uni fees, or put it towards some venture they have in mind). Wait until they’ve got a good job with a house? (25?)

  12. Gifting Parent

    My husband and I are in our early 60s and planning to retire soon. We have saved more than enough for retirement (includes one pension plan). When our kids were young we didn’t have alot of money so couldn’t help with education fees but tried to help with them by living at home and helping with small costs, paid for their car insurance to get to school, etc.. We’d rather not end up leaving a large inheritance to our kids but give them small gifts when we see they may need some assistance eg. family vacation (w/ 3 kids), buying a new car, etc. Is this the way to go? Also, the kids families are different sizes – 5 in one family, 2 in another. If you gift for a family vacation (all of us going), do you give the same amount to each family or do it with respect to how many people are in the family (more for the family of 5)? Not sure how this is viewed. I’d assume the same amount to each family since we are basically gifting each child. ??

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