Lowered pay, deferred rent, how to have that conversation with DD?

[Scallywag]

Never mind. Kork's response is deeply appreciated!

[Jluke]

is she college or high school - I couldn’t tell?

Are you accounting for her payments as income to you at tax time?

is she supporting herself financially such that you are not able to claim her as a dependent in your taxes?

Not sure how I feel about the game you are playing but wouldn’t want it to cause added stress in today’s world. Especially since the Big Reveal (bank account) might not be for another 8-12 years

i guess the joint account is not UTMA/UGMA so she needs to know about that come tax time.

[Scallywag]

is she college or high school - I couldn’t tell?

Are you accounting for her payments as income to you at tax time?

is she supporting herself financially such that you are not able to claim her as a dependent in your taxes?

Not sure how I feel about the game you are playing but wouldn’t want it to cause added stress in today’s world. Especially since the Big Reveal (bank account) might not be for another 8-12 years

No, the money she "gives" us is technically savings (in an a/c in her own name with me as joint owner), although she thinks she is contributing towards rent and groceries and her new car. She does not make enough to support herself and is a dependent on our tax returns but has had to file taxes since getting her part-time job where she reports her income.

[ua_guy]

Maybe I'm confused but this sounds really, really wrong on many levels.

[Scallywag]

Maybe I'm confused but this sounds really, really wrong on many levels.

Wrong? Why?

[Scallywag]

is she college or high school - I couldn’t tell?

Are you accounting for her payments as income to you at tax time?

is she supporting herself financially such that you are not able to claim her as a dependent in your taxes?

Not sure how I feel about the game you are playing but wouldn’t want it to cause added stress in today’s world. Especially since the Big Reveal (bank account) might not be for another 8-12 years

i guess the joint account is not UTMA/UGMA so she needs to know about that come tax time.

It's money from her income which is reported to the IRS so why should she have to report savings to IRS if she's already reporting income? The account does not pay any interest at all that she might need to report.

In any case, I needed advice on something entirely different.

[Jluke]

I think there’s another lesson(s) that could be taught with the money in the account (I.e. investing and letting your money work for you; spending small sums of money and experiencing buyer remorse on a small scale)

all work and no play could lead to a negative view of work and money.

when I had $20 and bought a DVD or something for $15 and then I was left with $5 and it would be a while until I got more money (I only worked summers in high school and college). Quickly learned that wasn’t a wise choice.

it’s tough no doubt. Thus personal finance.

[ua_guy]

Wrong? Why?

Edit: I have a problem with this, personally, and I shouldn't comment any more on it. If she's in high school, I can't understand why you would obligate her with debt and not let her work to fulfill that obligation. IMO, that's not real life. I also don't understand this bit about holding her money hostage until she's 30 (including privacy over her own savings) and then giving it to her as a surprise.

[kork13]

FWIW, I have seen a number of friends' families who did similar for kids who save up money for mission trips. Kid hands over cash to mom & dad to cover the costs, they keep it set aside & fund the mission out of their own cash flow, then on the kid's return hand back all of the saved money. In those circumstances, I'm totally comfortable.

I'll admit, though, that the dynamic here seems a little different, and does seem a little......funky...... For me, it's not even really about the money so much as the control. Sounds like this is a young college student (aka "legal adult"). You're covering her tuition, and plan to give this money back to her after she graduates. I totally understand that you're trying to look out for her, and as parents, you absolutely should help to guide her in making wise choices. But it sounds like the job is mostly a nicety, to give her experience and perspective. It's not essential for her living expenses nor is the "rent" she "pays" essential to yours.

If all of that assessment is accurate... My suggestions would be one of the following:
0) In all cases --- DO NOT HOLD A DEBT AGAINST YOUR DAUGHTER. Relationship-wise, it's only going to be destructive. Especially because you don't need the money, don't expect her to repay any "back rent." My philosophy: Parents are there to be a safety net if life goes sideways. As long as she's still working, making good choices, getting her schoolwork done, and otherwise doing what she needs to (and she's respectful of your home/rules/boundaries), then don't kick her while she's down. And who knows? Maybe she'll come back later & voluntarily repay what she believes is owed.
1) Just let her accept the reduced work hours, and reduce the amount of the "rent" that she's responsible to "pay."
2) Encourage her to get a different job that will provide her with better hours (and maybe better pay to boot), then she can go back to "paying" the normal amount.
3) If your concern is that she can't work at this place when it's more busy while still getting her work done, stop charging any rent, allow her to quit the job or maintain low hours, and encourage her to focus on her schoolwork.
4) Alternate option to #3 -- Just let her make her own adult choices, but make the expectations clear. If she works too many hours, fails a class, then she has to own it -- she's responsible to pay to retake the course (or come next semester, she's responsible to pay for however many credit hours she bombed).

Personally, I like #4 -- treat her like an adult. She might surprise you and find a way to work the hours she wants while also succeeding in school. And if she falls on her butt trying... well, there's wisdom to learn there as well. Coach her, mentor her, offer advice... But don't try to control her choices. Learning the consequences & outcomes of her choices is just as important a life lesson (if not more so) as understanding how to pay for rent & groceries.

Take it for what it's worth (not much), because my kids are all <6y/o. But just speaking from a relationships perspective, I think you'll get further by giving her some leeway paired with sage counsel and an open door to listen when needed.

[Scallywag]

FWIW, I have seen a number of friends' families who did similar for kids who save up money for mission trips. Kid hands over cash to mom & dad to cover the costs, they keep it set aside & fund the mission out of their own cash flow, then on the kid's return hand back all of the saved money. In those circumstances, I'm totally comfortable.

I'll admit, though, that the dynamic here seems a little different, and does seem a little......funky...... For me, it's not even really about the money so much as the control.

Funky and controlling? Why? Because I am concerned that she may have trouble balancing a full course load with a demanding job schedule?

Sounds like this is a young college student (aka "legal adult"). You're covering her tuition, and plan to give this money back to her after she graduates. I totally understand that you're trying to look out for her, and as parents, you absolutely should help to guide her in making wise choices. But it sounds like the job is mostly a nicety, to give her experience and perspective. It's not essential for her living expenses nor is the "rent" she "pays" essential to yours.

Job is not a "nicety". She wants to work and gain some experience in customer service / sales while earning some money to pay for things like books, a new car etc.

If all of that assessment is accurate... My suggestions would be one of the following:
0) In all cases --- DO NOT HOLD A DEBT AGAINST YOUR DAUGHTER. Relationship-wise, it's only going to be destructive. Especially because you don't need the money, don't expect her to repay any "back rent." My philosophy: Parents are there to be a safety net if life goes sideways. As long as she's still working, making good choices, getting her schoolwork done, and otherwise doing what she needs to (and she's respectful of your home/rules/boundaries), then don't kick her while she's down. And who knows? Maybe she'll come back later & voluntarily repay what she believes is owed.
1) Just let her accept the reduced work hours, and reduce the amount of the "rent" that she's responsible to "pay."
2) Encourage her to get a different job that will provide her with better hours (and maybe better pay to boot), then she can go back to "paying" the normal amount.
3) If your concern is that she can't work at this place when it's more busy while still getting her work done, stop charging any rent, allow her to quit the job or maintain low hours, and encourage her to focus on her schoolwork.
4) Alternate option to #3 -- Just let her make her own adult choices, but make the expectations clear. If she works too many hours, fails a class, then she has to own it -- she's responsible to pay to retake the course (or come next semester, she's responsible to pay for however many credit hours she bombed).

Personally, I like #4 -- treat her like an adult. She might surprise you and find a way to work the hours she wants while also succeeding in school. And if she falls on her butt trying... well, there's wisdom to learn there as well. Coach her, mentor her, offer advice... But don't try to control her choices. Learning the consequences & outcomes of her choices is just as important a life lesson (if not more so) as understanding how to pay for rent & groceries.

Take it for what it's worth (not much), because my kids are all <6y/o. But just speaking from a relationships perspective, I think you'll get further by giving her some leeway paired with sage counsel and an open door to listen when needed.

OK.

There will be no question of "kicking her while she's down". That's the reason I asked here in the first place.

When she first started working, she was all enthusiastic and picked up a ton of hours, not realizing that it would be enormously difficult to balance her classes AND work all those hours at the same time. It really did not work out well for her. We did the whole "adult thing" of you bomb a class, you pay to retake it. What is not expected - until we see it - is how it affects their self-confidence to "bomb a class", and I would hate for her to get dejected over grades again.

Also, the whole spiel over "back rent" is because during the hot season, they make a LOT more money. Her disposable income will likely triple then. So "back rent" was merely to bump up her savings rate to cover for the next low season period. I think it's important for people employed in a cyclical industry or whose income varies during the year to save more when they're making more, to bolster up their nest egg to get over the leaner seasons with not much impact. Obviously, I understand that no matter what, springing "back rent" on her later would be aggravating (to anyone), hence my query IF I should maybe have that conversation now? But then my fear was what if she decided that she didn't want to "owe" "back-rent" and ran out and got a job at the other business that has hired many of her co-workers? That's something I'm conflicted over since it does not work out for her. Maybe under these circumstances, it's best to just have an upfront conversation and simply tell her to increase her savings rate when she earns more.

Someone mentioned investing that money rather than letting it sit in the bank. That was something we hadn't considered but we would need her input on that. That would be something we would want to do when she's graduated and on her own.

[Jluke]

I mentioned the investing.

perhaps even the better move would be to open a Roth IRA if her income qualifies.

no sense in the money earning absolutely nothing at the bank.

lots of moving parts and I think if you shifted to focus on “savings is fun / good; watch how quickly the money piles up” vs “you owe us for groceries and rent”. It could be a great life lesson.

otherwise I would like to think that my mantra with my kids will be “your job is to study and get good grades”. That’s what worked for me growing up.

Job experience is all well and good. But job burnout during college could be detrimental to a fulfilling professional career where the real money can be made.

not sure how your kid is wired (money habits, work ethics, resiliency, etc) so tough for anyone else to know which approach will work and which won’t.

[kork13]

When she first started working, she was all enthusiastic and picked up a ton of hours, not realizing that it would be enormously difficult to balance her classes AND work all those hours at the same time. It really did not work out well for her. We did the whole "adult thing" of you bomb a class, you pay to retake it. What is not expected - until we see it - is how it affects their self-confidence to "bomb a class", and I would hate for her to get dejected over grades again.

Also, the whole spiel over "back rent" is because during the hot season, they make a LOT more money. Her disposable income will likely triple then. So "back rent" was merely to bump up her savings rate to cover for the next low season period. I think it's important for people employed in a cyclical industry or whose income varies during the year to save more when they're making more, to bolster up their nest egg to get over the leaner seasons with not much impact. Obviously, I understand that no matter what, springing "back rent" on her later would be aggravating (to anyone), hence my query IF I should maybe have that conversation now? But then my fear was what if she decided that she didn't want to "owe" "back-rent" and ran out and got a job at the other business that has hired many of her co-workers? That's something I'm conflicted over since it does not work out for her. Maybe under these circumstances, it's best to just have an upfront conversation and simply tell her to increase her savings rate when she earns more.

When I called it "a bit funky & controlling", it was mostly for the forced but secret savings, and trying to drive how she uses her time. It's not wrong or abnormal, because she's a young lady still trying to figure out adult life, and you're a parent that cares & only wants to see her succeed. That's great, but I just think that failure is sometimes meaningful, if it teaches her about how to make & assess her own choices.

In the end, I think your final point (bolded in my quote) is the best way to go. Trying to help her learn to save & manage her time is an essential set of skills for her. But she'll learn from it better if she knows what's going on, and it's an active part of the discussion. For starting an awkward conversation where she might be a bit hostile, one method that is often quite disarming is to apologize & be frankly honest about your concerns. I'm sure there's still plenty of love & trust in the relationship, so give her the respect of trusting her & talking to her as a peer, not as a pet. That was a gift that my parents gave me when I left for college -- I was no longer there child to direct & dictate, but rather an adult peer to whom they offered advice & counsel.

Putting yourself out like this, subject to everyone's criticism & questioning of your parenting style/choices is very hard to do, so I understand that you're a bit defensive. I hope I haven't come off as accusatory or degrading-- you're doing what you think is best for her. My biggest thought is just to involve her in the discussion rather than driving her choices for her.

[Scallywag]

I mentioned the investing.

perhaps even the better move would be to open a Roth IRA if her income qualifies.

no sense in the money earning absolutely nothing at the bank.

lots of moving parts and I think if you shifted to focus on “savings is fun / good; watch how quickly the money piles up” vs “you owe us for groceries and rent”. It could be a great life lesson.

otherwise I would like to think that my mantra with my kids will be “your job is to study and get good grades”. That’s what worked for me growing up.

Job experience is all well and good. But job burnout during college could be detrimental to a fulfilling professional career where the real money can be made.

not sure how your kid is wired (money habits, work ethics, resiliency, etc) so tough for anyone else to know which approach will work and which won’t.

She has a ROTH. That was the *first* thing we set up as soon as landed her first job a while ago. Per IRS, she can contribute up to the maximum of what she earns that calendar year or the max allowed per year ($6000), and we help her with that usually if she falls short. Not sure what her earnings for 2021 will be, we need to check. The ROTH isn't a secret as she contributes directly to it, but the fact that her "rent" and "groceries" are all actually being banked for her in an a/c where she is the co-owner is. We have zero control over the ROTH (she's investing in VTI for now), but do help her with meeting her maximum allowed for the year (depending on her earned income).

I honestly don't understand the problem with parents charging kids "rent" and "groceries", Back when I turned 18, I had to start paying rent. It absolutely did NOT damage me one bit or leave me utterly scarred for life. It did mean that I needed to work part-time and balance school / work at the same time and it made good at time management. In fact, in preparation for needing to pay "rent" on my 18th birthday, I ran out and got a job at 17! Gee, my parents must have been real pricks, eh, to send their teen to work?

On my wedding day, though, I received a handsome wedding present, and all the money that I thought they had taken for rent and groceries was given back to me *in full*. That's where the idea came from. Obviously, some parents can't afford to return kids' rent monies and groceries, and NO judgment there, either. But we can. AND, it's real life. So, get her to pay a portion of the "rent" and "groceries" and then bank it all in an account in *her name*, and give it all back to her when she's a certain age, and at a maturity level, where she'd appreciate it and put it to good use.

BTW, do non-related landlords give your rent money back after a certain number of years? So kids who pay "rent" technically shouldn't even expect the money back. It's just that she will get hers back but why should we alert her to the possibility now? I don't get all the claims of "secrecy" and "power-tripping" here.

Aside from the ROTH IRA, we don't have an investment a/c for her, although we've talked about a taxable a/c. She's not too keen because she is at that stage where she wants to have fun and "party" with the money and getting her to take the ROTH seriously is hard enough, although she's quite diligent about saving up to buy her first car. Also, it's one thing to have a bank a/c with her as a co-owner, but I don't think we can open an investment a/c in her name legally. We would probably need her signature and consent to do so, even if I could funnel some of the money already banked into a taxable a/c in her name. I could also open that a/c in my own name, but that might create unexpected tax consequences when it's time to "hand over" the a/c to her, eventually. These are probably all best discussed with an accountant and an attorney, so that we take legally sound decisions after careful consideration and consultation with the professionals.

[Jluke]

Thanks for the additional details.

Seems like a solid plan and you have first hand experience with how it worked for you when you were a young adult still living with parents.

[Like2Plan]

Also, it's one thing to have a bank a/c with her as a co-owner, but I don't think we can open an investment a/c in her name legally. We would probably need her signature and consent to do so, even if I could funnel some of the money already banked into a taxable a/c in her name. I could also open that a/c in my own name, but that might create unexpected tax consequences when it's time to "hand over" the a/c to her, eventually. These are probably all best discussed with an accountant and an attorney, so that we take legally sound decisions after careful consideration and consultation with the professionals.

I missed how old your DD is at this time. If she is over 18 then you would have to have POA in order to set up an account in her name (and some banks will only recognize their own POA forms).

However--In regards to creating a brokerage account in your name and transferring over stock ownership--it is not that difficult. In some ways it might be preferred if she has to obtain student loans and fill out FAFSA forms. (She could also discover the joint account as a result of filling out the paperwork). Anything in her name would require a higher contribution level towards college expenses.

There are of course, pros and cons to putting stock in your name and transferring. One is if has increased in value to the extent that it exceeds the current gift exclusion, you would have to file a gift tax form 706 with the IRS.
The basis for the stock would remain the same as when you purchased the stock after it was transferred. Then there is the kiddie tax while your DD is attending college--extending all the way into age 23. For a while there, they were taxing at the trust rate and in some cases a higher tax rate than what the parents were paying! (They did repeal that and I haven't kept up with it, but I concluded it might be easier to keep $$ in the parents name and then transfer ownership after age 23).