The Long Arithmetic: Issue 13

Quick note before we start: the three-month reader survey comes back Wednesday and closes Sunday: four questions, about a minute, and I read every single one. Thank you everyone who already replied.

How much should I leave my kids? Almost everyone who asks me that has already walked past the harder question underneath it: how much is too much, and too much for what.

Warren Buffett gave the cleanest answer I have found. He told Fortune in 1986 that the right amount is "enough money so that they would feel they could do anything, but not so much that they could do nothing." He has largely done it with his own children, giving the bulk of his fortune to philanthropy.

There is no single right number. I want to say that early, because most of what gets sold as inheritance planning treats the number as the hard part. The number is the easy part. It falls out of a decision most people skip: what do you want the money to do once it stops being yours and starts being theirs.

An inheritance moves capital. It also moves friction, or removes it. And friction is often the exact thing that made you capable of having something to leave.

This is the question to ask before the number: what am I trying to give, and what might I accidentally take away?

One reader put it to me this way. She wants to live the life she has earned "without taking our net worth to zero, or leaving too much for the kids." The operative phrase is the last one: too much for the kids. She has not asked how much she can leave. She has asked how much is too much. She already senses there is a ceiling, and that crossing it does something she would not choose.

Most planning tools cannot help her, because they are built to answer how much you can afford to give. They stay quiet on how much you should. That second question is not financial. It is about what kind of adult you are handing the money to, and what the money will do to them once it lands.

Money given to a child does two things at once. It removes a constraint, and it removes a reason.

Some constraints are worth removing. The medical bill that would wipe out a decade. The student debt compounding against them before they have found their footing. Removing those is a real gift, and I would not talk anyone out of it.

Some reasons are load-bearing. The need to figure it out. The long stretch of not-yet that teaches a person they can build. Money that removes the fear is a gift. Money that removes the effort can quietly remove the thing that would have made them able.

I knew of a family where the inheritance dropped out of left field. No warning, no conversation, no plan built around it, just a large sum arriving on a young woman who had never been prepared for it. She struggled with addiction. The money did not cause that, and I want to be careful not to pretend it did. What the money did was remove every floor at once, at the moment she most needed something solid under her. She lost almost all of it. She gets by now on a part-time job. The inheritance had nothing holding it, because no one had ever built anything around it, least of all a conversation.

Set that against a smaller thing from my own house. When my kids were 8 and 12, I changed our vacuum cleaner three times. The machines were not broken. I was looking for one light enough and simple enough that a child could actually run it and take part in running the house. I was engineering a way for them to contribute.

That is the whole inheritance question in miniature. You can hand a child a finished thing, or you can hand them the capacity to build one. The finished thing is easier to give and easier to spend. The capacity is the part that compounds.

Before you pick a figure, a few questions decide what the figure is even for. Consider each one honestly. The number you can defend is the one that survives them.

Consider what you are removing. A constraint that would crush them, or a struggle that would grow them. Those earn very different amounts.

Consider when it arrives. What a 22-year-old does with a large sum and what a 40-year-old does with it are rarely the same, because one of them has already built something and one has not.

Consider whether the amount assumes they will build, or replaces the need to. The first is a foundation. The second is a ceiling with good lighting.

Then there is the question that sits under all of them, and it is not really about money at all. Do you trust this child to handle it. You do not answer that at the reading of a will. You answer it over years, out loud, in ordinary conversation.

In our house we talk over the important things at dinner, and money has been one of them since the kids were in middle school. Just the real questions, in the open, repeated as they got older. That is how you learn whether you can trust a kid's judgment, and it is how they learn what you actually believe money is for. "Wisely" is a relative word. It only means something once you have said, more than once and in plain terms, what it means to you.

Start that conversation late, or never, and the money becomes a test the child sits without ever having seen the material.

The first trap is confusing security with the removal of effort. Security is a floor under a person. Take away their reason to stand, and the floor becomes a couch.

The second is believing more is always more love. A larger number is not a larger gift if it lands on someone who never had to become capable of using it well.

The third is treating this as only a financial decision. Your estate lawyer will ask how much goes to each child. He will not ask what you want it to do to them, or whether you have ever talked to them about it. That part is yours, and no document decides it for you.

Consider the last time you pictured leaving a specific amount. Now ask what you wanted that money to do once it was theirs. Was it there to remove a fear, or to remove a struggle. The answer moves the number more than any spreadsheet will.

Here is the one I would sit with. If you had to write a single sentence to your kids about what this money is for, what would it say. That sentence is the number's job description. The figure comes after. (If you write one, I would be glad to read it. I read every reply myself.)

Someone sits in the shade today because someone planted a tree a long time ago. The tree is worth planting. The question worth sitting with is whether you are leaving your kids the shade, or the reason to keep planting.

Buffett's line holds because it refuses to hand you a number. Enough to do anything, not so much they can do nothing. Where that lands for your family is a conversation you have, and it is easier to start over dinner than across a lawyer's desk.

Disclaimer: This is not financial advice. This material is for educational purposes only and not financial, legal, or investment advice. Private investments can be risky. Do your own research and consult licensed professionals before acting on anything specific to your situation. Full disclaimer.

Until Monday.

Alina