I am really proud of our 21 year old daughter. Despite a turbulent high school experience and very severe ADHD and anxiety, he was gainfully employed.
At this point it’s more than we ever dreamed of, but despite his huge success (in our eyes), financial freedom still seems impossible. So we came up with a brilliant solution (humility aside) based on a book written by Nobel Prize-winning economist Thomas Piketty.
So our daughter…
It was his one-year anniversary as a line cook at a local high-end restaurant. It was never a no-brainer that this would happen.
My wife and I and her therapist were both prepared for at least a few years where she probably wouldn’t work a full-time job or study full-time, as she let her brain mature and transition into adulthood.
We were hoping for, at best, part-time work and, perhaps, as soon as he lost his temper, he would start and quit.
We were hoping that she would probably be home with us for the next few years.
But he is working full time (about 30 hours a week). And, to our great surprise, he is living on his own (with his girlfriend) in a small apartment near us.
By all accounts, she’s doing well — a regular paycheck, even as she manages her mental health (always a struggle) while excelling at work and doing her best to make ends meet.
Doing well, but…
But here – of course – is the rub. He makes slightly more than minimum wage, as does his girlfriend.
Between the two of them, they can’t afford their rent, bills and basic living expenses. Recognizing this, as they decided to live on their own, we agreed to pay them 1/3 of the rent, and said we’d see if that was enough to keep them going.
Obviously not. They do not live extravagantly. They may spend more on Uber Eats than I like, and they often want to buy little knick-knacks for their pets that are unnecessary but not ridiculously expensive. They all work hard, and I think they deserve this little indulgence.
But even with their modest living standards, I’m constantly saying I’ll get the monthly Uber bill, or I’ll pay for the pet.
It seems unfair that they both work hard and earn wages commensurate with their work, given that they have no post-secondary education and are early in their careers.
My Enlightenment…
I was reading Thomas Piketty’s book, Capital in the 21st century. This is a book about how wealth and capital accumulation have changed over the past two generations, and it explains why the super-rich are getting so rich while the working class is stagnant or in decline.
Not to bore you with the details, but the tax and investment policies that began in the 1980s and have continued for the past 50 years have already allowed the owners of capital (the rich who own businesses and investments) to see an exponential increase in their wealth. Workers who do work, already seeing stagnant wage growth, don’t have enough money to invest, and are therefore left out of the massive boom in capital and real estate markets that is making the rich richer.
Piketty proved why the rich get richer and everyone else gets poorer.
Our daughter and I are in this exact situation. My wife and I — we have investments that have grown in value over time, and we, despite retiring early and not working at all, are literally set for life. Our daughter, on the other hand, works hard and can’t make ends meet.
(Finally), the solution…
My wife and I have known for a while that our children will receive a substantial inheritance… when they are 65 years old!
We’ve struggled with this. Having money early in life can make them happier. But our mantra, like our parents, is that our number one job as parents is to make our children self-reliant. So, apart from paying for their education and a little rental assistance, we give them very little money.
But they struggle. As I have described, our daughter’s condition is such that two working young men are not able to meet the daily expenses.
But as Piketty says – it’s not their fault. The deck is stacked against them. To get rich from my investment, he remains poor because his employer cannot pay him a decent wage.
So, our invention. We have just decided that we will top up our daughter with $5 ‘intergenerational wealth transfer’ (we need to work on the name) every hour she works.
So if he works 120 hours a month, we’ll give him an extra $600 on top of his paycheck.
It is not a fortune, and he has to work to access the money. In fact, the more he works, the more we will give him. But with that extra money, we think he can cover all his own expenses and even save the 10% suggested by my financial-planning hero — rich barber.
My wife is a bit worried that it will seem like we are subsidizing her and will make her feel like she can’t make it on her own.
I strongly disagree. We are not subsidizing him. The economy subsidizes us. More specifically, young workers subsidize us. When Reagan and Thatcher and the neo-cons decided to bust unions and give huge tax breaks to those of us who invest in stocks and real estate, they took money from the working class and gave it to those of us who could afford to invest.
By paying our daughter a living wage (or at least close to it), we’re paying her something close to what her work is worth. Or at least some of the value that government policies and rich fat cats like us have taken from him.
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This post was Previously published at medium.com.
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Photo credit: Vitaly Garev at Unsplash
