After a lot of thinking about the way that my spouse and I spend a lot more money on my daughter than my son ($4,000 for her but only $300 for him), we decided to hake a hybrid approach to correcting this unfair spending situation. It not like we intentionally meant for it to be this way, but unfortunately that’s the way it turned out.
Luckily, we figured this money spending imbalance out fairly early versus later in their childhood and can take some sort of corrective action now. After all, someday our son will realize all the money that was spend on his sister. Both of my kids are already smarter than I was when I was there age, so it would just be a matter of time before they figured it out.
Below are the options from the article called “Fairness in Spending on Kids“, you might want to read them or the original article to understand the options that I was previously considering since the two approaches are the basis for our final decision.
Fairness in Spending on Kids, Our Action Plan
Basically we blended the two options below into one hybrid solution that we believe to be the most fair and affordable.
My plan is that I’m going to do is invest $1,500 each year into stocks (mostly ones that have solid dividend history and growth) for my son. The idea here is to start a dividend stream for him when he’s dating girls some day, and when he’s in college and need some “fun” money from the dividends. Actually both kids already have brokerage accounts, and already have dividend streams in place (yeah, I’m great!)… So I’m just going to put a extra money each year into my son’s account ($1,500 to be exact).
Next I’m going to invest $500 each year into an investment in my own account to give to him if he needs it in the future to help with a house or whatever. Alternatively, if there comes a time when for whatever reason he picks up an activity that’s more expensive than my daughter’s, this can be the feeder account for that activity. I guess you can think of it as spending insurance lol.
Two years from now if the same situation still exists, I’m planning on changing the numbers a bit and invest $1,000 in his account, and $1,000 in my account to be saved for him in the future. Of course, if things change then so does my plans. For example if my daughter quits gymnastics, and the inequality reverses, then I’ll do something similar with her brokerage account. So only why the spending imbalance exists will I fund his account. If the imbalance doesn’t exist or for some reason we spend more on him than her, we’ll stop adding extra to his account.
Now some of you might think that my daughter is still making out like a bandit because she’s still getting at least $1,7000 more than him, but really she’s not. You see that extra amount that I’m investing in my son’s account will grow and could be a decent amount in 4 or 5 years thanks to compounding interest. And besides, we offer him options all the time (practically once a week I’m asking him if he want to try something new), so just because he doesn’t want to do anything isn’t our fault, so the spending stream should be discounted accordingly.
I have to admit, I’m quite pleased with our decision. I think it’s a much better solution than spending all of our money only on my daughter only. I think this is a fair solution.
My “Fairness in Spending” Previous Options
I could start to purchase a stock that is designated for my son some day in the future. Preferably it would be a non-dividend stock that just accumulated over time. Hopefully, if I choose well, the stock will grow to a decent amount in the future. While this seems like the best and simplest approach, it’s probably one that I won’t use. After all, I’m not made of money, and cutting out $3,700 every year would put a small financial hurt on us.
Option 2 (this is what I’ll probably do):
Each and every month I spend about $300 to $400 on only me; it’s my fun money. Mostly this money goes to eating out and other forms of entertainment, but perhaps I’ll cut back and redirect that money to some type of investment that provides a yield for my son. Oh, I’ll keep the money in my account, as sort of an emergency fund, but that money will be pigeon-holed for my son. Or perhaps that money could be used for a down payment on a house 15 to 20 years from now. Or maybe that money could be used for entertainment while he’s on dates or in college. Or perhaps he’ll develop an expensive hobby in his later teens. How knows…
I don’t think it’s fair to save the full $3700 for him though. Perhaps I’ll only save half of that amount $1,500 or most likely $2,000 (this seems like a more fair number). That is unless he does eventually find an expensive activity, in that case, I will make the amount equal to my daughter’s money (as much as it would crimp my own style).
If you have a better solution, please feel free to comment, in our world, nothing is set in stone!