Personal Finance

I'm considering giving my 20 year old kids $250k each but I'm not sure if that's the best choice

Marc Guberti

Published: February 10, 2025 12:44 pm

Giving money to your children can set them up for financial success. Extra funds may make it easier for them to buy a house and work toward other financial objectives. However, giving your children a lot of money all of a sudden can be risky.

A Redditor posted in the Fat FIRE subreddit about giving his 20-something kids $250,000 each. One of the young adults is choosing between $250k/yr offers from Google and Netflix, while the other is going into med school. 

Furthermore, both children are on track with their goals and don’t do any drugs. They also have stable long-term relationships. I’ll share my thoughts, but it is good to speak with a financial advisor if you can.

Use the IRS Gift Limit

One of the top comments in the Fat FIRE community came from a Redditor who recommended gifting them the IRS gift limit. The current limit is $19k per year, or $38k per year for a married couple. You can give each child $38k per yearwithout reporting it to the IRS. 

This $38k annual limit goes up each year due to inflation. It can offer more consistency for both children instead of lump sum $250,000 payments, which must be reported to the IRS. It also puts less pressure on the couple to give their children $250k each right away.

Don’t Give Them Stocks with the Highest Capital Gains

Although it’s good for financially capable parents to give money to children that they have raised well, you should hold off on giving them any of your most profitable investments while you are alive. If you did the equivalent of buying Tesla or Nvidia stock back in 2010, hold onto those stocks and never sell them.

When you pass away, your children will inherit those stocks on a step-up basis. That means they won’t have to pay taxes on any of the capital gains you accrued on those stocks. Some investors take out margin to access cash without having to sell those types of stocks.

Talk with the Children About Money

It’s safe to assume that young adults are financially responsible since they seem to be responsible in other areas of their lives. However, it’s still good to have conversations about money and explain how to approach it.

Investing in stocks and real estate can help your children get to their financial goals sooner. They can also see tangible success in their portfolios, inspiring them to invest more money in the process.

Wait Until the Children Are in Their 30s for Larger Amounts

There are a few reasons to wait until your children turn 30 to give them larger amounts. While the IRS gift limit is a good starting point, you should wait for larger amounts. One reason is that the human brain doesn’t finish developing and maturing until your mid-to-late 20s. 

Another key reason is that your children can make mistakes with small amounts of money. It’s better to lose $100 with reckless decisions than it is to lose $100,000 with those same reckless decisions. People learn a lot about money when they lose it, and it’s better to learn those lessons with small amounts of money.