My wife and I recently took our two young daughters to a fall festival at a farm about 45 minutes from our house. We went on a Friday after work, and the girls were having such a great time that we stayed later than we normally would have.
As parents of two young kids, sleep already qualifies as a scarce resource in our house. Anyone who has gone through this stage is probably rolling their eyes at the idea that we even have a “sleep schedule” to protect, but we try.
Between staying late and the drive home, we knew we were pushing bedtime and that the next day could be a little more challenging. Tired kids generally don’t make for easier kids, and tired parents managing tired kids rarely leads to a peaceful Saturday.
We stayed anyway. A little less sleep felt worth the extra time together.
Financial decisions often ask something similar of us. We can calculate what a choice costs, but the numbers can’t tell us how much we value what we receive in return.
The utility of money comes from what it allows us to do. It can provide security and independence, create opportunities, help us care for the people we love, and support causes that matter to us.
For much of our financial lives, we have fairly clear objectives. We need to save, invest, prepare for retirement, and protect ourselves against the things that can knock us off course. As our financial capacity grows, so does the range of choices available to us. Over time, the question becomes less about simply maximizing what we have and more about how thoughtfully we use it.
Traditional financial planning software does a good job projecting future assets, spending, taxes, and the effect one decision has on another. Those numbers help us understand what’s possible and what different choices cost. Software has a much harder time quantifying what those outcomes are actually worth to us.
Diminishing Marginal Utility
I’m a math person, and I love formulas. There’s something uncomfortable about a question that we can’t solve neatly with one. But utility depends on our circumstances, values, relationships, stage of life, and the opportunities in front of us. Those things resist precise measurement, but that doesn’t make them any less important.
Economics gives us a useful starting point through the concept of diminishing marginal utility. As we accumulate more wealth, each additional dollar tends to matter a little less.
Consider what $50,000 means to two people. One has $5,000 in savings. The other has a $10 million portfolio.
For the first person, $50,000 can substantially change their financial position. It could eliminate debt, establish an emergency fund, or provide a down payment on a first home. For the person with $10 million, the additional $50,000 doesn’t change much about daily life or financial security.
The dollars carry the same monetary value, but they don’t have the same impact. The amount of wealth someone already has affects the usefulness of the next dollar, and so does the point in life when that dollar becomes available.
Money available today might create an opportunity that looks very different, or no longer exists, ten or twenty years from now. We understandably spend a lot of time thinking about the risks of using money too soon. Less obvious is the opportunity cost of waiting.
When Time Changes the Equation
Consider a family in which Mom and Dad recently retired in their mid-60s. Their children live in different parts of the country, and several grandchildren are approaching high school and college. For years, they’ve talked about getting everyone together for a family trip.
They have the resources to do it, but the expense isn’t inconsequential. Spending the money today reduces some of the flexibility they spent decades building.
Waiting has a cost too. A few years from now, one grandchild could be in college while another has a summer internship. Children get married, careers become more demanding, and health changes. Coordinating the whole family rarely gets easier as everyone gets older.
Maybe they take the trip. Maybe they do something smaller. Maybe preserving the money matters more. Financial analysis can help them understand what each option costs, but it can’t decide which outcome they value more.
The money can remain invested and compound. The opportunity to bring everyone together during that particular season of life may not.
Of course, utility doesn’t always favor spending. Someone might pay off a 3% mortgage even though keeping the money invested offers a higher expected return because owning the home free and clear gives them greater peace of mind. Someone else might value the liquidity more and keep the mortgage.
The same financial facts can lead to different decisions because people don’t always need their money to do the same thing.
Giving Earlier, Not Necessarily More
For many families, the question isn’t whether the next generation will receive an inheritance. It’s how and when that wealth will pass.
If Mom and Dad live into their 90s, their children may receive most of the inheritance in their 60s. By then, those children could be approaching retirement themselves. Their homes could be nearly paid off, their own children finished with college, and their retirement accounts well-funded.
The inheritance remains a tremendous blessing, but it arrives during a very different season of life.
Twenty years earlier, those same children are raising families, paying mortgages, funding education, and building careers. One might have an opportunity to buy into a business. Another could be trying to purchase a home. Grandchildren could be approaching college.
Capital is often scarcer at that stage of life, and access to it can open doors that simply aren’t as relevant years later.
This is where the utility argument starts to favor giving earlier.
If parents have enough to maintain their own financial independence and already intend to leave meaningful assets to their children, moving some of that inheritance forward can create considerable value. The child gains access to capital when it can fulfill a need, remove a constraint, or create an opportunity that might otherwise remain out of reach.
The eventual dollar amount transferred could be lower. Assets given earlier no longer have decades to compound inside Mom and Dad’s estate. But is maximizing the numerical value of the inheritance at death the goal? A smaller gift at the right time can carry significantly more utility than a larger inheritance received when the child already has everything they need.
Witnessing the Present Opened
Giving during life also changes the experience for Mom and Dad.
Helping a child purchase a home allows parents to watch the family enjoy it. Providing capital for a business gives them the chance to see where the opportunity leads and offer advice along the way. Helping grandchildren through college lets them participate in an important part of their lives.
As Ron Blue has said, “Do your givin’ while you’re livin’ so you’re knowin’ where it’s goin’.”
The same principle can apply to charitable giving. Someone who already intends to leave meaningful assets to a church, university, or nonprofit can preserve those assets for a future bequest or begin giving some of them during life. Giving sooner means fewer resources remain available to the donor, but it allows the organization to put those dollars to work today and gives the donor a chance to see what their generosity accomplishes.
The How Matters
Successful parents understandably worry about giving too much, too soon. They don’t want generosity to replace the motivation, discipline, or work ethic they spent years trying to instill. The same gift that helps one child pursue an opportunity could encourage another child to avoid responsibilities they would benefit from carrying.
This is where being thoughtful about the structure of the gift can help. Parents can match what a child saves toward a home rather than buying it outright. They can provide business assistance through a loan or investment that still requires the child to accept risk and make the opportunity work. Grandparents can help with education without covering every dollar. Families with greater wealth can use trusts to provide resources for particular purposes without giving a beneficiary unrestricted access to family wealth.
Every family and every child is different. Earlier gifts won’t always make sense. Parents still need to account for the child’s maturity, financial habits, circumstances, and ability to handle the gift responsibly.
But when parents have more than enough for their own needs and expect wealth to pass to the next generation anyway, waiting until death doesn’t have to be the default. The timing and structure of the gift deserve as much attention as its eventual size.
What Is the Money For?
Preparing for an uncertain future remains central to good planning, but life continues while we prepare for it. Health changes, children grow up, opportunities come and go, and our priorities change along the way.
That Friday at the farm was hardly a consequential decision. We gave up a little sleep for a few extra hours together and dealt with two tired girls the next day. Given the choice, I’d make the same trade again.
Financial decisions carry greater stakes, but the principle isn’t all that different. Financial analysis can help us understand what we can afford, what risks we’re taking, and what one choice costs relative to another. It can’t tell us which choices will ultimately mean the most to us.
That leaves a few questions worth sitting with:
What does enough look like for me?
Who do I want these resources to benefit, and when could they have the greatest impact?
Which trade-offs am I comfortable making to use my money in ways that matter to me?
There isn’t a formula that can answer those questions for us. So, perhaps the best place to start is asking what we want our money to make possible, and whether waiting will help or make that possibility harder to reach.
Joel Pietila
Associate Director, Planning
Trevor Cummings
PWA Group Director, Partner
