Instilling Money Values in Children and Grandchildren

Money values can be a guiding light that is a component of your legacy. If communicated frequently and purposefully, these values can be an important reference for your loved ones as they learn to handle money.

The Key Takeaways

·                 Having regular family discussions about household finances, shared money goals and general money concepts will, over time, communicate your values to your children and help them learn to be financially responsible adults. These discussions can also bring family members closer.

·                 Even young children can learn about setting spending priorities, working within a budget, saving for a larger purchase, and giving to others.

 Family Meetings About Money

Money discussions can start when children are as young as ten years old. While there is no need to go into detail about income and specific expenses, you can explain that there is only a certain amount of money and everyone needs to be careful with how it is spent. You can talk about your budget in general terms and let them know that some things, like housing and food, are at the top of your priority list. You could let the family decide how to spend the monthly entertainment budget or which charity (or even a friend) should benefit from your giving budget. You can discuss where to go on a family vacation and how everyone could help save money for it. And, by your example, you can illustrate the importance of saving.

As your children mature, you can start to teach them money management principles—how to balance a checkbook; how credit cards work; how companies make money; how simple and compound interest works; how to make and follow a budget.

What You Need to Know

Parents often don’t want their children to know how much or how little money they have. But kids spend time in other kids’ homes, and they are quick to pick up on the differences. How you earn your money—and how you prioritize spending, saving and giving—says a lot about your values. Talking about this with your children and including them in the process will help them learn your values and guide them as they mature.

Actions to Consider 

·                 Create a plan to purchase an item for your family, like a new TV or camping equipment. Include your children as you shop and compare prices in stores or online. Figure out how much your family would need to save each month to reach your goal, and encourage everyone to find ways to save. This will show your children how to plan to make large purchases without going into debt. 

·                 Give your children allowances so they can learn to handle their own money. Some families give each child a small allowance just for being part of the family, with opportunities to perform household chores to earn more. You could give teenagers their clothing allowance for each school semester and let them make their own purchases. However, resist the temptation to bail them out if they overspend and run short of funds—you want them to learn responsibility and make smarter purchases next time.

·                 Have monthly family meetings. The regular frequency lets everyone feel they are truly involved with the family finances, gives them opportunities to ask questions, and lets them see progress and make adjustments in spending.

·                 If you see your finances are going to suffer (for example, if you are laid off or incur unexpected medical expenses), let your family know right away so they will all understand the situation. They may even have some creative ways to help cut expenses or increase income. 

How to Leave Assets to Minor Children

Every parent wants to make sure their children are provided for in the event something happens to them while the children are still minors. Grandparents, aunts, uncles and other relatives often want to leave some of their assets to young children, too. But good intentions and poor planning often have unintended results.

For example, many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that’s not what happens. When the will is probated, the court will appoint a guardian to raise the child; usually this is the person named by the parents. But the court, not the guardian, will control the inheritance until the child reaches legal age (18 or 21). At that time, the child will receive the entire inheritance. Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child reaches the age of majority, the court must distribute the entire inheritance in one lump sum.

A court guardianship for a minor child is very similar to one for an incompetent adult. Things move slowly and can become very expensive. Every expense must be documented, audited and approved by the court, and an attorney will need to represent the child. All of these expenses are paid from the inheritance, and because the court must do its best to treat everyone equally under the law, it is difficult to make exceptions for each child’s unique needs.

Quite often children inherit money, real estate, stocks, CDs and other investments from grandparents and other relatives. If the child is still a minor when this person dies, the court will usually get involved, especially if the inheritance is significant. That’s because minor children can be on a title, but they cannot conduct business in their own names. So as soon as the owner’s signature is required to sell, refinance or transact other business, the court will have to get involved to protect the child’s interests.

Sometimes a custodial account is established for a minor child under the Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). These are usually established through a bank and a custodian is named to manage the funds. But if the amount is significant (say, $10,000 or more), court approval may be required. In any event, the child will still receive the full amount at legal age.

A better option is to set up a children’s trust in a will. This would let you name someone to manage the inheritance instead of the court. You can also decide when the children will inherit. But the trust cannot be funded until the will has been probated, and that can take precious time and could reduce the assets. If you become incapacitated, this trust does not go into effect…because your will cannot go into effect until after you die.

Another option is a revocable living trust, the preferred option for many parents and grandparents. The person(s) you select, not the court, will be able to manage the inheritance for your minor children or grandchildren until they reach the age(s) you want them to inherit—even if you become incapacitated. Each child’s needs and circumstances can be accommodated, just as you would do. And assets that remain in the trust are protected from the courts, irresponsible spending and creditors (even divorce proceedings).

Whose Time Is It Anyway?

No one likes spending their weekends filled with AYSO [All Your Saturdays Occupied – as I used to call it when my kids were young], dance classes, birthday parties, and running around like a chauffer, but for most of us, this is how we spend our children’s early years.  However for children of divorce, time spent on their activities can become a matter of litigation and contention between the parents.

Accusations often fly that the non-custodial parent should not be required to facilitate playdates or take the children to activities or birthday parties because it is “better for the children to be with the parent” than with their friends.  Some parents enroll the children in too many activities in order to place a burden on the non-custodial parent.  A court will consider both of these scenarios when determining how to rule on whether or not a parent should be required to take the children to their activities.

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