Part 2: Party Time
Many well-intentioned parents follow their estate planner's advice and give money to trusts or custodial accounts for their minor children. Unfortunately, those parents inevitably face a dilemma as the kids approach age 21 when they will vest in the funds.
Will handing this money to my daughter ruin her moral and social values? Will it kill my son's fragile work ethic? Will the kids squander it on bad investments, fast cars, or some dubious charitable cause?
Last month, I addressed some approaches that you could use to keep the kids grubby little hands off of their money. However, there is another possibility that I'd like for you to consider.
I'm not about to tell you what's best for your particular son or daughter. I have two kids and they are as different as night and day. What works for one might not work for another. And, of course, you might be forced to take drastic action for a really bad kid.
I suggest that you talk with your spouse about the issue. Together, realistically assess your child. Recognize that perhaps she has matured a bit since those brutal teenage years. Consider which parent might have the best relationship and skills to deliver the news.
Be a Parent
Then, try talking with your child about the money and the issues. With as much love and respect as you can muster, tell them about it and act like a parent provide guidance. You might say some of the following things, but you should be selective based upon your specific child's personality and situation, as well as the nature of your relationship.
We have set aside some money for you to save and invest for your future. We are very proud that we have been successful enough in our business and conservative enough in our spending so that we can give this money to you. You are an adult, so it is up to you to decide what to do with the money. However, I would like to spend a few minutes explaining our concerns and our wishes.
Our objective is to help you accomplish your long-term dreams, not to change your short-term life style. We want this money to give you some sense of financial security, not to alter the course of your life. So, we intend for this money to be invested for the future.
Even though we are pleased to give you this financial head start, we worry about whether we are doing the right thing. We fear that the very financial security this money provides may keep you from becoming happy and fulfilled in life.
Happiness and fulfillment come from accomplishing difficult objectives and the self-respect that those accomplishments bring. So, we would be very sad for you if this money keeps you from completing your education and then getting a job. Happiness and fulfillment must be earned; they cannot be bought.
Please don't let this money rush you into a marriage or other social relationship. A successful marriage or family is not a function of whether you are wealthy or poor. Certainly, this money can help you support a family. But it does not ensure a healthy relationship. Don't let this money accelerate any thoughts you have about marriage.
You need to know that this money may attract friends, especially if you are very public in how you spend it. But ask yourself, are people who befriend you because you have money really the type of friends that you want? The friends you can buy are not worth the price that you pay.
Wealth Brings Responsibility
Wealth brings responsibility - responsibility to yourself, to your future family and to society. I hope that you will not waste it on today s pleasures. Spending money on fancy cars, fine wine - that kind of stuff - only brings short-term happiness, at best. Purchased happiness is very fleeting. If you invest it for the future, I guarantee that you will grow in your understanding of how you can best use the money responsibly.
You'll make some mistakes with your money. We all do. The important thing is to learn from your mistakes and to try to avoid the really life-altering ones. We are more concerned that our gift will cause you to waste your life than that you will waste the money.
I suggest that you do nothing in terms of changing your plans for your future or in terms of spending the money until you have had time to carefully reflect on the responsibility with which we are entrusting you.
Our Commitments to You
You are an adult. I trust and respect you. You have to make your own decisions and take responsibility for them. I would like for you to let me continue to manage this money for you, but I would like for you to be involved so that you can learn about investing.
I will try not to judge you for what do with the money, but if you decide to manage it yourself, I would like for you to get competent advice and to keep me informed. I hope that you will be proud enough of your actions that you will share them with Mother and me. After all, we put the money aside because we love you. It will give us great pleasure to see you use it maturely and wisely.
Well, I asked my wife to read this column and she thinks I am being too preachy. She says that we should just tell our son what we expect him to do and not do. So, maybe the best solution is to just let her handle it.
Or, perhaps I should just let my son read the column and ask what he recommends in this type of situation. Hypothetically, of course! (By the way, son, even if we put some money aside for you, it's no where near a million dollars, so don't get excited.)