There are two times people can give money to their children – at death and during life. Thank you Captain Obvious. But more and more, I hear people saying that they’d like to give the money now rather than at death so they can experience the enjoyment of giving and seeing what a difference it can make in the lives of their children.
I’d like to challenge that strategy today. This is not to discourage you from giving to your children. I simply want to encourage a way that both you and your child(ren) will hopefully experience more of the joy you are looking for when giving.
But, before I get to the alternative…
The Problem with Giving Money to Your Children
To be clear, when I say money, I mean any form of asset. This could be writing a check up to and beyond the federal gifting allowance of $15,000 per person or giving investments of some kind. This covers the majority of gifts I’ve observed
Here’s the problem, let’s say your child has exercised prudence with their own money because they’ve been learning from you over all these years. What are they likely to do with the funds you give them? I’ll bet they will invest the funds or pay down some kind of debt. Because, after all, that’s the prudent thing to do and they take after you.
So, despite the fact that you might encourage them to do something “fun” with the money, they probably won’t. Being one of those prudent children, I know there are just too many competing priorities – retirement, saving for college, and plenty of other possibilities. So, it’s not that writing your child a check is a bad thing; you’ve further bolstered their financial situation, which is great. But did it provide the joy you were hoping for? I’ll guess probably not.
What about giving to a spendthrift child? In this case, you may actually hope that they exercise a little prudence and hang on to the funds for a rainy day or for their future only to find that they’ve spent it frivolously. What of the joy you were hoping for? I’ll guess it’s lacking there as well.
Now, this could be slightly different if your child/children are in need of something specific where you can provide help. By all means, I’m not discouraging your giving. But, the point of this post is to help you consider a slightly different strategy.
Give Experiences Instead of Cash
Whether your child is prudent or a spendthrift, I think you’ll experience more joy by giving them a reason to travel or do things. And in most cases, I’d encourage you to be part of the adventure.
For instance, you want to go to Yellowstone. Bring your child’s family along and offer to pay for everything on the trip – including airfare, lodging, food and anything else they might need. It might cost an additional five to ten thousand once all is said and done, but you were planning to give them those funds anyway.
What do you have to gain by doing this instead?
You’ll get to spend a week with your child and their family which is precious at this stage of your life. You’ll make a ton of memories. And hopefully, you’ll take lots of pictures too!
They’ll get to spend a week with you which is precious at this stage of their life. They get to enjoy time with their family in a place they may never have ponied up the cash to go see because it wouldn’t be a “prudent” expense. I’ll bet they will think this is a lot cooler (and surprisingly less guilt-ridden than getting a check) because who doesn’t like an all expense paid trip to go somewhere.
For the record, your giving in this manner doesn’t have to be for travel. The possibilities are only limited by your imagination. Traveling just has so many ancillary benefits for everyone involved that many other activities don’t have.
In the end, you still gave them the money, but in the form of an experience that will live on in each of your memories for the rest of your lives.
I call that a win/win/win.
(To my parents and in-laws – this post is NOT my way of asking for free trips LOL)
Related Reading: A Letter to Grandparents
Thanks for reading!
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I am a Financial Advisor in Pittsburgh and a CERTIFIED FINANCIAL PLANNER™ professional with Shorebridge Wealth Management. I enjoy helping clients and readers find sensible answers to retirement’s big questions. If I can answer any questions for you, feel free to Contact Me or if you think you might be a fit for our practice, see Who We Serve.