gift of financial education

The advice to take care of yourself first is not selfish. All too often, I meet with people who have who gifted away their own financial security…all in the name of helping their adult children. Remember, you are not responsible for paying your adult children’s bills. 

The right way to gift

The best gifts are those that come with thought behind them. Likewise, the best financial gift isn’t merely the presentation of a check, but pairing the funds with a financial education. Parents and/or grandparents who will someday bequeath a significant sum to their heirs need to begin training the next generation to deal with the responsibility of wealth.

One client recently brought his daughter for a meeting. The young woman signed the paperwork to open an account and the father funded it. Because this was the first time the daughter was dealing with investment-level sums of money, she needed a basic education. I started explaining the basics of investing and money management. We spoke about risk and reward, stocks, bonds, and mutual funds. 

Everyone has to learn sometime

This family realized some important concepts in wealth transfer. Had the parents waited until they were on their deathbed to begin bestowing assets, the daughter would be dealing with sizeable sums of money for the first time, without parental guidance, and the stakes would be much higher. In this case, though, as part of their estate planning gifting plan, they are easing their children into the responsibilities of handling wealth. Furthermore, if the children make some mistakes, they are dealing with smaller amounts to lose, and their parents and financial advisors can help guide them. 

Learning how to properly manage money is an acquired skill set. Kudos to the parents who, along with gifting funds, gave their daughter the tools to learn how to manage the assets. If you plan on gifting money to your children (either during your lifetime or as an inheritance), make sure you also give them the gift of a proper financial education.  

 

Douglas Goldstein, CFP®, GFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.

Published June 1, 2012. Updated March 2022

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