We are able to give gifts to our grown children, all married and busy for the time being. Although one of them is well educated, they are ruthless in their money and debt management.
We spoke to them about finance workshops in general. In your opinion, is there any way to give away with the understanding that attending at least one online workshop or meeting with a planner is associated with this gift? Yes, we know it sounds controlling and manipulative, and they are adults. However, it is difficult to watch one of them, an in-law, go into debt for being raised that way.
Also, is there a way for one party in a marriage to protect itself if the partner goes into debt other than divorce?
Setting expectations before giving away money is neither controlling nor manipulative. If anything, spending an afternoon in an online workshop or with a financial planner is an exceptionally low bar.
What naturally makes me pause is your second question. I am not aware of any solution that would enable an affected parent to protect their adult child from the unpredictable expenses of a spouse. If your child is concerned, they will need to consult an attorney who is familiar with their state’s marital property laws.
But if your child hasn’t asked you for help, the question at least seems a nuisance to me. And when you are gifted in hoping to interfere in your child’s marriage, you are absolutely falling into control and manipulative realms.
I often get letters from people who are concerned about from someone else Finances. It is seldom clear that the letter writer knows the specifics of the situation. An even bigger issue: unless family members begging beat them for money, the letter writer was not asked for help or even advice. I always ask myself whether the letter writer actually knows that there is a problem – or whether he is just an outsider guessing what is going on.
But I’ll give you the benefit of the doubt here, and take you for your word that one of your kids with money makes bad decisions and their spouse’s expenses are to be blamed.
Giving a blank check to someone who has a bad track record with money is the worst thing you can do. Learning how to handle money is a good place to start. But it’s also a toothless strategy. Your offspring can always give lip service to advice and then ignore it.
Also, I’m not sure if a lack of knowledge is causing the problem. How many people max out credit cards despite understanding the exorbitant costs? The problem isn’t that they don’t know any better. The point is that bad habits are really hard to break.
If we were talking about tens of millions of dollars, I’d tell you that you should work with an estate planning attorney to build trust for your children. They don’t want them to suddenly inherit a fortune with no rules in place. But since you asked your question to me, a counselor rather than an investment advisor, we will likely speak of a lesser amount of money. Regardless, the basic principle is the same: start small. Don’t give any of your children a chance to bust a large sum at once.
Discuss with each of your children and their spouses before giving them money. It is perfectly reasonable to let your children know that you are giving them money with the expectation of how they will use it. For example, you can choose to use it to pay off debts, or Invest in a 529 plan for the future of your grandchildren. Or you can leave it open while making it clear that you want to use that money to invest or upgrade to a more expensive car. It is important to communicate that future gifts are not guaranteed.
I wonder: would it be so bad to ask that each of your children sit down with a finance professional to get the money? Even if you agree with the way your other children manage their finances, they may be able to make even better decisions. In addition, your child with bad spending habits will not feel like they are being cast as a black sheep knowing that you have the same expectations of their siblings.
Start by giving away small amounts with high expectations. And if these gifts were to jeopardize your retirement in any way, know you can’t afford to get them.
Robin Hartill is a certified financial planner and senior editor at The Penny Hoarder. Send your tricky money questions to [email protected].
This article originally appeared on www.thepennyhoarder.com