Graduation time is upon us. My son, Matthew is graduating from Northwestern University this June and, many families that have children that are graduating or who have already graduated, I have been reflecting on whether or not I have raised a financially independent child – a concern shared by almost all of my clients. While some children prove to be financially responsible and mature even at a young age, others, (through unpaid bills, credit card abuse and repeated requests for parental bailouts) may never be able to manage their finances responsibly. Parents and grandparents of financially irresponsible children naturally wonder, “If this is how they carry on while I’m here, what will they do when I’m gone?” Here are my suggestions on how to raise a financially independent child and how to develop an estate plan that will account for those children in the family who might need more financial guidance in place when you’re no longer around.
Monkey See, Monkey Do
When it comes to managing your finances, in many cases, it’s monkey see, monkey do. This is necessary regardless of how wealthy the parents are. It is most important to be guided by parents who teach the benefits of hard work and perseverance, disciplined saving, establishment of financial goals, prudent investing and the proper use of credit. I can’t tell you how many times I learn from clients that their son or daughter who at age 35 or 45 or 55 still can’t make it financially and needs help with the mortgage or paying off their financial credit debt, needs money to buy a car, or pay for health care needs. How about the grandparents that are asked time and again to pay private school tuition several times over? The number of adult children coming home to live with Mom and Dad today is astonishing. Even the new health care reform bill touches on these circumstances – allowing children to stay on their parents health insurance policies effective immediately up to age 26.
Many years ago, a client couple received a large windfall as result of being employed at the right company at the right time. They could have easily quit their jobs at that point. I remember recommending to them, however, that at least one of them (despite the good fortune), should continue to work in order to teach their children about the importance of hard work, having a job, and being part of the community at large.
Enough is Enough
From an estate planning perspective, the question then is “how much is enough” and should children ever have complete and absolute control over their inheritance? Is it really helping adult children, if he or she knows at an early age, that the family wealth will bail him or her out, or will eventually be there to live off? And while this question comes up in all households the question is no different for a family worth $100k, 1 million or 100 million. In fact, what we see happen is that the child/children...
