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How to Assist Your Children to Make Good Financial Decisions
September 5, 2007
One of my children has not made good financial decisions in the past. How can I prevent this from happening in the future?
You may be saying to yourself, “Are you kidding me? All of my children have made bad financial decisions in the past. In fact, I have made plenty myself.” You can count me in that category as well. Who among us has not made bad financial decisions at one time or another?
I am referring to the child who consistently makes bad financial decisions. In many cases, the child matures, learns from his/her mistakes, and moves on. The last time I checked, success is based upon the failures we learn from. So, what can you do to assist your child with their financial decision making?
Here are three ideas to consider:
- Give the child an opportunity to show he/she has learned from past mistakes. For example, instead of making a significant gift to your child, which may result in tremendous estate tax savings, make a nominal gift and watch how he/she handles it this time.
- Keep principal in trust and provide income and principal at trustee’s discretion.In cases where a child repeatedly makes poor financial decisions that continue into adulthood, sometimes this could be a good option to protect the child from themselves.
- Exhibit tough love.In the event you have enabled your child financially and may be having a hard time turning off the money faucet, sometimes it is the best thing for the child. It could be the wake up call they need in order to become self-reliant and a productive citizen.
Teaching successors the importance of fiscal responsibility and stewardship is important not only for their personal welfare, but potentially for the good of the business succession plan. It is possible they may be called upon to make important business decisions in the future which could ultimately impact the value of the business.
Next Post: Your Grandchildren’s Education
Posted by Dave Ciambella on September 5, 2007 | Comments (0)
