5 Financial Gifts Every Parent Should Give Their Minor Children
Nov. 2, 2021
Parents often think that they can't help their children financially until they are 18 years old. However, there are many financial gifts that parents should give to their minor children now to make sure they will be taken care of when the parent is no longer around.
These 5 financial gifts every parent should give their minor child include:
A trust fund,
Life insurance policy,
Educational funding for college or vocational school tuition and other school-related expenses,
Retirement plan benefits in the form of 401(k) or IRA accounts with the designation that the child is beneficiary and/or successor owner, and
A custodial brokerage account under the Uniform Transfers to Minors Act (UTMA) for investing purposes,
If this list seems overwhelming, don’t worry! I’ll break down the reasoning behind each of these financial gifts, plus I’ll give a few tips on which might work best for your situation.
Pros and Cons of Financial Gifts
It’s the time of year where we are all thinking about gift-giving and what is most important to us. As parents, our primary concern is usually providing for our children - while also teaching them to grow into financially independent adults. Many of the financial gifts listed above will help them do just that - grow into educated, financially-savvy adults who understand the importance of financial planning.
Living trusts are typically a good idea for parents of minor children because they offer you much greater control over the distribution of your estate if something happens to you and your spouse. With a Will, minor children will receive a lump-sum settlement as soon as they turn 18 - something which typically spells disaster for today’s youth. Trusts, however, enable you to distribute your estate slowly, over time and set parameters to protect your hard-earned assets (like blocking distributions to a child struggling with addiction).
Life insurance policies are great tools to ensure your children will be cared for if anything happens to you. You can create life insurance trusts, or designate your child’s trust as the beneficiary of your life insurance policy to protect the asset (and make sure it’s used the way you want it to be used).
Education is expensive, but one way you can help your child prepare for their future is by starting a tuition-savings fund. 529 plans may also come with tax advantages, so you can save for your child’s future while also saving a bit on your annual tax bill. Likewise, a retirement plan can benefit you - but can also be a gift to your children. You can designate your children as successors or beneficiaries on your retirement accounts to pass on any remaining retirement savings you don’t use during your lifetime.
Finally, a custodial brokerage account is a great financial gift that can help your child learn about investing and save for long-term goals. Even small investments, over the long haul can yield a nice financial gift for your child as they age.
My Office Can Help You Plan For Your Child’s Future
If you would like to learn more about financial gifts and ways you can plan for your children’s future, contact my office for a free strategy session. I can help you preserve your legacy, protect your assets, and plan for your family’s well-being for generations to come.
Don’t Protect Kids From Failure - while failure can be unpleasant in the moment, it is a valuable learning tool that builds resilience in children. Instead of protecting children from failure (which can backfire) teach them that failure presents an opportunity for growth. By teaching children that failure is an inevitable hurdle on the way to success, you help them grow into stronger, well-rounded individuals, capable of learning from minor setbacks.