Whatever the law may say, in reality, our children age, mature and transition to real “adult status” at different rates.
Some can be entirely responsible, trustworthy and well-balanced by the age of 15 or 16. They can be completely equipped to cope with financial matters and be relied upon to behave appropriately. By contrast, other children can seemingly struggle to get to grips with the adult world of money and it’s probably fair to say that we have all met people who, at the age of 30, still appear to be struggling to move out of a certain childish immaturity where financial matters are concerned.
True, most responsible parents will always regard their children as being “the kids” – whether those offspring are 10 or 50 years old! That is also accompanied by a strong desire to constantly protect and help them.
Even so, sometimes dealing with money matters and your children can be challenging. There are no easy answers to this but a few of the following points might be worth considering.
The “Mum and Dad Bank”
Most of us accept that our children are largely financially dependent upon us all through their schooling and probably through any further education too. During that period of time, children will have a perfectly natural and indeed necessary tendency to ask their parents for cash when they wish to purchase something or spend money on other things.
However, parents need to think about what strategies they need to adopt in order to make their children more aware of the value of money. For example, it may be appropriate to ask them to seek a summer job during the school holidays and require them to fund some of their own purchases through their own earnings.
This isn’t being mean!
In the real world, money is going to be something that they will have to manage themselves. They will also need to understand the relationship between earnings and expenditure.
One does see examples of fully grown adult children, sometimes with their own families, who continue to look to their parents as a source of almost limitless and free banking. That is not healthy.
Encouraging our children to be increasingly financially independent, at an appropriate time, should be part of responsible parenting.
Even once they are fully grown, independent and perhaps with their own household and relationships, it may be the case that our children have not yet ever needed to handle large sums of money.
Whilst making something such as a one-off substantial financial gift may be a wonderful and caring thing to do, it’s worth being confident that your child or children have the experience to handle the sums involved.
A large financial gift may be regretted if your children subsequently squander it, even though intellectually we must recognise their right to do what they wish with money given to them on a no-conditions basis.
It is worth being cautious before making large cash gifts to children or indeed bequeathing them things such as property.
Remember that if they are married or in another form of legally recognised relationship, their partner might be legally entitled to 50% of that gift or bequest. That thought might not be a problem for you and of course, most of us would hope that our children’s relationships remain stable and permanent.
Even so, given the recent rapid increase in things such as divorce rates, being cautious in this area might only be prudent.
While we might all like to think that property and cash are ours to do with as we will, in some cases, there may be taxation issues where bequests and inheritances are concerned.
This is a complex area and one with a multiplicity of potential situations. Before simply signing a cheque or legal document that makes a significant gift to your children, do take legal advice in order to ensure that you are using the most tax-efficient mechanism for doing so.
Provide for a rainy day
This is perhaps one of the most sensitive and emotional issues that parents occasionally need to think of.
However fantastic your relationship is with your children and however many sacrifices you may have made for them over the years, it may be sensible to recognise that they may not see you in quite the same why as you regard them. That might be an issue if, for example, in your old age you became short of cash and need to start asking them for financial or accommodation assistance.
Even if your child or children were both able and extremely eager to assist in such, there is no reason to suspect that their partner might feel likewise.
So, understandable as your instinct might be to pass as much of your property and financial reserves over to your children in order to help them launch their own adult lives, be a little cautious and think about your own future at the same time.
Your children should understand and respect your reasoning.