Would you give your child total control over all their funds?

Parent Cafe
1

<p>Interested in opinions, as we are having a slight difference of opinion about this in our house. Our younger son will be graduating college this spring. He has already accepted a very nice paying job. We have had funds set aside for each of our s’s that was earmarked for <strong>education</strong>. Younger s had initially considered grad or professional school, so he attended a college on a nice scholarship, with plans to save much of the money for grad/med school. However, he changed directions and is not planning to attend grad/med school at this point. This leaves a nice chunk of change that is earmarked for him. </p>

<p>This may be all moot, as he is over 21 and the monies are in his name (investments, savings bonds, etc) so in actuality he has the right to complete access to these funds. That is what he is asking for as a holiday gift. Financial independence. We have been giving him an “allowance” (living expenses plus extra spending money) every month, moving monies into his savings account, and he pulls it from there as needed. He is wanting instead to be free of our doling out money to him a little at a time, and instead manage all his funds completely on his own. He has always been very independent, and now that he is an adult, wants mom and dad not to have oversight over his finances. </p>

<p>OK- the pros and cons:</p>

<p>Pros:

  1. He has in truth had access to all these funds since he turned 18 and hasn’t touched them (as we still are jointly on the account and would see any money movement).</p>

<p>2) He is a pretty responsible young man, has done well in school, has secured a good paying job, has worked in HS and had summer internships (he has not had paying jobs during the school year in college but this was fine with us).</p>

<p>3) Has shown an interest in learning about investments (though the ones he chose haven’t unfortunately done too well).</p>

<p>4) He pays all is bills in full on time (rent, utilities, credit cards, etc)</p>

<p>Cons:

  1. We sat down together to establish a budget and adjust his monthly allowance since he moved off campus 2 years ago. He has had challenges staying within that budget and does pull money out of his savings account (sometimes a LOT of money) to cover his expenses.</p>

<p>2) He is generous to a fault- loans money or covers expenses for his roommates that they dont always pay back (yes I know this is a life lesson and his generosity is not a bad thing).</p>

<p>3) Doesn’t have an established savings plan (ie he doesn’t put “X” amount in savings a month as we have encouraged).</p>

<p>4) Lives (and will be staying) in a city with temptations (eg casinos) and he enjoys them (this is not in my comfort zone, but thats another story).</p>

<p>My concerns:
What he wants is not to have the parental eyes over his spending habits any more. I understand, but I worry a bit. DH and I have each had family members who have seriously mismanaged their funds. While DS is not like them (I dont believe), I would still like to see a continued demonstration of fiscal responsibility before removing our eyes from some of his accounts (his checking account is already in his name only-- we cannot see that).</p>

<p>Our older s is very very financially responsible, so yes, younger s has a tough act to follow, but younger s has been less responsible and has has a few times that we have had to have a serious conversation about the funds he was pulling out of savings tro cover his expenses. Yes it was his money (mixture of what we give him and what he earned) but he was at one point draining it fast, and some of his spending choices were not what we are in agreement with. )</p>

<p>With older s, there was much less $$ left at the end of his college career to turn over to him, and he had demonstrated much sounder savings/financial management skills as well, se we were not at all concerned about his spending patterns. He also continued to turn to us for some investment advice.</p>

<p>The funds that, IMO, were earmarked for “education” will now be released to DS’s general funds. I don’t entirely agree with this at this point, especially since he may choose to go to professional school down the road, and yes, he’ll have to cover his own costs. I’d like him not to touch these funds at this point, to keep it in savings for this possibility, and otherwise build himself a nice nest egg. Also, he wants the $$ NOW, as opposed to waiting until he starts his full time job this summer. </p>

<p>My suggestion is that we give him some of the money now (completely in his name), and hold the rest (ie keep our name on the account) until he has graduated and starts his job, as we did with older s. DH thinks he is, at 21, entitled to have all the $ free and clear now. DH feels its DS’s money. I feel its money we saved for DS, but was our money so we get a bit of a say in how its managed, or how /when its turned over to DS.</p>

<p>Aside from the fact that he is of legal age and entitled to the $$ free and clear, what would you do? I would like to believe he’ll manage it responsibly, but I have some concerns, and I hate the thought of having him learn that lesson the hard way if I can help it. We are stil his parents and would like to continue to guide him, as appropriate, with fiscal responsibility/financial management.</p>

<p>What would you do? Turn it all over free and clear now? Do some now, the rest in June? Other thoughts?</p>

2

<p>I would absolutely not turn it over to my son, assuming that he would not take it without my giving him the nod to do so.</p>

<p>Down the line if my son wanted to purchase a condo, home, purchase a business, and these were wise risks to take, then I would turn over the funds at that point.</p>

3

<p>Your 2 sons sound very much like mine. S1 is very responsible with $, hardly tpouches his savings & really lives within his means. </p>

<p>S2 likes to spend $. We just helped him move this past weekend (he’s graduating college this month) and, when we took him grocery shopping, he just picked up whatever he wanted without checking the prices of anything. When he eats out, which is more frequent than he should, he has no problem ordering the most expensive thing on the menu. DH & I are concerned that even with his new job, he’ll be taking money out of savings rather than putting it in (and he has eventual plans to go to grad school, so he needs to save). </p>

<p>If I were in your position, I’d be concerned about giving your S access to all his $. Maybe set some financial goals for him to gain access to the $. With my kids, we’ve already told them that siginficant $ will be given to S1 for a down payment (he’s in grad school & has a stipend) and to S2 for grad school (he’d be looking at a master’s program where there won’t be stipend $).</p>

4

<p>“My suggestion is that we give him some of the money now (completely in his name), and hold the rest (ie keep our name on the account) until he has graduated and starts his job, as we did with older s.”</p>

<p>Since you didn’t give your oldest son the money until he graduated and was working, it makes since to at least kick this issue down the road until graduation in the spring. The family precedent has been set that it’s a transfer made upon graduation, not Christmas. Between now and then you can figure out what’s in his best interests. In our family, we lean towards your view… it’s our money that we saved for their education, so strings are attached. But, a big difference is we didn’t put any money in our children’s names. Since you have the accounts in your son’s name and he is 21, he might have a legal right to the money as well as feeling he’s entitled to the money and it’s his to do as he pleases.</p>

5

<p>Well, if the funds are earmarked “education”, that may help steer the discussion. Even if school isn’t in the immediate future, it may become a priority. Also, if the funds are not to be used for further education, then I would still be thinking of them as funds for “big” purposes, not daily living routinely. Is financial independence something someone else creates for you?</p>

<p>If I were in your shoes, I’d be focused on what skills I want my young adult child to have. Living within a “real” budget is high on the list. In part, it may depend on how much money is in play here. If it’s a smaller amount that you can consider more as “tuition” in the school of life, maybe that’s how he’ll learn to manage his funds. If there is a good chance that his present maturity will cost him major future options, I would be inclined to proceed more slowly. This may not be an all or nothing decision, he could have a bit to start and see if he could incrementally increase his $ management skills and access to funds. It is a privilege to have a large amount of money to manage. It could be earned. This is a common dilemma these days. Many young adult I know have a lot more assumptions about what they should have access to than my peers did when I was that age. All the best as you sort this out.</p>

6

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<p>As a “test”…Rather than dole it out by month, give him all of the money for Spring now…or at the beginning of the semester. Let him know that’s all he’ll get until graduation. Stick with it. Let him know you’re going to stick with it. If you want, give a little more than you’ve given in past semesters, since there’s likely to be some end of school celebration stuff. He’ll need to budget over a longer period of time than a month. </p>

<p>We had a very similar situation with our older child although it was just about spending money, not a larger pile of money (which isn’t that large, but is being saved for grad school, which seems to be in the future.) Doled out money each quarter of school so it would last all 4 years…child usually needed more. Child didn’t like asking us for $$, so we gave all that was left in the school spending account…I think at the beginning of Sr. year. Child blew through the money relatively quickly, but did get a campus job to have some spending money. Knew it wasn’t going to come from us.</p>

<p>This money all belonged to our child. Worked every summer of HS, and we required saving 2/3 of funds. Same for summer earnings during college (didn’t work summer before Senior year…but that’s another story!) Along with some gifts received over the years (same savings arrangement…1/3 for kid, 2/3 for savings), there was more than enough spending money for college if there had been a little more responsible spending…</p>

<p>In the end, it seems to have worked out. Job right after college has been good, and some earnings seem to be going into savings. A few large “toys” have been purchased, and there’s a big trip coming up…but it’s all been on our child’s dime from earnings. Hasn’t asked for the small amount of grad school savings…so we think grad school is probably still likely.</p>

7

<p>I wouldn’t turn it over. He hasn’t been out in the real world yet. There’s a good chance the realities he will face will lead him to grad school in a few years.</p>

<p>You’ve given us enough info here to lead me to believe there’s a chance he’ll use the money to cover overages in his expenses. Kids so often think their new salary sounds high and plan to live well. I would fear that he will not have money left when it’s time for grad school or to buy a house. </p>

<p>In the end, it really depends on your and DH’s philosophy about the money. do you see it as money you saved for important contributions to his life, or would you be OK subsidizing his lifestyle?</p>

<p>My husband’s son had money left in his college fund when he graduated last year. He didn’t assume that the money was his to keep and signed it back over to his parents. I’m glad because it just would have been frittered away. He’s now living with his mom rent free, working part time and using his money to go on vacations. Hopefully he’ll mature and we’ll help pay for grad school or give him a downpayment for a house.</p>

8

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<p>What the heck does financial independence have to do with accepting a large sum of money from ones parents?</p>

<p>This money was earmarked for education. Your son is far too young to know if he’ll need that money for grad school further down the line. I’m also uncomfortable with his attitude of wanting this money right now. That does not strike me as a sign of maturity.</p>

<p>Frankly, I think you’re being very generous. We have money earmarked for education for our child as well but if he doesn’t use it all, then it becomes our money again.</p>

9

<p>Tell him nearly everything you told us. If he is responsible, he may still press the issue but at least he will understand why you were hesitant and focus on not disappointing you.</p>

10

<p>Seems to me you have two issues here:</p>

<ol>
<li><p>There is money in a fund for your son for which you had established a purpose, but now the son is legally entitled to it for whatever purpose he wishes.</p></li>
<li><p>Your son is impatient/feeling entitled and wants this money before he is in a position to put it to good use. He does not want you overseeing his management of it.</p></li>
</ol>

<p>Seems to me the real issue is that your son is unappreciative of what you have provided for him financially. Regardless of his legal entitlement (and he has a point there), should he be demanding something now which you had set aside for him for a particular purpose? </p>

<p>If you and he have a good, cooperative relationship then he should work with you on forging a mutually acceptable agreement re how this should be handled.</p>

<p>If he is not willing to be cooperative, he could on his own take legal steps to access the money to get it totally under his control.</p>

<p>I would share your concerns about gambling, past money management issues, etc. Plus discuss, “What would be the potential harm in holding off access to the funds?” He could not spring for a grand post-grad trip for himself and all of his friends? What would the worst case be for each path? Sit him down to discuss this.</p>

<p>IMO how he responds is a good clue to how your relationship will go in the future.</p>

<p>However, any money in this fund that came from his own earnings he should be entitled to, IMO. If that is the case, can you turn over just that portion?</p>

11

<p>While your son may not have the spending and budget habits you wish for, if the money is in things like Universal Gift to Minors accounts, the funds are legally his and you probably have no legal right to not turn it over to him. In fact, not doing so once he requests it may open you up to legal liability. It also would be a bad example to set: “Yes, I know I know I have a legal obligation to give you the money, but I am not going to do so. Sue me if you want.” You have no legal obligation to give him an allowance, however.</p>

<p>None of us like to see our kids fail or get hurt. On the other hand, we want them to be adults and independent. Sometimes they will make mistakes and suffer the consequences. We hope that the mistakes and consequences are not too terrible. For our kids, suffering the consequences on their own sometimes makes the lessons have more impact.</p>

12

<p>A reasonable compromise would be to invest the money in high dividend stocks (utility stocks) and give him complete freedom to use the interest for whatever he wants. Utility stocks pay around 5%, so he’d probably have a couple thousand a year to use to his liking, and he’d be able to get used to having more money. Note this wouldn’t be an allowance - that sound parental - but an endowment or trust fund. </p>

<p>But with that said, my siblings and I all received nice (~$20,000 gifts) at high school graduation from a relative, and the money was ours to use. There were six of us altogether and we have our own spending habits. A couple of my siblings blew through the money and no longer have it, while other siblings have hung on to the gift. I have it to this day. I’m sure my family wasn’t as pleased with the siblings who wasted their money - but it was theirs to waste. </p>

<p>(However, the money wasn’t replaced after it was wasted. They got to sleep in the bed they made for themselves.)</p>

<p>I think to a large extent, you’ve taught him a lot in life and it’s up to the teaching that you did earlier in life…</p>

13

<p>I have one daughter launched. Freshman year we doled out her education expenses on a quarterly (her school was on the quarter system) basis. Sophomore year on we gave her money for the whole year in August. Upon graduation we gave her some money and the pink slip to her car to help her start off her life. She has a job in her chosen profession and is living on her own while saving for grad school. That is my definition of financial independence.</p>

<p>The second daughter looks to be just as responsible, so I’m going that route again.</p>

<p>I’d say start this son off by giving him the rest of the money for the year. If he makes it to graduation without additional help he has a good grasp of his finances. At graduation give him a bonus to help him start his life, and then save the rest for grad school or the purchase of his first home.</p>

14

<p>You put together the funds to be used for education. Why not hold the funds or maybe half the funds for a year or two. If he decides to go to grad school great, if not, then he can have the money. In a year or two his priorities might change. A down payment on a house, a newer car, things that will last. A year or two out of school tends to reform our wants, needs and dreams.</p>

15

<p>Already did.</p>

16

<p>^Yup, BCEagle is right. If it is an UGMA or something similar you set yourselves up for this when you established it.</p>

<p>However, both my kids had UGMAs and would never have thought of asking for the money for non-school purposes. They know we did our best for them financially and appreciate the educations they got.</p>

<p>On the other hand, your son did take advantage of a merit scholarship at perhaps not his first choice school so perhaps he feels he “earned” the money saved.</p>

<p>A toughie, but I still feel a cooperative discussion should take place, and I would hope it would lead to a positive resolution.</p>

17

<p>Title is a bit misleading since in fact he already has total control over the funds, but you can still see it. And you could yank it out before he could yank it out. Since you are both on the account (if I am reading it right) then it still is YOUR money, too.</p>

<p>I vote with CSFMAP, that makes sense.</p>

<p>jyber209 makes some very good points. </p>

<p>And it is hard when DH and you are looking at it differently. </p>

<p>We felt … squeamish, I guess is the best term, because we set up education accounts for both kids with the same amount of seed $$. DD went to a much more expensive college and her money isn’t lasting until she graduates. DS went to state school and will have much MORE than he needs to graduate. We “raided” his to pay hers. Felt a little wrong to us, but really made sense. We were paying for their school. Just because the kids’ names were on the accounts, it was our money to pay for school. Still felt a bit like we were stealing DS’s $$. </p>

<p>So I don’t know how you make it “equal”. Kids are not equal; paths through life are not equal. Does the process for distribution of money have to be equal to be fair? I don’t think so, but I sure do see your dilemma. </p>

<p>My completely 2¢ valued advice, first get you and DH on the same page, then present THAT to DS2. Doubt you’d chose wrong in any case. What is the worst that could happen?</p>

18

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<p>Before I even reached these paragraphs, this is exactly what I was thinking. I was also think that as parents we have to be careful not to convey that our kids are in any way “entitled” to money we have earmarked for them. If we go out to eat with our daughter, she intuitively knows about what we think is a reasonable amount to spend. She knows our limits. If she orders a lesser item, we don’t give her the difference. A silly example, but not as different as it might first appear. </p>

<p>I would give #2 son about the same amount of funds you gave #1 when he was launched, holding back some money to contribute should he decide to go for additional schooling. Frankly, I don’t trust myself. If I gave my daughter all the remaining $$ we had allotted for school (and we are in a similar situation), then when she does go back to school I would have a hard time not giving her even more $$$.</p>

<p>Maybe I should have your son negotiate for me. I have three senior citizen households who plan on giving me a sizable portion of their estate when they die. I don’t know why I can’t just have that money now. Just kidding.</p>

19

<p>Thanks, everyone, for all the comments and opinions. Keep em’ coming!</p>

<p>To clarify a few things, I don’t think DS has an “entitlement” issue. He has always wanted to do things himself (since he was 3, when he pronounced “I dood it myself!!”) and I see this as just an extension of this kind of thinking. He has demonstrated pretty good financial responsibility in other areas (eg he is the treasurer of one of the campus clubs he helped found and has been handling the expenses for the club, getting funding/reimbursement from the school, negotiating deals for uniforms, sponsorship, etc). What he values is privacy, and this has also always been true. So when we look at his use of his savings and comment on it, he gets a bit uncomfortable. When we did have the “come to Jesus” talk when we noticed a large amount withdrawn over several months, he handled the discussion responsibily, maturely and did change his spending patterns (some was by his choice, some was not, but thats another story). He did lose some money and learned a lesson. I hope. It was a wake-up call for him.</p>

<p>The money is invested. Most of it is not immediately “liquid” (though he could sell stock). Currently the investment/stock account has his name and our name on it, so my DH can look at the accounts. The on-line savings account is in his/my name as we set it up when he was a minor and linked accounts so I could transfer in money easily. It has several thousand dollars in it and thats where he pulls from when he needs liquidity. I could remove my name from the account if he insists. I do admit I am more comfortable knowing I can see it…</p>

<p>As for the “allowance”, it is subtracted from the monies set aside for education. I feel strongly that we earmarked the money for education and that’s what it should be identified as. DH feels this is DS’s money, and its no longer identified, in his mind, as specifically for education. We have done a lot to help our s’s establish a foundation of financial security. They each have Roth accounts. They have investment accounts. They have savings accounts. Yes older s has done a better job saving than younger s has, but younger s is not one to buy a lot of unnecessary stuff. He isnt a clothes hound, doesn’t buy the latest and greatest, etc. I think most of his $$ goes to maintaining his car and spending on fast food. He and his roommates have done a good job with food budgeting, but he does tend to pay more than his share as he is generous and the roommates are less financially secure. Again, its a good/bad thing. He is not one to press them to pay back what they owe him. He gets some, but not all, from what I understand.</p>

<p>I like the idea of giving him the next 5 mos of “allowance” up front, now, as a holiday gift, and dealing with the rest of the funds at graduation. I also think my DH will agree that its a good idea for him to stay on the stock account to oversee it for the time being (I never look at it-- not sure my name is on that account to be perfectly honest). </p>

<p>I am aware that my angst is influenced largely by what I’ve experienced first hand with family members (on my and my DH’s side) who are severely fiscally irresponsible. Thats also another story, but it does influence my thoughts and feelings. I do NOT see my s as like them, but still, I prefer to err on the side of caution.</p>

<p>I have absolutely no concern that my DS is going to make a legal issue out of this. He is genuinely appreciative of all we have done for him. He has commented that he is the only one he knows of friends his age who already has a Roth account. But I am not sure he feels that he has been personally contributing to his savings the way I 'd like him to feel.</p>

<p>In truth, he is already semi independent in that we cannot see his credit card accounts, his checking account, etc, and he is open with us if he ever has a problem (e.g. he accidentally paid a credit card bill twice and had to move $ into his cking account quickly to avoid an overdraft, so called my DH to help with that).</p>

<p>My DH is the one who feel strongly that the money is DS’s and he should have the right to manage it. The compromise so far is DH staying on the stock account. We havent talked to DS about this yet. DS does agree that any savings bonds that havent matured will stay with me. If any have matured and are not earning interest, he wants to cash them out (older s did this).</p>

20

<p>“Gave” D all the money that was legally hers when she turned 21. When we did this we had a big sit down and discussion on the cost of impending grad school, the burden of loans and the importance of keeping a good credit score. She handled the money well, worked 20-30 hrs a week during grad school and came out virtually debt free. Every kid is different, but it worked out fine for us. She still periodically sits down with me to discuss impending expenses and the best way to budget—I think it’s because our financial relationship is based on advice and respect rather than control.</p>