If you enjoy financially helping out your children and grandchildren, you're not alone. Giving to them is fun and often provides immense satisfaction. The question is how to help without breaking the bank — and keeping everything in check. Here are some strategies and tips that can help.
• Give only what you can afford.
Your own financial security should be your first priority. Since there is no way to know with any certainty how long you will live or how the market will perform, make sure you give within your budget to avoid compromising your own financial health. Doing so will help ensure your generosity today doesn't create a financial hardship for you — or your family members — down the road.
• Give the gift of time instead of money.
Even if you want to give money to your children and grandchildren, it may not be appropriate to do so. Many young couples and/or parents take pride in their financial independence. The experience of letting those we love live within their own means is an important life lesson. If your children prefer to make their own way in the world, consider giving the gift of your time instead of your money. Whether it's spending the day at the beach, taking in a movie or volunteering, you'll enjoy the time making memories together.
• Discuss your intentions.
If you would like to help support your grandchildren or save for their future goals, such as college, talk with your children to let them know your plans. This can help your kids do a better job with their own financial planning. For example, if they know how much you are saving toward a grandchild's education, they may be able to save more of their dollars for retirement. Be sure to talk with your financial planner or tax advisor before setting up education accounts to identify the opportunities that are best suited to your goals and financial situation.
• Give season passes.
Instead of giving money or material goods, treat your children and grandchildren to experiences. Depending on their interests, give them an annual pass to their local zoo, science museum or water or theme park. If you can afford it, think about season tickets to the theater, orchestra or a local sports team.
• Plan a vacation.
Treat your family to a multi-generational family vacation. To help keep spending in check, create a budget and let everyone know what you do and don't plan to cover — from travel expenses to food, lodging and excursions — so that everyone knows upfront what to expect. Also, be thoughtful of those who have to take time off of school or work by scheduling travel over national holidays or school breaks.
• Give equally.
To help prevent family battles and avoid damaging relationships, give equally to your children and grandchildren to the best of your ability. If you need to give more to one person to help him or her through a rough patch, consider adjusting your will if you want to even things out.
• Clarify whether you're making a loan or giving a gift.
If you are loaning money, be specific about the terms and a repayment plan. Also, make sure you have a written document that both parties sign and date. This will help safeguard your financial situation if things go bad by providing you with legal recourse. If you are giving a gift, be upfront about it. Let the recipient knows it's a gift to alleviate any uncertainty about whether or not they need to pay you back.
For help determining how much you can give and/or ways to leave the legacy you desire, consult your financial professional. He or she can evaluate your financial situation and create a strategy to help you meet your goals.
Rocco is a Private Wealth Advisor with Ameriprise Financial Services, Inc. in Southampton, NY. He specializes in fee-based financial planning and asset management strategies and has been in practice for over 20 years. Advisors is licensed/registered to do business with U.S. residents only in the states of NY, NJ, TX, MA, PA, NC, NH, UT, NV, CA, NM, WA, VT, MS, MD, RI, FL, MO, SC, GA, MN, CT, AZ. Ameriprise Financial Services Inc., and its representatives do not provide tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation. Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. www.roccocarriero.com