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Pass Along Values and Money

More than two centuries after his death, Swift's words still resonate today. The appreciation of money - not the love of it - can inform parents who plan to pass on their wealth to their children. True wealth is more than just the bottom line, for without a value structure, money is an empty vessel. So when passing along their money, parents also need to pass along their values.

As the Dallas Morning News says, parents want their children to become good stewards of the assets they leave behind. "Values drive behaviors," Kansas State University financial psychologist Brad Klontz told the DMN, but parents who bequeath money to heirs without passing down their values, their work ethic, their motivations are setting their children up to be poor stewards of their wealth.

Without a value structure they're likely, Klontz said, to mismanage and squander their inheritance. Keeping that from happening comes from a lifetime of good examples.

Start early

Children as young as 3 can begin learning a central principle about money - delayed gratification - Forbes says. Instead of buying whatever a child wants at the store, explain to them how they need to save to buy the item, whether through birthday money or from a weekly allowance.

It all comes down to teaching responsibility and setting boundaries at an early age, say Forbesand the Dallas Morning News.

One way to do this is to have three buckets, one for saving, one for spending and one for giving. Have the children put an equal amount of their money in each bucket. This teaches the value of delayed gratification and service to others while giving them a reasonable amount to enjoy spending.

To show the value of saving, parents can consider matching the amount their children put in the savings bucket.

Of course, all the teaching in the world won't work unless the parents practice what they preach. Even if they can't spell it or precisely define it, kids are quick to pick up on hypocrisy. Set the good example, and the children will follow.

Continuing education

Now that the values have been laid out, allow for mistakes but don't bail the children out, says the Dallas Morning News.

With the holidays approaching, the child has money to spend as he chooses, knowing that he needs to buy presents for his parents and his sister. If he spends it on something frivolous for himself, tell him he'll have to save the rest of his money for the family. This helps teach the value of delayed gratification.

Similarly, if he blows all of his money, parents shouldn't step in with more cash in hand. Doing this teaches him that Mom and Dad will come to the rescue, so it really doesn't matter if he goes over his budget.

A child must learn there are consequences to being financially irresponsible.

To give or not to give

Providing an allowance is a decision each family must make, but as personal finance writer Ron Lieber tells NPR, an allowance can help teach values and traits such as patience, moderation, thrift and generosity. And Lieber says there are three basic ways parents can approach an allowance.

  • No chores necessary. Lieber says he and his wife are in this camp, and they use the three buckets method. This approach, he says, fosters a sense of confidence and empowerment in his daughter.
  • No free lunch. In this approach, chores are rewarded monetarily. But what happens when the child decides that the monetary reward isn't worth the price of doing the chores and declines to do them?
  • Nothing at all. A parent can choose not to provide an allowance but take a "reasonable request" approach. To get what they want, the child would need to make a persuasive argument about why they want something, honing their sales pitch. And the parent can then decide whether the pitch was persuasive.

With these tools and approaches, parents can make sure their children know the value of a dollar - and their values, too.

If you have questions about this topic or related issues, contact our office for a consultation.

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