A letter to a financial expert asking for advice about an inheritance was not your usual request. The question came from a woman whose father-in-law left her 29-year-old daughter---his granddaughter--a sizeable fortune in a trust that was currently being managed by her daughter's father. When the daughter reaches 30, however, she is eligible to manage the trust herself. Few of us are in the situation of being the parent of a child who is inheriting a fortune. And yet, though the sums of money may be significantly substantial, the issue this parent faces is one many of us worry about: Will our grown children be able to handle financial responsibilities if we're no longer around to help them. How do we prepare them?
If you're interested, you can read here the expert's advice on helping the daughter understand her financial challenges and choose an adviser to manage the money.
But the expert's advice on preparing a child to be engaged in and understand how to handle financial responsibilities applies more universally. Here are some points Quentin Fottrell, who writes as the Moneyist, makes:
Encourage them to ask questions:
Unless your daughter builds enough financial confidence to ask questions and learn about how she can invest her money, and trust her instincts and establish her own risk tolerance when it comes to investments, she is vulnerable to another person stepping in and filling your husband’s shoes, particularly when he is no longer around to help.
Let them make decisions:
Trusting your daughter to make the right decisions is part of her growing up....The best you can do is to lead by example, and — I’m with you — part of that is allowing her to make her own decisions, as you and your husband have done with your own lives.
Talk things over with them:
Bottom line: You want your daughter to become an active decision maker, even if the answer is to do nothing for now; learn the basics of investing so she knows what questions to ask; and not hand her fortune over to one person to make decisions without her knowledge or understanding. It’s her money, after all.
The first step is for you both to sit down with your daughter and include her in these conversations. You will discover that you will all learn from one another.
painting: Marinus Van Reymerswaelle, 1539