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When Your Kids Receive Big Monetary Gifts

receive moneyThere are many times when a child can receive money from well wishers. But what to do with it? Do you save or spend? Let her decide? The key is to plan a strategy early, before things get messy. Read more about it in Make Your Kid a Money Genius (Even If You’re Not).

 

If your family celebrates an event that involves money, you should set the expectations for where the money goes before your kid is holding a wad of cash or a handful of checks. Later, when your post-party kid is rolling around on his bedroom floor covered in twenties like a lottery player who’s hit the jackpot, is not the time to make a rational plan for his windfall. Does it belong in your kid’s college savings account? Will some of it be donated to charity? Will your kid get to blow it on stuff he wants (a drum set or an expensive spring break trip)? Or will your family need to use it to pay for the expense of the celebration party? (That’s what my folks had to do.) Or (most likely) will the money be divided up and used for more than one purpose?

Of course, what you choose to do will depend on your own family’s finances and the sum involved. I say that if you’re allowing your child to consider the money “his,” then you should require that he set aside a significant portion of it for long-term savings, especially college. If you are so inclined, having him donate a portion of it to a meaningful project or charitable organization of his choice is great too. While it may be “his” money, he’s still your kid, and you can help him come up with a wise plan. It’ll be good practice for when he’s older and might receive money as a cash bonus at work or a fat tax refund.

It’s still okay if they run around the house singing For the Love of Money but know that hard work pays off. Even for preschoolers.

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