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Money Gifts to Kids: 3 Rules Every Parent Must Follow

November 12, 2015 at 12:00 AM

As we are heading into the holiday season, I know plenty of kids will be receiving a check from a grandparent, aunt or uncle. So I want to review how every family with kids under 18 should handle financial gifts year round.

Rule 1: Let your kid have total control of 50% of the money. And I do mean total control. Do not suggest how it can be spent (or saved). Do not judge the choices your child makes. Let your child learn through personal experience. What they learn today will impact financial choices they make in the future.

Rule 2: Have your child save 40% of the money. You want to tie this to specific goals. I personally think every child should be saving as much money as possible for college, even if it is 10 years away. This is a natural way to start talking in an age appropriate way about the cost of an education, and how as a family you plan to tackle it. Or if you anticipate your child will want a car, have them start saving up now.

Rule 3: Give your child the gift of giving. At least 10% of the money should be donated to charities. This is a fantastic opportunity to talk as a family about the importance of helping others, whether they are in our neighborhood or halfway around the globe. If there is a local charity your child wants to donate to, I would highly recommend an in-person visit to drop off the contribution.

The percentages for each Rule above are my recommendations; you are of course encouraged to alter as you-and your family-deem appropriate.

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