For many parents, giving financial assistance for their newly grown-up children means providing monetary gifts. But beyond simply giving handouts, advisors can suggest some simple ways for clients to orient and set up their children to be financially secure.
“If a client’s child is over the age of 18 and leaving home for school or work, recommend that they establish power of attorney,” Gregory Sarian, managing director and partner at the Sarian Group with HighTower Advisors, wrote in a piece for the Wall Street Journal.
He said that in the event of a medical emergency, a power of attorney is important for the parents to make medical and financial decisions on behalf of their child.
College and graduate students may also take on work opportunities or internships with companies that auto-enrol them in a retirement plan. According to Sarian, young people aren’t prone to naming the beneficiaries of such accounts, so advisors may have to provide a reminder for clients with children in this position.
Children also generally benefit from being oriented about saving. Sarian recommended three reserves based on different timeframes: a short-term reserve, a one- or two-year fund, and a long-term fund. For children who have just entered the age of majority, the first fund can be an ATM/debit account, the second can be a brokerage account that can trade ETFs, and the third can be a retirement plan account.
“Another suggestion my firm makes for 18-year-old children is that they open a credit card to help establish a credit rating,” he said. Aside from allowing young people to build up credit, it can also help them develop monetary discipline and budgeting skills that will stay with them for many years.
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