As parents and grandparents, we all want to be able to provide for our (grand)children. Beyond the basics of feeding, clothing and sheltering them, oftentimes parents can find themselves in a favorable situation in which they can give their children more than just an allowance and move toward heftier financial assistance. However, this assistance can present uncharted territory when it comes to laying out financial expectations for your children as they grow up or enter their young adult years. While you don’t want to control your children’s lives, you also want to set clear boundaries as it pertains to the financial assistance you may be providing for them. Consider opening up this intricate dialogue with an expectation statement that will make your vision for them much clearer.
What is an Expectation Statement?
Think of an expectation statement as a casual parent contract. The purpose of the statement is to set forth the obligations of the parent in regard to the financial assistance they will provide to the children. Now bear in mind, this isn’t designed as a legal document that binds you as a parent; it’s a written statement signed by yourself and your children that outlines their eligibility for financial assistance.
Providing Financial Assistance in College
An expectation statement is a great way to outline your expectations for how you expect your children to behave in college. While these are transformational years for your children and you want them to grow and learn as adults, you are also footing a hefty tuition bill. Utilizing an expectation statement will allow you to set forth a minimum threshold of behavior that you believe is likely to lead to a bright future. You can communicate an expected minimum grade point average, course load, community and extracurricular involvement, and actions that you believe constitute the value of such a large financial investment in his or her education. Click here for a sample of an expectation statement for education funding.
Jump Start Savings
With age comes financial wisdom, so parents and grandparents have the benefit of passing that wisdom to their children early on to create a habit of saving. Ideally, your children would take advantage of the tremendous power of tax-free, compounding growth by setting aside savings from his or her first paycheck into a retirement plan. But alas, reality isn’t so kind. Most people don’t get around to saving until their mid-thirties, as starting life as an adult presents more pressing financial issues than retirement saving. You can make a huge difference in your children’s financial security by ensuring they don’t pass up the opportunity to make contributions to a Roth IRA early on in life, even if they can’t afford to use their own paycheck to make the contribution. An expectation statement can allow you to explain to your children that an opportunity exists for you to provide this type of jump start to their retirement and set forth some minimal expectations for you to make this investment in his or her future. For more on the benefits of helping your children fund a Roth IRA, read Supercharging Your Child’s Retirement Savings, or click here for a sample of an expectation statement for retirement saving.
How will my children react to this kind of offer?
Honestly, your children’s reaction to this sort of proposal depends on your personalities and how you frame the purpose of the expectation statement. Reiterate that you are not trying to control their lives but instead, invest in their future. However, this is not an investment you are obligated to make, and you are entitled to some reasonable expectation that your children utilize your investment to enrich their life. Communicate the key behaviors you want to encourage or discourage, ones that you think will impact the success and happiness of your children. Ultimately, creating an expectation statement is a way to clearly communicate your intentions when it comes to assisting your children with their finances and helping then achieve their goals in order to become well-rounded and functioning adults.
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