Is $60K Too Much To Give An 18 Year Old? I’m Worried It’s Too Much For My Son.

Providing a gift to an 18-year-old can help them get started off right in their financial life. However, providing too much money could also increase the chances of your son wasting the funds in a way that he regrets. Rather than just transferring the money, it’s important to work with your son to create a plan that ensures the money helps set him up for a secure future. 

How can you prepare an 18-year-old for a big financial gift?

Before you even consider transferring the money to your son, you should make sure to have a number of conversations with him where you help him prepare to manage the money effectively. Specifically, you should discuss issues like:

• The consequences of taking on large financial obligations
• The ways in which to use money to grow your wealth
• The power of compound growth on invested funds

You can and should give specific examples here. For instance, you could explain to your son that while it may be tempting to go out and buy an expensive car with the financial gift, doing so would mean committing to large insurance costs as well as expensive maintenance and repair costs. Your son may want to avoid things like that because the purchase could drain his finances over the long term and become unaffordable. 

As far as using money to grow your wealth and the power of compound growth, show your son how investing the $60K could help set him up for true wealth in the future because the money could work for him. Investing $60,000 at the age of 18 could turn into $188,305.70 by age 30 assuming a 10% average annual return. This could give him a good amount of money to put toward a house when he is an adult and is ready to buy. Or, if he leaves the money alone until he is 65, would have over $5.2 million just from that initial investment. His retirement savings would be taken care of.

Help him to understand how that single investment could make all the difference in his future — as long as it is used wisely. 

Make sure your son is ready by considering his current behavior

You can also decide if your son is ready for a big financial gift by watching his current behavior. How does he do when he gets money from a job or for a gift? Does he spend it all, or save some of it toward big purchases he wants? Is he generally responsible in life, doing well in school, and getting good grades? 

Some 18-year-olds are responsible and can make great decisions, while others tend to be more impulsive and may not be able to effectively manage the $60K in a way that makes sense. Since you have known your son for his whole life, you should have a pretty good idea of which category he fits into. 

Consider all the issues before transferring the funds

Finally, you need to consider all of the financial issues associated with the funds transfer — such as whether giving your son a lump sum of money could trigger gift taxes or could affect his ability to qualify for financial aid for college. 

A financial advisor can help you look at the big picture and can help your son better understand what he should do with the money, so it may also be a good idea for you both to talk with a professional before you move forward with gifting your son the cash.

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