A gift that will help your kids grow rich

Your adult children may need a hand charting a financial course. So buy them time with a planner.

By Jean Chatzky, Money Magazine editor at large

(Money Magazine) -- Around this time each year, as the graduation season winds down and the wedding season goes into full gear, I get a lot of questions along the following lines: "Do you know of a good gift for my niece/son/goddaughter who just got engaged/got married/ graduated from law school/landed that first job?"

Well, I can recommend good values at Home Depot (Charts, Fortune 500), where you could get a whopper of a tool kit, or at Bed Bath & Beyond (Charts, Fortune 500) for sheets with a decent thread count (newlyweds and grads tend to need both). But here's a better idea. How about a session with a financial planner?

Editor-at-large Jean Chatzky appears regularly on NBC's Today. Contact her at money_life@moneymail.com.

That's what Maureen Rosenblum, a psychotherapist in Sherwood, Wis., recently did for her two daughters, ages 20 and 28. "I wanted to do this because my mother kept me entirely in the dark about financial things," Rosenblum explains.

"She was wonderful, but even when she was in old age she was still making out my checks and paying some of my bills. It was my money, but she'd come over and organize my checkbook. I realized it was to my detriment. I thought, I would like to make sure my daughters learn those lessons a lot earlier than I had."

Turns out, Rosenblum isn't the only parent thinking that way. There are no big surveys on the topic yet, but financial planners tell me they've seen a large increase in the number of times they're being asked to take adult children (ranging from 20 to even 50) by the hand.

June Schroeder, the Wisconsin planner Rosenblum sent her daughters to, has been in practice for 26 years. But it's only in the past five that people have started calling and asking for gift certificates for newlywed couples or as birthday or graduation presents.

Larry Botzman, a planner in Somerset, Ky., says that more clients have begun taking him up on his longstanding offer of free services for their children. "It's because of the changing times," he says. "There's plenty of money out there to be lent, and we're provided with more opportunities to make mistakes."

Be certain that she wants this as much as you do

How can you decide if your child (or granddaughter or nephew) is a good candidate for a session with a financial pro? And if you go

About 80 percent of the time, she says, adult kids really appreciate the gift. The other 20 percent? They don't even bother to return her calls. "I've seen parents who believe that this is a cure-all," Francis says.

"They have a child who is absolutely delinquent with managing money and they think this is going to change them. It's not. It can give them the support and the tools they need, but they have to want to use them."

Have them come prepared...

Planners who work with newbies (as these adult kids tend to be) say a successful session is a focused one. Many will give your child a written questionnaire to fill out ahead of time.

Make sure they do it so that time isn't wasted on preliminaries and they can get right to work. Also, encourage your children to select at the most three topics they'd like to delve into.

This may include getting a handle on their cash flow, figuring out how to prioritize their debts and managing a credit score. Or it may be getting started with retirement planning, buying a first home and naming guardians.

Make sure your child brings to the meeting any documentation that he needs to discuss those matters, including recent pay stubs, tax returns and student loan, credit-card and bank statements. A benefits book from an employer will also be helpful.

...and leave with a to-do list

Most of the time, explains Southfield, Mich. planner Timothy Wyman, initial sessions reveal that what new clients need most is a spending plan. They need to start keeping track of how much is coming in, how much is going out and where it's ending up.

Once they have that information they can become more disciplined with their cash management and can start building an emergency cushion. A year or two down the road when those spending and saving habits have had time to set, the kids should come back to the office.

"Once they've conquered these challenges," Wyman says, "then we can really move into other areas, whether it's education planning for their kids or retirement planning for themselves."

Finally, stay out of the process yourself

This is for all of you helicopter parents out there - the ones who hover over your kids so much you're pulling crazy stunts like calling your grown child's prospective employers. The goal here is to foster children who are able to stand on their own two feet financially rather than relying on you.

That means giving them space alone with the planner to speak frankly, without worrying the information will be passed along to you. A good planner - who by the way has an ethical responsibility not to share information, despite the fact that you're paying the bill - will see it the same way.

"The children seem to feel like they're getting it straight from the hip when I give them an answer," says Schroeder. "And besides, I don't have the same baggage with them that their parents do."

Three ways to find a planner
  • Your own planner (if you have one) Many will set up a starter financial plan for a client's child free of charge. At the very least, you can negotiate a good deal.
  • The Garrett Planning Network Advisers associated with this group of fee-only planners typically charge $150 to $300 an hour. Expect a 2- to 3-hour session. garrettplanningnetwork.com
  • The National Association of Personal Financial Advisers A financial checkup with one of their member advisers, who are strictly fee-only, usually costs $1,000 or less. napfa.org
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