Do You Need a Trust Fund to Protect Your Kids and Your Money?

As parents and grandparents we all hope to raise happy, healthy and financially responsible kids, but it can be quite a struggle to instill a sense of a frugality and explain the value of saving and investing. Whether we like it or not we now live in a world where instant gratification is valued over careful planning, and it is all too easy for even the most financially astute young man or woman to be led astray.

From phones and electronic gadgets that cost as much as a house did in their grandparent's generation to the siren call of partying every night, there are plenty of things to tempt young people and separate them from their money. That is why it is so important for parents to protect their children and their assets through a wise system of financial help.

If all young adults were financially responsible the choice would be easy enough. Parents and grandparents could simply gift their money to their children to get them off to a good start in life, secure in the knowledge that their gift would be used wisely and invested well.

Of course if all young people were financially responsible much of this help would not be required in the first place. The sad fact is that more and more young people are entering life on their own saddled with thousands in long-term debt, and this debt can lead to a lifetime of problems. While parents cannot and should not seek to solve all of their children's problems, there are strategies they can use to give their kids a boost without giving them a bailout.

One great resource parents and grandparents have at their disposal is the trust fund. Once the exclusive province of the wealthy, this vehicle is increasingly being used by the middle classes as a way to pass on their money to their kids in a controlled manner. Unlike a traditional gift, the money in the trust fund can be doled out over time, and the giver of the money can enjoy a great deal of control over how, when and under what circumstances the money is provided. This can allow parents to use their resources to teach their kids financial responsibility, instead of simply bailing them out of their bad decisions. Those who are simply bailed out of the problems they created through their bad choices are likely to repeat those choices, while those who are allowed to suffer the consequences can learn from their experience and gain valuable experience. A trust fund is one way to make that happen.