Budgeting

The 3 Most Important Things To Do When Your Kid Inherits Money

child inherit money singapore

Joanne Poh

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If you have experienced a recent death in the family, you might have mixed feelings when you later find out that your child has inherited some money. And I’m not just referring to your inner conflict about using it to pay off your gambling debts.

If you’re afraid your child is going to try to get hold of his inheritance the moment he hits 18 so he can buy a Subaru Impreza (if kids still think that’s cool by then), well, the situation isn’t quite so bleak.

There are, however, some steps you will need to take to ensure your kid gets something out of the inheritance besides regret.

1. Check if You are the Trustee

If your child is under 21, any money and property left to him under the will is to be held on trust. Check with the executor to determine if you are the trustee.

It is common practice to appoint a parent as trustee, so chances are high that you will end up holding and managing the inheritance on trust for your kid, at least until he or she turns 21.

2. Get Advice on How to Invest It

There is no one-size-fits-all solution to investing your chid’s inheritance, and your final decision will depend on your own financial situation and the age of your kid.

Just because your rich uncle let his kid have his share in cash because it was “only” $200,000 doesn’t mean you should do likewise.

If Junior is nearing university-going age and will need the money to pay for his education, you’ll want to make a more conservative investment that can be liquidated in a few yars.

If your kid is an infant, however, stocks or mutual funds might be an option.

Consult a qualified financial advisor (NOT the taxi driver or your mahjong kaki) and work out a plan. If you need some information and don’t know where to start, head on down to our Learning Centre and check out some of the basics on investing.

3. Break it To the Child… Eventually

Tell your child today that he’s inherited a large sum of money and the next thing you know, he’s quit school in order to live a life of luxury or threatening to move out if you nag him to do his homework one more time.

When you do decide to break the news, try to make Junior realise that the money was painstakingly earned and saved by the deceased and have an open discussion about budgeting and investing.

The key is to help your child realise that the money, when it eventually falls into his hands, can help to make his life better when managed well—if he doesn’t spend it all on Playstation games first, that is.

Have you ever had to manage an inheritance? Share your experiences in the comments.

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.