The Psychology of Gifting

 

While I called out Gail Marks Jarvis of the Chicago Tribune for her article on our assumed rate of return, she provided what seems to be solid advice on the topic of giving in an article titled “Financial Cord Can Trip Up Adult Children“.

While this article is focused on parents giving money to adult children, the concepts still resonate with those setting up a trust fund for a minor (such as this site). She quotes from Brad Klontz, author of “Mind Over Money”.

Financial handouts are rarely helpful in the long run… money for nothing typically results in more of the same – nothing.

That is very well said, direct, and to the point. If you give someone something for no activity on their part, why should they try to help themselves?

While everyone has their own situation to consider, in my experience the “matching” concept has been very effective. Matching requires the recipient to take action in order to receive the gift, so you are rewarding action, not inactivity. Since the money came from their sweat and toil (it takes a lot of work to earn $500 when you are a kid, mowing lawns, working for minimum wage, or babysitting) they really take this process seriously, and feel that they have a stake in the outcome.

In order for matching to be successful, you have to be consistent in your expectations and give notice. The kids need to earn the money, and they need to know when it is due. For my nieces and nephews the end of summer is a good time because it is right before school starts and gives them a chance to earn money when they are on break. You also can’t reward when there isn’t any achievement on their side (we did put in an additional amount at our discretion upon graduating from school or college).

Handouts can also “lead to resentment on the part of the givers, who may feel that they are being taken advantage of”.

I learned from a good friend of mine who told their experience of giving when the recipient just wanted more, more and more and in the end they are hardly even on speaking terms. I listened to this advice in constructing my matching program.

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