My teenage daughter is getting $800/month from Social Security after her mom passed away. How can I help her with making the most of this money?

The Social Security Administration’s (SSA) survivor benefits are meant to help support children like Rebecca due to the loss of one of her parent’s income. Steve, who will be managing the funds until Rebecca turns 18, wants to be smart with the money to ensure long-term financial stability for his daughter.

But since he’s far from a finance expert, Steve feels overwhelmed with the situation. Here are a few things parents should know about survivor benefits, as well as some tips on what to do with the funds.

Survivor benefits explained

According to AARP, approximately 1.3 million minor children receive survivor benefits in America (1). The SSA allows minors to receive benefits until the age of 18, or 19 if the child is a full-time high school student.

Survivor benefits for minors can equal up to 75% of a deceased parent’s Social Security benefit. If a deceased parent did not claim their benefits prior to their death, a minor child would get what the deceased parent was entitled to receive at the time of death. There’s also a maximum family payment that can be 150% to 180% if more than one child in a family is receiving survivor benefits.

In Rebecca's case, assuming she's still in high school at 19, she could potentially receive these benefits throughout the next three years. After a year of collecting survivor benefits, Rebecca has already received about $9,000, and three more years of $800 monthly benefit checks would give her another $28,800.

With this in mind, Rebecca has the opportunity to earn a significant amount of money over the coming years, and managing these funds responsibly is essential.

“Careful consideration must be used in determining how to use these benefits and how to prepare for the transitions that come as the child ages,” Melissa Brennan, a certified financial planner at ARS Private Wealth Management, shared with AARP.

What Steve needs to keep in mind

Because Rebecca is under 18, Steve will act as her representative payee, which means he’s legally responsible for setting up her benefit deposits — into a family bank account or one owned by Rebecca — as well as making sure the money goes toward Rebecca’s current needs (1).

These needs can include food, clothing, medical and dental care, shelter, as well as personal care items. If the benefit funds are not needed for these purposes, the representative payee must save or invest the money for the beneficiary.

Since Steve’s managing the survivor benefits on his daughter’s behalf, there are certain things he should be aware of that could affect Rebecca’s benefits.

A record of spending

As part of a representative payee’s main duties, Steve must maintain a record of expenses while managing Rebecca’s survivor benefits (2).

The SSA requires representative payees to keep track of how every benefit dollar is spent. Steve is required to use the benefit funds to pay for Rebecca’s current and future needs, while properly saving what’s left. If the SSA were to request a report on Rebecca’s benefits, Steve would have to provide it with proof of how her benefit funds were either spent or saved.

Potential overpayment

While Steve is managing Rebecca’s benefit payments, he should keep a close eye on the deposits to make sure she isn’t receiving more money than she should. Overpayments within the SSA can occur from time to time, typically because of missing or wrong information (3).

If the SSA believes a payment error has occurred, it will send an overpayment notice to the recipient or representative payee. The SSA will then give the benefit recipient 30 days to correct the overpayment before it starts collecting the money on its own.

If the recipient doesn’t pay the SSA back within 30 days, the SSA will withhold 50% of the benefit — or 10% of the recipient’s Supplemental Security Income — each month until the overpayment is paid back.