Everyone wishes their children would be financially independent as adults and not experience the same financial challenges they had to struggle through. It’s not just about making sure that parents can afford to send them to top schools, let them take part in various sports and leisure activities and not want for anything. It’s about teaching them responsible financial habits and giving them a head start in life.
Head Start means enabling your kids to achieve financial success in two ways: empowering them through financial education and building a secure financial foundation for their future.
Financial Education and Money-savvy
It starts with education. Teach your child financial savvy, how to view money, and how to share your experiences.
Teach them to save – From an early age, teach the valuable lesson of saving. Saving for a toy, saving for a trip, saving for a rainy day especially, and that anything good is worth the wait.
Instant gratification is the exception and not the rule – We live in a world that wants everything now, and we use credit and impulse shopping to get it. Having savings on hand for these buys teaches them that they need to work for what they want. The bank of Mom and Dad is not a limitless cash machine.
Work to a budget – Money is not limitless and doesn’t grow on trees. Your children need to learn from an early age to plan expenses. Giving them an allowance that they need to budget for is a good start. You can even print a simple budget plan that allocates savings, needs and extras, e.g. if their allowance is £50, then £10 must go to the piggy bank, £5 towards a charity, £20 for a movie ticket and popcorn and the other £15 for whatever they want to buy etc. If something costs more than they have, then they need to save.
Share your money experiences – Let them learn from your experiences. For example, let them see you saving for a new flat-screen TV.
Teach them to give – Giving is a crucial part of life. Let them give to a charity or cause they believe in or join a charity event to experience the importance of giving back.
Give them financial responsibility – The best way to teach is through gaining experience. Let them go to the grocery store, make purchases, pay for coffee at a restaurant, etc.
Build a Secure Future Financial Foundation
There are things that you, as a parent, can do to help give your children a head start in life. This means ensuring they are financially ready for significant life events like tertiary education, a first home deposit or even retirement.
Start a Retirement/Pension Fund – The most significant gift you can give your child is time. Open a retirement or pension plan for them when they are little that they can take over when they start working. The extra 15-20 years of contributions and compounding interest could be the difference between a financially secure and stress-free retirement or a stressful retirement hoping to make ends meet.
Open a savings account – Start a savings account for your kids to learn the value of saving and transacting and seeing their balance grow monthly.
Tax efficient savings – This is a good way to invest money tax efficiently for your children.
Invest in the stock market – An investment or trading account can teach your children about the markets and how investing works. It is also an excellent way to build wealth from an early age.
Education savings plans – To finance even one year of university or college can be costly. A college or university savings plan will allow your children to attend any institute they choose when they graduate high school. A top education means a top job or career.
Major life savings plan – A savings or investing account can help build significant capital for when your children need it most, be it a deposit on a first-time home, starting a business, or even a car. This financial boost will help them in life and lessen the stress of financial worry.
Many professionals wish their parents had prepared them financially for life and had the savvy to realise the importance of time in building wealth.
Chat with your financial advisor about ways to help your children get a financial boost in life through a junior retirement plan, education savings or investment account. Give them the headstart in life you never had. Instead of a new iPhone, give them savings.
Please note, the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.