Financial Literacy and Property Investment for the Next Generation

  • Financial Literacy and Property Investment for the Next Generation image

A major difference in the mindset of successful property investors, when compared to people stuck in the rat race, is that they don’t think about acquiring money. They think about acquiring assets.

Money is instead something they use to leverage into their assets and to service their debt. They want to create wealth, not accumulate cash. Other Aussies might have a goal of getting a certain amount of cash and then spending it on a holiday, or a new TV. They are fixated on money as an end goal, even though inflation means that money is worth less every day that you keep it. Someone who had $1 million in 1990 would be rich, but if they did nothing with it, inflation would have caught up with them.

Now, with the same money, they’d find they couldn’t even buy a pretty average house in a pretty average suburb. People set up for success have often been lucky enough to have the right mindset from an early age. So you can help give your kids a leg up by teaching them financial literacy and the benefit of investing for wealth when they are young.

Build wealth

If you are giving kids pocket money, it can help if you incentivise them for saving, or buying something of value, rather than spending their hard earned on Pokémon cards or at the school canteen. Kids are often encouraged by rewards. Offer to match some of their savings contributions, or take them to fun activities when they hit certain milestones and they are likelier to stay on track.

You should also help them learn that places like banks aren’t actually there to help them (that’s what banks want them to think), but are actually after their money. Keep them engaged to look for the best deals from banks and ditch them when they find a better offer. Teach them that they have a choice and they should discern between the best and worst places to park their money.

Speak their language

In the past, you had physical cash to demonstrate the act of paying for something you want, receiving change, and watching as your funds dwindled away if you spent more than you could afford. These days your kids likely watch you tap your phone and walk out of the shop.

The good news is that they probably already know how to use your phone better than you do. Show them apps and games that will help them learn financial literacy. RoosterMoney (teaching about short and long term business goals) and Bankaroo (which allows parents to pay pocket money to an account which kids can manage, along with receiving incentives as a bonus) are two examples that can help develop an investment mindset.

Start early

The earlier you teach your kids the value of not wasting their money, the better. Explain that in order to have wealth, you have to earn it. The money you spend on food, groceries, bills and their toys comes from working for a certain number of hours. When your child sees you tap and go, explain that every time you do so, money comes out of your bank account.

Save to invest

Interest rates on savings accounts are bigger than they were a couple of years ago but still not high enough to keep pace with inflation. Still, it’s important your kids know the value of saving. They should avoid frivolous spending on small bits and pieces when there is a bigger goal at hand. Explain to them how much they will save and how soon if they put a certain percentage of their money aside each week. Also show them how compound interest works and how the interest payments they do receive will increase as they accumulate more money.

When they are still very young, you could introduce them to investing through asset classes like classic toys, or similar. When they are a little older, you can teach them what you know about property investing, so that they’re savvy, educated and ready to go when they hit adulthood. If you’d like to help them financially, you might help them with their first property deposit rather than buying them a car or an overseas trip. If you need help figuring out the strategy you should follow or require more information, feel free to reach out to the Investor Relations team at B.Invested.



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