Help Your Kids Achieve Financial Freedom
Times are a little bit different to how they used to be back in the day, when your kid would head off to primary school and the bank would send in puppets to “educate” the students on the importance of putting their pocket money in the bank (and coincidentally score plenty of lifetime customers at the same time).
Back then, you had an account book with statements and receipts and you could see how much interest you were accumulating every time you made a deposit (which significant if you were a child of the late ‘80s/early ‘90s).
You also had the advantage of plenty of physical cash with which 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.
Nowadays, kids just watch mum and dad tap their card or phone and walk off at the shop. And interest rates are super low, so saving money means more than just putting it in the bank.
One thing remains constant. The earlier you teach your kids the value of not wasting their money, the better.
Explain that in order to have money, 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.
When they are old enough, they can work chores to earn pocket money, which might go into their own bank account and they can then tap and go themselves (under your supervision) to buy things they want. When they do, show them that their bank balance has immediately gone down.
Interest rates on savings accounts are currently almost non-existent, but it’s important your kids know the value of saving. If they want to grow up and build wealth, they must save before they can invest. They should avoid frivolous spending on small bits and pieces when there is a bigger goal at hand that they know they can reach sooner by saving. 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.
Credit where it’s due
Avoid using credit cards, full stop. If you must use one, ensure your child knows it is only in case of an emergency. An early lesson in life that could make or break your child’s financial future is to only spend money you have. Especially when the money you don’t have comes with ridiculous interest rates and a credit limit that reduces your own borrowing power. Spending only the money they have means your child will not end up saddled with unnecessary debts on frivolous items like clothes and holidays.
Help them get a foot on the ladder
Most of us want to help our children financially. Rather than giving them money to go travelling or buying them a car, help them with a deposit for their first property. Explain that investing in property is a numbers game. It doesn’t have to be somewhere they want to live right away, but a way to accumulate wealth and further savings.
If they want to spend some money on travelling, that is fine for them to also save towards, but you are leading by example by helping them with the most important part of their financial future.
Imagine how well you would have done if your own parents helped you buy a property when you were 18. Here’s your chance to make a difference.
Why not speak to our team about how we can help you and your family prepare for their financial futures Book in for a free Discovery Session today: