Are your children graduating from school or university?
Do you want your kids to be money smart?
As a parent, we do so many things for our children; driving them to sport, extra-curricular activities and social events, educating them and teaching them life skills. But how many of us teach them about money?
The sooner you teach your children how to be money smart the better. There are so many things to learn and understand; starting at the very basic such as understanding the numerous types of bank accounts and which one they should use, the ability to manage their cashflow, the advantages and danger of debts, the myriad of investment options including but not limited to superannuation, property and shares and the need for cashflow.
Getting into good habits early on, is a sure way to kick financial goals. The best thing is, as kids, they have time on their side. They have a lifetime to learn. They have a lifetime to enjoy the power of compound returns.
Here is an example. If your child saved $50 a week from the age of 15 ($2500 a year), then when they start to earn more dollars, say at 22, they lifted it to $100 a week ($5000 a year), then increased it again at age 30 to $200 a week ($10,000 a year), assuming the rate of annual interest is a constant 4% which you will now get from many share portfolio’s and investment funds, then at age 65 they will have just over one million dollars. This is a very conservative figure as it has only taken into account the interest, not the increase in the capital value. If I assume an average 4% capital growth as well (still conservative) that figure would jump to just under 3 million dollars. Now take a person whose parents decided not to encourage them to save, and who only came upon the idea themselves later in life when their income picked up. Here I’m assuming they start saving around $200 a week from the age of 30. Using the 4% return, they end up with around three quarters of a million dollars – or about a quarter of a million dollars less than the person whose savings started earlier. If I add 4% capital growth to that equation, the 30-year-old ends up with $1.87 million. It’s certainly still worth having but the compounding effect has not had as long to work. It’s close on $1.1 million short of the family and the kids who started putting the money away much earlier.
I wish that I was empowered with this information when I was a kid.
The moral to the story is small steps now make a BIG difference later. For older kids it is important they know that they have never “missed the boat” but they need to take action immediately. It takes commitment, but it is worth it!
Click on the link below to learn the top 3 action items to give your kids a leg up.
Do you have a child (or maybe you) need some help mapping out a plan?
Be sure to pass on Kate’s number for further guidance (sub AR number: 325345). For peace of mind, the first appointment is no cost and no strings attached.