Naturally a lot of people focus on building their wealth and a maintain a certain lifestyle, but often forget the importance of ensuring our children have a suitable financial understanding and its responsibility.
There are of course many problems that can seriously affect our children whether you have been financially successful in life or not.
It is known that on occasion, some children, also known as “rich kids”, refuse to travel economy, or require the most updated technology and also depend on the never-ending bank named “Parents”. This is one of the biggest problems for children born into wealth.
I have highlighted below the some points that we should all try and follow in order to financially educate our children and protect them from the more “real” world.
How is “Money” perceived in your household?
Ask yourself this question, is money a value or simply a “given” in your household? Often children/young adults do not see past the next weekend, therefore saving for a rainy day, that may never occur, or putting money away for a future does not sound at all appealing.
In order to be clear and help you children you must also know exactly what you’re talking about. This can be one of the many things that a financial adviser could help you out with. Sometimes talking to an expert and visiting different scenarios can help your children significantly with developing a financial sense.
From when children are small I believe they should know what a savings account is for, and learn why they may get pocket money, and also how to spend money. This develops the concept of “money value”. It’s no longer a given if you have to do a chore to obtain it, right?
Later on, when your children are that bit older you could start to have the conversations around what national insurance, taxes, interest and capital growth etc. are.
This will help ensure your children start the adult life with a better overview on financial situations. This doesn’t mean that you can’t treat your kids, or make their early life that bit easier, it simply sets them up with a stronger appreciation and understanding of money .
How do they know when to stop?
As your children fly the nest, and get their own homes, or go to university etc. they often get a “credit card” with a maximum. More often than not a £5,000 limit is perceived to be £5,000 and it’s simply not.
It’s also much easier to spend more when you’re constantly paying on your card, as you don’t physically pay the money, it just gets deducted straight from your account.
So, my point here is who teaches your children when to stop? Or how to manage their credit cards? How do they know their limit?
A much secure way I believe is to have a debit card instead, and even include an overdraft for a rainy day or an emergency. Once they know how to manage their debit account, they will be in a much stronger position to visit the credit card option.
You need to plant a seed to have a harvest
The biggest education of all is the “How we got to where we are” conversation. People work extremely hard every day and night to earn what they have. Whilst, you may have been lucky and inherited the majority of your wealth, there was always somebody that did the hard work. Extend this story to your children. If you have a successful business, invite them to work with you as an intern/apprentice and teach them to work hard and earn their rewards.
There is no better life lesson for children than work ethic, as this will prepare them for the tough world out there. Nobody gets given these great positions – it’s all dedication.
I strongly believe that by following these three super simple advice strategies you are protecting your children from a financial “scare” when they are older.
Please discuss this topic with your financial adviser to see where he can assist in any way.
Blog published by Mike Coady.