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If you get your children into the sharemarket early, by the time they leave home, they’ll have a nest egg and the skills to keep it growing.
By Julie Nipperess
One of the best ways to teach your children about saving is, without a doubt, the ‘savings jar’ or ‘piggy bank’ or something like the $5 challenge!
Using cash is the perfect way to start, because kids can actually see exactly how much they have and what’s left over after spending. For primary schoolers, it’s an excellent way to learn basic counting, addition and subtraction skills. Plus, using cash makes money ‘real’ and in these days of cards and pins and swipes, online transactions and smartphone pay apps, this is really valuable.
As they get older, you can expand the lessons with an investment portfolio. You can buy shares on your kids’ behalf (in your name, but as a trustee for your child and then transfer the shares to their name via a simple form when they turn 18, without incurring capital gains tax (CGT), as there is no change in beneficiary).
Managed funds are also simple and inexpensive to set up, and you can even have a choice of investments.
Tweens and teens like to invest in things like fashion and technology, and so long as they have a balanced portfolio there’s no reason why they can’t invest in things they’re interested in. This, as you can probably imagine, really helps with engagement, too – they’re much more likely to be interested when they own shares in a company or brand they know. Managed funds also allow you take as little or as much interest as you like in actively managing your portfolio, too.
And the financial lessons are endless… You can open up discussions about market cycles, why it’s important to diversify and what compound interest means. Most secondary schools are beginning to build finance education into the curriculum, and it’s about time.
The benefit of starting young of course is that over the long term the investment will grow in value. Other family members can contribute, too – grandparents, aunts and uncles can all put in some money at Christmas and birthdays, and of course, you should also encourage the children to add to the fund regularly.
When they are grown up and capable of making their own decisions, they may decide to use some of the money for uni, travel, a home deposit… or perhaps they’ll just continue to let it grow, safe in the knowledge that it’s always available if they need it.
Many parents work hard and are hell bent on providing their children with everything they need and want, and it’s a tough gig. But one of the most important things you can give your children is financial freedom. That doesn’t mean just setting them up with an investment, it means making sure they learn the skills required to look after that investment, as well as develop a good relationship with money and some healthy spending habits along the way.
Building wealth takes time, and so it stands to reason that the younger you start, the more easily you get ahead.
If we can help, contact us.
This is general advice and should not be treated as personal advice. Julie Nipperess is an authorised representative of Step Up Financial Group Pty Ltd ASFL No: 512509.