Easter time is here, and while our children scavenge for chocolate delights in an easter egg hunt, Janine Horn, Financial Adviser at Momentum, says parents should consider laying down the most important egg of all – a nest egg that will give their children the leg up in life that they deserve.
“As a parent or guardian, it is critical that we think of our children and how they will be able to cope in a new world economy that may not be as favourable as the one we live in today,” says Horn. “A nest egg can help give children the opportunity they need to pursue their goals on their own journey to success.”
According to Horn, a nest egg isn’t some unique, esoteric financial tool. It is simply a label for what we all know and strive towards – saving. “The nest egg can provide direction towards attaining specific savings goals, which contributes towards the long-term finances of your children. These include important life milestones like school, university, their first car and more.”
Saving for your children’s future is a savings goal that deserves all the attention it can get. Horn provides some useful advice for those parents and guardians looking to start a nest egg:
The best time to start saving was yesterday
Starting to save early will be a big boost when the time comes to fly from the nest, and gifting money to your children now could potentially reduce a future inheritance bill.
Learning to save regularly is a skill thatto lasts a lifetime and one that some adults struggle with. “Make saving money second nature for your kids, by embracing this habit early on. Set up a savings account for children to save some of their pocket money while you also throw in a little extra yourself to match their savings.”
A little can go a long way over time
With the power of compound interest, Horn says time can help do the heavy lifting if you plan accordingly. “Try and explain how interest works to your children and keep a record of their savings in a notebook or on a spreadsheet so that they can see how the total can grow over time.”
Trust in the trust
Trusts are generally used to set assets aside, from cash to shares, for beneficiaries they were created for. In some cases, Horn says a trust can be a useful way to pass on assets to children. “With a trust, you’re able to set out certain conditions – for instance, you may decide that your child can only access the assets once they turn 25.”
If you want more control over how and when the assets of a nest egg should be used, Horn advises parents and guardians to investigate a trust. However, she warns that this can be complex and irreversible once set up, so it’s advisable to seek the right financial advice.
Financial literacy is the ultimate nest egg
While it may pay to save, the returns are even more fruitful when one is educated and financially savvy. “Get your kids interested in learning about money. Help them manage their own finances, including the long-term savings you have set up for them already. Equipping children with the ability to make good financial decisions gives them an essential skillset to use for the rest of their lives.”
Often it is the parents who require education as well, and Horn says there is no shame in admitting you don’t know best. “Speak to a financial adviser, and they can help you secure your children’s future financial success,” concludes Horn.