Parents want the best for their kids, and this includes being financially independent when they are old enough.
To raise children who are confident with their money here are five steps for fathers to follow:
1. Start saving from as young an age as possible or as soon as you earn any income
By doing this, your child can either use the money for a trip overseas, buy a car or even use it as an emergency fund should they not have a credit card. Sometimes unforeseen circumstances arise such as their car or bike breaking and the money saved up may help to fix it. By doing this, they avoid loaning money and creating debt for themselves.
2. Save at least 10% of your income
If your child starts young, they will only need to put away a small sum of money every month. Saving 10% of their salary – or even allowance - can help grow their retirement fund or investment account. Saving 10% of their income might not make a huge difference now, but down the road their future-self will thank them and you for instilling this discipline.
3. Invest in good quality investments
Focusing on quality investments is an important part of long-term financial planning. By doing some research you’ll be able to select a good quality investment which offers you good value for investing your money, offers the chance for a reasonable return and is tailored to fit their needs.
4. Always spend less than you earn
Spending less than you earn is an imperative financial concept to understand and live by. If your children do not live on less than what they earn, they will never get ahead. Spending less than what they earn may take some initial life changes, but the longer they do it, the easier it is to continue doing it.
5. Don’t lose money
Opening a bank account for your child as soon as they are old enough is a wise decision. This eliminates losing money as it will be stored in a safe place and you and child will be able to manage their finances accordingly. This way your child will be able to see what they spend their money on and avoid making unnecessary transactions or payments.
Making sure your children are given a solid financial education is important, as this will affect their financial wellbeing and ultimately, their quality of life.
Martin Leins is a Certified Financial Planner at Alexander Forbes