The Gift of Financial Intelligence: Setting the Next Generation Up for Success

As parents or grandparents, it can be tempting to hand over an envelope of cash for birthdays or Christmas. While this gesture is thoughtful, it may not teach younger generations the money skills they need for a financially secure future.

Instead, consider alternatives that invest in their future while helping them master money management early in life. Here are some practical ideas to set them on the path to long-term financial success.

Start with the Basics

Before gifting money, instil the idea that money isn’t just for spending—it’s also for creating wealth. Teaching this mindset early is crucial, as children’s first experiences with money often involve spending. Emphasizing the importance of saving for a rainy day will help build habits that last a lifetime.

Open a Savings Account

For younger children, a piggy bank can be a fun way to learn about saving. But as they grow, opening a savings account can teach them how banking works and the power of compound interest.

Look for a savings account that offers competitive interest rates and be prepared to co-own the account until they’re old enough to manage it independently. Watching their savings grow can be a powerful motivator for financial discipline.

Introduce Them to Investing

An investment account can provide a head start on building wealth while teaching children the basics of investing in a hands-on, educational way.

You might start small with contributions to an investment fund and use this as an opportunity to explain concepts like diversification, risk, and returns. Over time, you can tailor the strategy to match their financial literacy and goals.

Set Financial Rules

Just as children need boundaries for safety, they need rules to guide their financial decisions.

One widely recommended rule is the “10-20-10-60” approach:

• 10% for emergencies
• 20% for investments
• 10% for retirement or superannuation
• 60% for spending

Additionally, financial experts like Scott Pape, the “Barefoot Investor,” suggest children should earn their pocket money. This teaches them the value of hard work and creates a sense of ownership over their finances.

Start Superannuation Early

As teens begin part-time or holiday jobs, help them set up a superannuation fund. Selecting the right super fund early can prevent unnecessary fees from multiple accounts and ensure their retirement savings get off to a strong start.

A financial advisor can guide you and your family through the maze of superannuation options to find the best fit for their needs.

Help Them Ride the Wealth Bike

Setting the next generation up for financial success is like teaching them to ride a bike. You help them get started, provide guidance on what to do and what to avoid, and then watch them pedal confidently toward financial independence.

By combining practical tools with sound advice, you’ll give them the skills to make intelligent, informed financial decisions.

For more tips on building wealth for you and your family, or to discuss personalised financial strategies, book a free consultation with our Fiducian Financial Adviser today.

Source: https://www.fiducian.com.au/

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