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The 5 Best Investments You Can Make For Your Children

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We all want the best for our kids, and everything we do for them is, in essence, an investment. But what will give you the best ‘return’? The truth is it things like this can be hard to quantify. Money helps, of course, but it isn’t the be-all and end-all. With this in mind, I thought I would go through some of the best investments you can make for your kids. Let’s take a closer look.

A happy home life

No matter what we do as parents, it all has an effect on our kids. The trick is to make those experiences as positive as possible for them. While money can give them choices, it won’t necessarily turn them into stable, healthy adults who have a good outlook on life. Your role is critical, so consider the impact it will have if both parents are working, chasing the money. No child is worried about how much money you earn – their concerns are about how much time you spend with them. It’s a delicate balance to strike, of course. But, spending your time providing a happy household will be the biggest – and best – investment you can make.

A dollar a day

Could you afford to save a buck every day for each of your kids? Think about it – it’s a Starbucks coffee at most if you have three children. Save up for a single year, and you have $365. Use that money to invest in some small-cap value stocks, and you might get a return of 12%. So, after 18 years, you will have saved a total of $6,570 – but the compound interest means it will be worth $20,348 – not bad at all.

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Education

Educating your children to the very best standard costs a lot of money, even when you avoid the private schooling system. To give your child the best opportunities, it’s vital to start saving at an early stage. College and tuition fees can hit you hard later on in life, but without that money, your kids may miss out. https://www.moneysmart.gov.au/managing-your-money/ recommends investing in an education fund – and start as soon as possible. The amount you pay in will be nominal, and it will give them the opportunity to experience a high-quality learning experience.

Real Estate

While there are no guarantees with investment, there’s no doubt that real estate offers a lot of long-term potential. It gives your children a more secure future – and even somewhere to live when they decide to leave home. If you want to go down this route, location is key. According to http://www.marshallwhite.com.au/suburb-guides/brighton/, there are a few things to consider. World-class schools, parks, shopping, and amenities are all highly sought after. Find a location that has all of these, and you should keep your tenants happy.

A family accountant

Finally, hiring a family accountant can be one of the best investments you will make. They will work with you – and your children – to get you the best return on any investment possible. They will teach you how to save your kids from paying tax when you pass away. Most importantly, they will get your children used to the idea of looking after their money.

 

Setting A Good Example When It Comes To Finances

Taking care of your finances is one of the most important things you’ll ever do. Being lackadaisical with the money that you have will only leave you in sticky situations, such as in debt or worse, bankrupt. Another crucial thing to think about, is how your family handle their finances. You can tell your kids all you like about how to save money or becoming financially smart, but at the end of the day, they are going to learn from what you do. Kids will always pay more attention to what you do, rather than what you say. You must set a good example when it comes to your finances. Here’s how to do it.

Start Early

Starting as early as possible ensures your kids develop the right attitude towards money is important. You can do this by making sure you use your money responsibly. It’s no use starting when they are teenagers, as they pick a lot of it up when they are very young.

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When You Do Talk About Money, Know How To Talk About It Properly

When you talk to your kids about money, make sure you know how to talk about it properly. You should be open with them about what you’re doing with your money, and give them advice on what to do with theirs when they have it. Speaking to them about it like adults is important. Try not to discuss money in a negative way, as many people do. Although money isn’t everything, a positive attitude towards money will help them later on in life.

Give Them Pocket Money And Encourage Them To Save/Spend Wisely

Give your kids a set amount of pocket money and encourage them to save and spend wisely. Make sure you encourage them to develop a savings habit early on. When they want to buy something, let them work out how much it will cost and whether it’s worth it.

Live Below Your Means

So many people spend more than they earn and end up in debt. It’s up to you to show your family how to manage their finances by living below your means. This means spending less than you actually earn, in short.

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Plan Your Purchases
Planning your purchases rather than buying on impulse sets a really good example to your family. You should know you’re going to buy something a few weeks in advance so you can adjust your finances accordingly. Never buy something without mulling it over properly first, as the novelty can quickly wear off and you end up being a consumer for the sake of it. Act like you have to wait for a check to cash. Although, you can get them taken care of pretty quickly these days. See this link for more references.

Try Not To Use Credit For Non Emergencies

Credit can be useful, but using it for non emergencies can be a bad idea. You could potentially end up in debt with a lot of interest to pay, and kids usually pick up their parent’s spending habits. Unless you have an emergency or it makes sense to use your credit for whatever reason, steer clear. Don’t spend money you haven’t got.

Parenting From Beyond The Grave. Teaching Children Finances For When You’re Not Around

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Becoming a parent is a huge responsibility. That responsibility doesn’t end, even from beyond the grave. Every parent takes steps to ensure their children would be okay should anything happen. Discussing when you won’t be around anymore isn’t nice, but it’s necessary. It can be reassuring to have relatives who could take care of things. Even so, it’s important to talk things through with your children so they know what would happen. Don’t hide this from your kids, especially as they get older. How can they learn if you don’t teach them? Here are some things you should take time to explain.

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YOUR WILL

If you don’t have a will, you should write one. If you do have a will, it’s important to discuss the document with your children. Setting up a will is the best way to help them figure things out after you’ve gone. Bear in mind that it won’t be any good to them if they don’t understand it, or don’t know it exists. Talk them through the contents of your will and make sure they know where it’s kept. Keeping them in the loop will give them much greater understanding of things. Ensure they’re prepared for the worst. Thorough explanation helps avoid confusion or arguments when the time comes. It’s also worth discussing who will be taking care of them should anything happen. No one wants to have such a sombre conversation, but it’s necessary. It will put all your minds at ease.

LIFE INSURANCE

Explaining the value of insurance to your children will help them understand the need for insurance when they get older. It’s essential that they know how important these added policies are. While you’re explaining insurance to them, it may be worth mentioning life insurance. It’s crucial that your children are aware of any life insurance policies you have. That way, they’ll know what they’re owed when it comes time. This will also help them set up their own life insurance policy later in life. Our reference to our life insurance policies can make a real difference later down the line. Learn what your children will receive from your policy after your death so that you can explain it to them. Make sure they know what you pay in and why you do it. Show them phone numbers and who to contact should they need it in the future.

EXPLAIN TO THEM ABOUT ANY TAXES

There are often fees involved in death. Maybe you’ve got savings, or it’s just taxes on your estate that would need paying. It’s important to discuss this with your children too. Make sure they know what they would have to pay, and how to pay it. This knowledge is crucial. Make sure to explain it in terms your children would understand. This conversation may be best left until your kids are a little older and have some understanding of the tax world. Be realistic in how much your kids are going to understand at any given age.

 

Is the Virtual World Contributing to Financial Illiteracy?

There is no doubt the internet has changed the way we shop and make purchases. Not only has it made things more convenient, letting us make purchases from the comfort of our own home, but also internet shopping has removed the need for cash. Even when we do venture out to go shopping, many people forgo physical money altogether, preferring instead the convenience of paying for everything with plastic. However, if you have children, this may not really be a good thing.

The problem with this cash-free society is that it makes teaching children about the value of money incredibly difficult, because children have nothing tangible to learn with. Even when we withdraw cash from a bank machine, the concept of where this money comes from can be quite difficult for a child to grasp. After all, you have simply inserted a plastic card into the wall and received cash.

There can also be issues with parents opening up bank accounts for their children. While on one hand this is a good idea, as it helps children learn about saving and earning interest, it can also remove the tangible nature of money because looking at numbers on a bank statement is far removed from counting out coins from a piggy bank.

Is a cashless society causing financial illiteracy?

Plastic culture

Of course, children need to learn about using plastic. Both credit and debit cards are essential and unavoidable tools they will have to get to grips with by the time they are adults, and by the time today’s children grow up and become financially independent, credit and debit cards are possibly going to be replaced by the next generation of phone or watch based payment. However, without a basic understanding of money, where it comes from, the difference between debit and credit, and knowing that money spent equates to money earned, we could be at risk of bringing up a generation into this virtually cash free world with high levels of financial illiteracy.

Already, many children are growing up with a limited grasp of how debit and credit cards link to physical money. Many parents make purchases for their children on the internet, buying books, video games and other items. Some parents are even giving children their very own credit card to make purchases or to act as a safety net in case they need money when they are out. In addition, other parents readily offer up their credit card details to their children so they can purchases on the internet themselves or even open up credit accounts on Amazon, Netflix or iTunes, all of which can have unforeseen consequences.

The blurring of real and online worlds

A good example is the number of parents who open up accounts for their children to play apps and games online. As most parents know, online gaming is incredibly popular among children, but many games not only require a monthly subscription to play, but also in many cases, allow players to purchase additional items in the games using real money. Of course, parents have to hand over their credit card or debit card details to open the accounts for their children, which is where the danger lies.

An increasing number of news stories have highlighted incidents of children running up huge credit card bills by making purchases while playing online games. Many of these children are very young, so don’t grasp the concept that buying things in a virtual game world has an impact in the real world. In addition, the number of children that run up bills by making online purchases without their parent’s knowledge is rising too.

All this shouldn’t come as a surprise, because but with so many of us now making online purchases, the line between the real world where money is physical and has to be earned, and the virtual world, has become blurred. It is, therefore, no wonder that children have a hard time grasping the basics of financial management and how credit cards should be used responsibly, which could be costly when they grow up.

Young debtors

There has been a significant rise in young adults, and in particular, students, getting into deep financial trouble because of improper credit card use. In the United States, one fifth of all bankruptcies are filed by college students, and the picture is not much better in the UK. Most students have little or no credit history, and yet many are offered credit cards as soon as they start university. The consequence of this is that many students are getting into difficulty. Even by university age, not enough students have an understanding of interest rates and charges, but one of the biggest dangers is the ease in which credit cards give ready access to cash. Credit card cash advances are controversial, because they can encourage irresponsible behaviour. Making purchases with a credit card is one thing, but withdrawing cash that may be spent on anything, including socialising, leads many students to become debt ridden before they’ve even started work.

Another problem is that many students are leaving school with high levels of financial illiteracy and without a strong psychological link between actual cash – the physical money they earn – and the money they see in their bank account and credit cards statements, which is compounded by the reliance of plastic for online shopping and the diminishing use of cash, as mentioned earlier.

Back to basics

This psychological link is an important one too. Because even if a young person understands that the money borrowed on a credit card has to be paid back, psychologically and subconsciously this link can remain fuzzy. Growing up in a world where money is not tangible, but virtual, means the psychological link between what you have and what you have earned with what you can spend can be difficult to develop, but as with most things, by teaching children about money and the value of things at a young age, can help reinforce this psychological link. This is why The Financial Fairy Tales Books seek to teach both money skills and values.

Money advice for parents

Most children get money quite early on in life, whether as a Christmas or birthday gift or as pocket money, and often this is where developing this psychological link should start. For instance, paying money directly into a child’s bank account may seem like a good idea for encouraging the child to save, but actually handing them the physical cash helps enforce the idea that money is a tangible thing that exists beyond the numbers on a bank statement or online account.

Secondly, many parents make online purchases for their child and either deduct the money from their child’s pocket money, transfer it out of their bank account or even not take it from them at all. By far a better tactic is to make your children physically hand over the cash before you make any payments online, which again, will reinforce that what is spend on the plastic has to come from somewhere. The same is true in making purchases in physical shops. The act of handing over physical money and receiving change shouldn’t be underestimated, and neither should the importance of the trust old piggy bank, as it can provide a child with something that is physical, tangible and visible, rather than virtual.

3 Money Lessons for Your Teen

Teaching children budgeting is like riding a bike. You gradually show them how to do it and once they learn it, they are on their own without your support. After that, they will never forget how to ride a bike. After all, you do want your child to have a great annual credit report to present whenever required. So, given below are a few approaches you may adopt to make your budgeting lessons more effective for your child:

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1. Give Your Teen A Debit Card – Start with a debit card and gradually progress to credit cards. He will have a limited amount that he can use and has to manage in it. Giving your teenage child a debit card will teach him to budget his expenses. When you receive the statement, sit with him and review it. Discuss what was essential and what expense could have been avoided. He will soon learn the art of budgeting.

2. Add Him As An Authorized User To Your Credit Card – After he learns how to budget his debit card and has managed his account successfully without any overdraft fees, you can take your finance lessons to the next step. Add your teen child as an authorized user to your credit card. There are two benefits to this. The first is that he will have a credit history and the second benefit is that he will learn the intricacies of managing a credit card.

Explain the details of credit, with an explanation of interest rates, APR, how to repay his bills and how he can find out errors in credit card bills. Teach him to consider all these factors when he makes purchases. This is also the right time to give him lessons on credit report and credit score and how credit card bills affect them. Explain how a low credit score can make him pay high interest rates when he will want to take a car loan for his car purchase later on in life among other things.

3. Let Him Prove That He Is Financially Responsible – Now that he has a steady income and has proven that he can manage his expenses, it is time to set him free. Let him get his individual credit card and start building a credit history. You have taught him well and it is now time for him to prove that he is financially responsible.

Credit lessons begin early in life. You can teach your child how to manage in a limited budget and then supervise them. They are going to need these lessons in future.