We all want the best for our children, and some of us are lucky enough to be able to provide a financial safety net to help them get the most out of life.
Steps to supporting your child’s financial future come in what we see as three distinct levels. Let’s delve into how you can help your child’s or grandchild’s future.
Level 1 – The easy stuff
Get a Piggy Bank
A piggy bank will teach the fundamentals of money management; these will probably only be small purchases, but the benefits are immeasurable.
Help your children achieve a goal of filling the piggy bank to the brim before treating them to a toy or game. The incentive should become a motivator to save more, leading to good habits for life.
Talk to them about money early
According to a 2017 T. Rowe Price survey, 69% of parents have some reluctance when it comes to talking about money with their children. And only 23% of kids say they talk with their parents frequently about the subject.
But the conversation doesn’t have to be War and Peace. Ask them age-appropriate questions about what they want to do with the money they have; once they know you’re open to these discussions, they may be more comfortable coming to you with money questions.
Level 2 – The long term stuff
Consider the cost of university
The earlier you start thinking about it, the better. Between tuition fees, living costs and accommodation, university is an expensive business and putting a little away in a dedicated savings account will go a long way to supporting future education.
Write your will
Having a solid will so you know your child will be taken care of should be a top priority when planning your future. This should include setting out who should be their guardians were you to pass away before they turn 18, and the detail of how you wish your estate to be passed on or divided between children.
Take out life insurance
Life insurance is very important in protecting your family from future financial burdens in the event of your death. To help them cope with funeral expenses or financial liabilities such as your debts, life insurance can be a substantial safety net.
Level 3 – The life changing stuff
Pace teaching with your child’s development
Cambridge University released research in 2013 into the power of parents to foster money skills at home. The study found that by the age of seven, most children in the UK are capable of complex functions such as planning ahead, delaying a decision until later and understanding that some choices are irreversible; but children under eight years old have not developed an understanding of the difference between ‘luxuries’ and ‘necessities’. So it’s important to start with the little things and work your way up.
Look after yourself
Long term financial security for children can come in the form of inheritance. If you make sure that all your own finances are in order, that you’ve planned your retirement and ensured there is money left to pass on, then your children’s future will be more financially secure.
If you would like to discuss any of these options with your financial adviser, please don’t hesitate to contact us.