Wealth Connexion explores some of the key financial skills to pass onto your children and what can happen if you don’t.
While parents know the importance of helping their children acquire skills in sports and academics, they may often overlook the necessity of ensuring that their children have financial literacy. Amid increasing living expenses, financial advisors in Brisbane are stressing the importance of educating your children about money and its value as early as possible to ensure their future success. Continue reading to discover what some of the most significant financial skills that you can pass on to your children are.
Setting Savings Goals
The most important financial skill to instil in your children is saving. You can begin to teach your children to save money by giving them a piggy bank in which they can put pocket money or birthday money they may receive from family members. As your children get older, take the initiative by setting up a bank account for them which will help them not only to save any earnings they may make from a part-time job but also help them to gain interest on their savings.
As financial advisors in Brisbane, we believe that it is important to teach your children the value of money by having them work towards their own goals. For example, do they want to buy a car after they pass their test or travel overseas once they have graduated high school? If this is the case, help them to put money aside to ensure that they learn about the effort that goes into saving for these goals, a skill which they can then apply to larger goals later on in their lives.
Budgeting
It is also important to help your children avoid falling into unnecessary debt in the future. This can be achieved by teaching them the importance of budgeting and understanding the difference between a want and a need. Teaching children good decision-making skills and educating them about the consequences of buying things outside of their means will allow them to become more financially responsible.
Managing Debt Effectively
Whether it is a credit card debt, a student loan or a home loan, your child is likely to be in some sort of debt during their lifetime. Given this, it is important to teach your children how to manage this debt effectively with regular payments and to make sure they know not to ‘bite off more than they can chew’ when it comes to loaning money.
Investing
It is also important to make your children aware of other financial options outside of saving their money in a bank account, such as investing. Investing is a key factor in building wealth over time and helps children to understand that higher risks have the potential to generate higher returns. Guiding your children through the process of investing also fosters discipline, patience and delayed gratification which are essential qualities to ensure financial responsibility. If you are interested in setting up a beginner investment portfolio, contact our trusted financial advisors in Brisbane.
Overall, ensuring that your children have financial literacy will prevent them from becoming financially dependent on you and from making poor financial decisions.
