Planning For Your Kids Future

Your children's education, financial future, health and happiness are probably the most important issues you will ever deal with as a parent.
As a parent, I want the best for my kids and I never want them to have to struggle financially through their lives.

Some things I am sure about:

•  My kids probably won't get taught how to manage money at school.
•  There are few budgeting skills offered at primary or high school.
•  If I am lousy at saving then my kids probably won't save.
•  If I spend everything I earn and always struggle with money - then there is a high probability my kids will do the same.

Some parents may think "well I had to struggle, so that is how my kids will learn"
At the risk of being a little controversial, please, get over yourself. Your kids deserve more than a bad attitude. Your kids love you unconditionally and worship the ground you walk on. It is only what they learn from their most important mentors and influences in life that changes their attitudes.

There is no right time to start a plan. The most important thing you can do is "Start right now"

Hopefully we are all on the same page now. So what can we do to help our kids financially?

1.  A regular savings plan for your kids.
2.  Teach your kids how to budget
3.  Financially reward your kids for their contribution to the home
4.  Buy your kids some shares
5.  Invest some capital in a unit trust and reinvest the earnings
6.  Offer a savings incentive and match what they save

Where will the money come from? / How will we fund it? / How long do we have to do this for?
Here are a few ideas of where to find that extra cash.

One less morning Latte or Cappuccino
Assume one a day, six days a week at $3.80 ea
YOU HAVE SAVED $1,186.00 per year

One less takeaway meal (which is probably healthier for you anyway)
Assume one a week at a cost of $30.00
YOU HAVE SAVED $1,560 per year

There are savings to be found in many areas. Be creative!

STRATEGIES IN DETAIL

1. Regular savings plan for your kids

Calculator used ASIC Compound interest tool
Assumes annual amount paid at beginning of year
No fee or charges deducted

2. Teach your kids how to budget for this “thing” called money

We all want it, work for it and think about it. Everyone uses money

Money lesson 1 - Teach your kids money is a "medium of exchange"
Money lesson 2 - Money is a good that acts as a medium of exchange in transactions.
Money lesson 3 - Spend less than you earn and invest the rest
Money lesson 4 - Pay yourself first, treat your regular savings like any other bill
Money lesson 5 - Let someone make you money from your money without you having to do anything

For regular bills and commitments
- Plan one month in advance and save 1/12 of what is needed annually every month.
- Put these funds aside in a separate account & pay everything via BPAY.
“Protect yourself from yourself” and don’t make your savings easily accessible

Teach your children that making money is a game - and encourage them to be good at it.

3. Financially reward your kids for their contribution around the home

In other words, pay your kids for doing their part and teach them the value of money.

In essence they are earning their pocket money. You can start early and start with small amounts. 20 cents every time your kid takes out the recycling earns them $1.40 a week.
To a 7 year old $72 bucks a year is a fortune!

Be creative, be consistent and be fair. I promise you your kids will surprise you not only in how much they can save, but also in how much they learn about the value of money.

4. Buy your kids some shares

It does not have to be a large amount to begin with. 100 shares in any of the ASX200 listed companies would be more than enough.
Owning these shares will give your kids an active interest in their investment.
In time let your kids tell you which shares they want to buy with the money they have saved.

For example, if your child owns supermarket A shares, you may find that they lose interest in shopping at supermarket B pretty quickly. They will also be proud as punch when you visit supermarket A
because as shareholders, they are actually part owners in the store!
Your kids will learn more than you realize by having a stake in a company.

The key here is to reinvest all the share earnings and find shares that offer a Dividend Reinvestment Program (DRP).
Your kids will be fascinated by the effects of compound returns over the years.

5. Invest some capital in a unit trust and reinvest the earnings

10 Year timeframe

15 Year timeframe

Assumptions:
Invested in Growth option
Management costs 2%
Contribution fees 2%
Calculator used ASIC FIDO Managed Funds

6. Offer a savings incentive and match what they save

Get creative and use some entitlements that are already available.

Assume your kids are at least 15 years old, have started working part time and earning enough to pay income tax. Tell your child that you will match them dollar for dollar up to $500 if they put the money into their superannuation.

Between the two of you, make a Non-Concessional contribution of $1,000 in the financial year. The Government will give you $1,500 for free for doing this. That’s right, $1,500 via their Cocontribution program.

- If you only did this for 3 years whilst your child was still studying,
- Invested the funds in a growth option which earned them 8% after fees and charges,
- And left the money there until they reached retirement…

Their accumulated super would be worth around $326,000

It cost you and your child $10 each per week for 3 years. Could you afford that?

There are many strategies that Highland Financial can discuss with you and we can construct a customized plan that is tailored to your personal situation.

Even if you don’t call us, we hope you use this information to make a difference in your children’s lives.
This is your opportunity to be one of those clever parents that started early and taught their kids important life skills.
As a parent, my kids are the most important people in my world.

If you would like to know more, please click on the Contact Us link provided.