It’s every parent’s dream: Their child will be happy and healthy throughout their lives. That includes the offspring being financially secure.
But parents have very different ways of going about it – all of which can be valid if applied to the right children. Their strategies don’t always involve raining money done on the kids.
Some parents believe in giving every opportunity from day one. That includes everything from music lessons for pre-schoolers down to maths tuition at school. The idea is that they’ll find a talent to develop from which they’ll earn a good income.
Others believe that teaching resilience is more important than anything. A resilient child will grow into a well-rounded adult capable of standing on his or her own financial feet.
Then there’s the trust fund brigade who believe that providing the children with a trust fund to buy whatever they need when they need it is providing for the children’s financial security. I’m not convinced on this one because it makes some children feel entitled and unsatisfied with whatever they receive .
Leaving a bequest. Leaving money directly to the children in a Will or to a testamentary trust makes some sense. That way you leave something for the next generation. Yet because you might live to 100 or lose it all in rest home fees, the children still have to plan their own financial future.
Cutting the kids loose. There’s yet another belief that giving the kids a good education, then cutting the purse strings will make financially responsible adults of children. Like every approach this does work for some children. But both nature and nurture make children react differently to their financial circumstances and no one approach will work for all.
Teaching them the financial facts of life. A brand new book Gold Start. Teaching your children about money is well worth the $34.99 price tag. The book by Kiwi financial planner Andrew Lendnal has hundreds of ideas of how to teach your little ones about money with fun family activities. There’s even a quiz and some Monkey See Monkey Do mistakes that parents should avoid.
For children to be financially secure, it’s essential for parents to make sure that they’re setting a good example. That means spending within their means and also setting financial goals and achieving them. If little Johnny sees mum and dad buying everything they want on tic and not budgeting, he or she will follow suit.
If you want your family to be financially secure, it’s a very good idea to make sure you have adequate insurance cover. Most Kiwis are three months from bankruptcy. Anyone can lose his or her job or fall sick with a serious illness. It happens to people every day.
Most people need sufficient life insurance to ensure their spouses or partners can survive financially in their absence. It can also be a good idea to have critical illness cover and even redundancy cover for the mortgage at least.