Money lessons for children

Money lessons for children will help them the rest of their lives

Personal financial planning onlineMoney is an integral part of modern living and children who grow up understanding money will have a real advantage in life. It is up to parents to teach their children about money. This should start early with money lessons for children. Our values around money are established at a very young age. It is important to start teaching with money lessons for children. Good money habits for children should be taught from the moment they can speak, because it will be nearly impossible for them to change these habits when they are parents themselves.

What you need vs what you want

We need to assist children to understand that their financial resources will always be limited. Very often parents try to give their children everything they want, especially with high demand items such as smartphones and tickets to the latest music concerts. Use your kids’ demands for these items as an opportunity for  money lessons for children. If they want a smartphone, help them to figure out how to earn and save enough money to buy one rather than just buying one for them. This should include doing extra chores at home to earn additional money; this establishes the principle of extra work leading to more money. In addition, you could help them to open a savings account where this money can earn interest until they have sufficient funds to buy the phone they want. You might even teach them how to start a small business to earn money to buy the things they want. The lessons involved are numerous: marketing, negotiating prices, scheduling workloads and determining what resources are required.

Budgeting basics

Don’t shield children from the real cost of food, clothing and luxuries, they will need to understand these costs when they live on their own. You could start to involve them in your budgeting decisions e.g. what the family spends every month and how this relates to the family income. Teaching your children how to budget is nearly as important as teaching them to read, it should be second nature by the time they leave school. Try to impart knowledge about money without burdening your children with guilt. When times are tough, try to use the situation as an opportunity to explain how the family will adapt and more importantly how to develop a plan to work yourselves out of your situation. These are all excellent money lessons for children.

Investing for the future

By the time your child is in high school, you should be discussing how their savings should be invested. Very few young adults know anything about investing. They might have heard of concepts such as unit trusts and shares but they have limited understanding of what these are. Take the time to explain these concepts to your children and start investing some of their money into a unit trust or Exchange Traded Fund (ETF) such as Satrix to teach them real-life lessons about investing.

Tech them to fear debt

One of the most important lessons about money will be how they manage (and preferably avoid) debt. Try to raise children who have a fear of credit cards and personal loans. The one factor that most often leads to financial success is the ability to save and to avoid debt. Very few people manage to do this and that is why so few people are able to retire comfortably. Remember these useful money lessons for children.

Consistent discipline

Your children need to learn that financial success is achieved by consistently spending less than they earn. Teaching money lessons for children will do the trick. Achieving a balance between instant gratification and long-term discipline is critical. If your children have this discipline by the time they leave home, you will have given them a real head start in life.

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A financial services career is a great choice

Here is some advice about a financial services career

Advice about a financial services careerIf you want a career that is challenging, mentally stimulating and fulfilling, consider a financial services career.

After nearly two decades in the industry, including eight years as co-founder of a financial services business, I have watched many people succeed beyond their expectations. But many have failed, sometimes spectacularly. Here are some pointers that will help you become successful and avoid failure in a financial services career.

  • Be an advisor

When you’ve decided upon a financial services career, try to become a trusted advisor to your clients. Ensure this relationship lasts for life. With a long-term focus on relationships, you are not tempted by short-term goals. These could compromise your advice. In everything that you do, put the client first. Even before your employer’s priorities. This is especially true if your internal integrity radar is alerting you to potential problems. You might change employers on many occasions over your career. But you always take your reputation with you. Never compromise your integrity. You will be the ultimate loser, not your employer.

  • Relationships

Be happy and proud of the work you do in your financial services career. Remember, it’s always about people. Try to work with people and companies you admire.

  • Money isn’t everything

It’s not about the money! A financial services career is not a get-rich-quick scheme. If this is your aim, find something else to do. Preferably outside of financial services.

There are people who have accumulated significant personal wealth in financial services. But this is a by-product of their success in their careers. If you research the world’s most successful business leaders (Bill Gates, Steve Jobs, Warren Buffett and Richard Branson), you’ll find they did not start out to become rich. All of them had a bigger goal. Their wealth is a result of their success in their chosen fields. If your primary aim is to get rich, you will take shortcuts at the wrong time.

  • Don’t predict anything

If you manage money in a financial services career, clients often expect you to tell them where stock markets are going in the next few months. What will interest rates do? Or, what is going to happen in the currency markets? Statistically, if you tell the future it will be wrong. This is going to damage your credibility. Being constantly wrong is not a great way to build your professional reputation. Rather be honest. Tell others you have no idea what is going to happen. Neither does anyone else.

  • A public profile helps with a financial services career

Build a public profile for yourself. Write, present and educate people about money. Create a reputation as a knowledgable person. Write regular articles and get these published. The internet is a great forum for getting exposure. You can use your social media profile to broadcast your articles. Try to get on radio and TV often. Always make yourself available to the media.

  • Get skilled

Work on your interpersonal skills, especially client coaching skills. Technical knowledge is important. But it is only the first step. There are many technically knowledgable people in our industry. Very few of them can impart this knowledge in the proper way.

  • Be available

Always be available to your clients. Especially if you have to give them bad news. Investment managers in financial services careers tend to hide from their clients when markets are falling. This is a cardinal sin! Always return phone calls and emails within one working day. This builds trust with clients and reminds them you are there for them.

In summary, when you embark on your financial services career, protect your integrity at all cost. Focus on your clients and their goals. Develop a long-term game plan. In this way you will build a wonderful and constructive life for yourself, your family and your clients.

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Will you have enough money when you retire? Thinking of investing? Wondering how to repay your debt? Where to invest your money?

With a dizzying array of asset classes, asset types and more information than anyone can possibly process alone, why not speak to one of our expert financial planners? Get advice that’s tailored to your unique financial situation now.

 

Education policies

Parents of young children often buy “education plans” that are sold to them by life assurance agents. The sales pitch is quite simple and powerful – you need to start saving to ensure that you can afford to send your beloved child to school. Often mention will be made of how bad the public education system is and that private schooling is the only viable option for parents who really love their children. Whilst I like the principle of saving for your child’s education, there are easy and cheap options that are often much better than these “education plans”.

What is an education plan?

Education plans are quite simply endowment policies that have been packaged by the marketing departments of life assurance companies. You can buy an education plan and use the money for any purpose; they have no special dispensation or tax rebates, they are just ordinary endowments. Given our current tax regime, I feel that endowments are better suited to wealthy individuals and Trusts because they have very high Income Tax and Capital Gains Tax rates. If you are not at the highest tax rates, you probably won’t derive much tax benefit from an endowment. Whilst it is true that the proceeds of an endowment policy are tax free once it has matured (i.e. been going for five years or longer) the endowment pays Income Tax and Capital Gains Tax at quite a high rates of tax within the policy. I often recommend endowments to wealthy individuals or trusts but only when the cost of the endowment is totally subsidized by the fund manager and only when there are no initial costs/commissions to the endowment.

Education plans are sold by life assurance companies and they inevitably carry an upfront cost/commission as well as a pretty hefty annual cost. Unfortunately these costs are not easy to understand. By my calculations, the annual costs range from 3% to 5% per year and the upfront costs are usually similar. I feel that these costs are far too high and ultimately make education plans a poor choice for education saving.

What are the alternatives?

FUNDISA

Government, ASISA and a selection of financial companies created an investment called FUNDISA http://www.asisa.co.za/fundisa/ that is designed to help people save for a child’s tertiary education. It is a good alternative for people who can only afford to save small amounts – the minimum starts at R40. Government will top up your contributions to this scheme by adding 25% to the amount saved annually BUT only to a maximum of R600 per year. The annual cost is reasonable at 1.25% + VAT and given the low minimum investment amounts, it should certainly be considered by those who can afford to save small amounts. It is important to note that the money can only be used for approved tertiary institutions. In addition, the underlying investment is an income or money market unit trust. I feel there is nothing better available if you are investing less than R300 per month and is certainly better than an education plan, in my view.

Exchange traded funds (ETF)

Regular readers of my articles will know that I am a huge fan of ETF’s. If you are not familiar with them, here is a link to the JSE’s website to read more.

When close friends or relatives have a child, I always suggest that they open an ETF account for their child. This is an ideal way for the parents to start saving with a monthly debit order and their friends and family can contribute to the investment on the child’s behalf. I think this is a great investment for debit orders and lump sums of R1,000 or less. If you are saving larger amounts, you could consider a stock broking account to buy your ETF’s.

Unit trusts

If you are not a fan of ETF’s, a well managed, low cost unit trust is also a good alternative. Just make sure that the annual costs are less than 1.5% per year and that you are invested in the right type of fund. If you are saving for a period of 10 years or longer, you really should be invested in a high equity fund.

RSA retail savings bonds

If you have been a bit slack in starting your savings for your child and have a limited amount of time to save, consider the RSA Retail Savings Bonds. They have no cost and your interest is guaranteed by Government. This is ideal for people who are going to need the money within three years or less.

In summary, it makes sense to start saving for your children’s education as early as possible. In fact, you are foolish not to do so. However don’t be suckered by the first life assurance agent who plays on your emotions to sell you a policy. You have many great alternatives.

Get advice

Will you have enough money when you retire? Thinking of investing? Wondering how to repay your debt? Where to invest your money?

With a dizzying array of asset classes, asset types and more information than anyone can possibly process alone, why not speak to one of our expert financial planners? Get advice that’s tailored to your unique financial situation now.