In retrospect, I’m sure we all would have done things differently when it came to financial planning, especially if we had the knowledge we have now when we were teenagers.
Would we have invested in a pension earlier in life or made provision for life insurance?
If we knew then what we know now, we would be in very different situations.
Unfortunately we can’t turn back time, but we can prevent history from repeating itself by ensuring that our children have the knowledge and skills to become financially independent and retire comfortably without worries.
What we can teach our children
- Power of interest – compound interest is the 8th world wonder. The more you save the more interest you earn on interest. Teach your children to save from an early age. Not just a savings account for their savings goals, but good interest earning investments to build wealth.
e.g. £ 50 a month saved over 30 years with an average annual interest earned of 6% will amount to £50 225. That’s £18 000 in contributions and £32 225 in interest.
- Invest early – when we are young, we think we are invincible, and that time is plentiful. Time is an ally if you save early. Open a retirement account for your children when they are teenagers and contribute the minimum amount into it. When they reach working age, they can continue contributions with a 10-15year head start. That extra 10-15 years of compound interest will be the difference between a money-tight retirement and a comfortable retirement. Imagine saving for retirement for 50 years as opposed to the average 35 years.
e.g. a 50-year retirement investment (starting at age 15 and ending at age 65) at £50 a month with a 2% annual increase earning an average of 6%, will amount to over £255 000. As opposed to the average 35-year retirement investment (starting at 30 and ending at 65) giving you just over £90 000.
Time makes all the difference, and your teenagers have the advantage of more time.
- Become credit savvy – teach your teenagers about good credit and bad credit. Don’t let them fall into the same easy credit pit that we have. Instant money is great, but what about the interest and repayments. Also make sure they read the terms of the contract before signing anything. High interest loans and credit cards could cripple you and cost you thousands annually.
Create a ‘saving way of life’ instead of a ‘credit way of life’ mindset in your children and they will become financially independent and retire with comfort.
Your adviser can help start a retirement savings plan for your children to give them a necessary boost for their financial future. [email protected]
Please note, the above is for education purposes only and does not constitute advice. You should always contact your Acuma deVere adviser for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.