As a parent or a grandparent it is often tempting to give a gift of an envelope full of cash for birthdays and Christmas, but is this teaching the younger generation valuable money lessons?
There are better ways to invest in the future of your off-spring which helps them master money earlier, for a more secure financial future.
Start with the basics
Before you even consider gifting your junior family member with money, it’s important you instil in them the mantra that money isn’t only for spending, it’s for creating wealth too.
Why? Because their early interactions are likely to involve spending, so it’s critical you teach them from a young age they need to hold on to some of that money for a rainy day.
A savings account
A piggy bank is fine for tiny kids, but once they grow a little older a savings account is a brilliant way to teach them how banking works.
Shop around for a savings account which pays a decent amount of interest. You'll likely be required to sign on as a co-owner of the account until they are old enough to take complete control of the finances.
Think investment funds
Opening an investment account for your child or grandchild will provide them with a kick-start to their future financial security, as well as helping them understand the basics of investing in an educational and safe way.
You can also start putting a long term investment strategy together, ensuring it is realistic for their age and financial literacy.
For more information on investment strategies to bolster wealth, you can visit Fiducian Funds.
Set up some rules
A kid's life is already jam packed with rules - rules designed to put boundaries in place for their safety.
And just like rules for kids are necessary for life, they are just as crucial when it comes to teaching them about how to manage their money.
Perhaps one of the most critical rules is: 10% of your salary should be put aside for emergencies, 20% for investing, 10% for superannuation contributions and 60% for spending.
According to financial counsellor Scott Pape — better known as the "barefoot investor" — children should also earn their pocket money as opposed to giving them money for nothing.
"My view is that you should be paying pocket money," he told the ABCin an interview.
"[But] a lot of parents will either not pay pocket money, or it fizzles out, or they're actually giving their kids money without them having to work."
Get started on Superannuation
Helping your teenage family members set up a Superannuation fund is another great way to set them up for financial success. As they start to get part-time and holiday jobs, helping them select and control their Super will prevent them from having multiple Super accounts with small amounts of money being eaten up with fees.
With so many different Superannuation products available, it is best to talk to your financial planner to find the right one for your family members.
Remember, setting up the next generation for financial success is like learning to ride a bike - you get them set up and help them understand what they need to do and what not to do, and then send them off on their ‘wealth bike’ armed with the skills and knowledge to make considered, intelligent decisions about their finances.
For more information and tips on how to maximise your wealth, book a free consultation with Fiducian Financial Services.