Families and money

By BEC WILSON

This generation of retirees has more wealth than any before it. Many have children battling to get ahead in life, or happy to remain semi-dependent for years.

If you’re in this situation, one of the greatest legacies you can leave your children with is to teach and instil financial understanding, set up the right support structures and grow their confidence while you’re alive.

Let’s take a look at how that can be done. 

As a parent, one of the most important roles you play in your children’s lives is to care for them through thick and thin. So, it also makes sense that, as you have probably learned along the way, building financial independence in your children is an important job that needs to be done.

But what can you do to help and why would you bother? Here’s my best suggestions, learnt from years of speaking with modern retirees about their families, finances, and regrets.

Think about sharing some sensible money tips with your kids and grandkids from a young age and continue as they grow. 

I’m not talking about becoming a finance professor or conducting lectures but imagine how much impact you could have on your adult children’s or grandchildren’s lives if you taught them how to budget as they started to save for their first home, or shared practical investing tips with them as they started to build their savings.

Teach your kids the real-life stuff they won’t find in textbooks – like how to resist buying that tempting but unnecessary gadget.

Reduce and later eliminate paying your kids’ expenses. 

As your children grow and mature through their own education, it is wise to gradually immerse them in how the world really works when their parents are not paying the bills.

If you keep paying for things, your children will keep depending on you to pay, and that doesn’t build their independence or sense of financial confidence at all.

Instead, teach them how to live within their means and grow their means with their own prospects. It helps them to become independent.

Once they’re working in their chosen field, the best way can be to gradually slow down paying their bills or living expenses and let them take it over. Their confidence will grow with every bit of independence they achieve at their own hands. Watch them bloom.

Teach your kids that money issues should be carefully thought through and can be scary for you too. 

Money issues can be nerve-wracking, right? They’re even more scary when no one else seems to have them and you do. So, break the taboo. It can be liberating to hear about money issues and woes within families.

It’s good to try to make money into a more casual conversation, like talking about weekend plans or the latest binge-worthy show. When you discuss money openly, you're not just sharing numbers, you're sharing confidence and letting your kids get an inside view of how money works.

If they see that you make slow, careful decisions with money and occasional mistakes, and recover from them, they might feel encouraged that they can do similar.

Teach them to build a safety net and maintain it all their lives. 

We all really want our kids and grandkids to spread their wings and soar but setting them up with the skills to build their own safety net is important too.

For them, the knowledge they have a safety net in place is often a fundamental step in the process of learning to take risks. So, take time to explain why safety nets are important. Help your kids set up emergency funds or investment accounts that will be there for them to fall back on in life.

Think of it like teaching them to ride a bike with training wheels – they can explore new roads and pathways knowing they won’t crash and burn if things get bumpy. 

Be a leader in financial smarts and savvy living. 

Actions speak louder than words, right? So, don’t underestimate how important it is for your kids to see what it means to be financially responsible.

Let them in on the reasoning behind your spending choices, demonstrate the art of saving up for that dream holiday, and explain why you're investing in both high yielding and high growth investment opportunities.

Talk to them about superannuation and why they have it and explain how it has worked for you over your lifetime. When they see you putting your money where your mouth is, they're more likely to follow suit.

Consider helping them step on to the financial ladder of life, rather than supplementing everyday expenses or giving them an inheritance when it’s too late.

It’s tough to buy your first home in Australia today. Yet, from decades of data, we know it is one of the most important steps a young person takes to build their wealth and financial confidence. If you are a parent who is financially secure or even affluent, you have a couple of options for distributing wealth and helping your children at the same time.

You can leave your wealth as an inheritance, which many might receive in their 50s or 60s when you expire, well beyond the most difficult struggles of their lives. Or, you could contemplate how you can help your children pragmatically while you are alive.

I have to admit being impressed at those who can help their children earlier in life with the big leap onto the financial ladder of home ownership, when the time is right, and then get to watch them thrive from the support. 

It’s important to know that you don’t have to hand over wads of cash to help a child buy a home anymore. The banks have dedicated guarantor loans that can allow you to put up only the required amount of security without taking on unnecessary risks.

Ultimately though, the most important thing to recognise is that you likely have a treasure trove of knowledge to share with younger generations. By teaching real-world money skills, boosting confidence, and creating a safety net, and maybe helping them get on the ladder of life, you're giving your kids the tools to independently grow their own legacy.

So, as we step into this new era of generational wealth, let’s make sure we’re passing on more than just an inheritance – let’s pass on the power of talking more openly about money and the joy of watching our kids and grandkids ace their financial game.