Recently I was reading another article about how a parent can ensure their child will become a millionaire.
I’d my family as a typical family, in respect to income, it’s not huge, but it just manages to fit the needs of our lives. We’d like more holidays, more meals out, more leisure activities, less stress around birthdays and Christmas.
More so for me, as a father, I would dearly love my children, as they age and have their own families, not to have these day to day concerns.
Clearly, if they had a 7 figure bank balance, this would be the case, in reality, they wouldn’t even need that much.
From my perspective, the solution presented in the other article was out in fairy land, but it did inspire me to write this note.
Research from Tesco Savings gave that 51% of our 6 to 10 year olds believe that they will be millionaires one day. Even in the midst of a recession, our kids remain undaunted, that said, only 0.5% of the nation is currently a millionaire.
We should not discourage this as current society seems to have few ambitions nor significant goals.
The article went on to state that if you invested £1350 a month for 25 years with compound interest of 7%, they would manage it. If 25 years was too much and 18 is preferred, then you’d need to stash away £2500 a month.
I have 3 kids, so that would be a measly £4050 or £7500 a month put away, yeah right!!
Probably most people reading this, including myself, do not have such spare cash or even the possibility of considering that investment.
What is important for me and a vital message that I am trying to get into my own children is the power of compound interest.
For me, yes, saving is essential, assuming it can be afforded, but learning how to handle money is much more essential, chances are that if you handed over a 7 figure bank balance to your children, without then having any real financial education, they would spend it in a very short time, with little concern for the future.
Kids, like adults love to impulse buy, so training them to handle this urge is very important. I’ve had many upset discussions where I have tried to rationalize the spending needs of my kids. Trying to get them to consider and really evaluate if they really need that gadget or novelty.
Sometimes I have been thanked afterwards, when they have realized it wasn’t worth it, other times rather disliked for quite a while, but reason does generally sink in.
My tactic is getting them to think if it’s worth it, if they need it, or even if it’s still a must have at this stage, getting them to sleep on the urge and re-consider it.
We are now trying to encourage and teach the wisdom of savings, trying to show that it earns interest and explaining compound interest, the message is getting through, but slowly – quite ironic as we do not save and have learned many financial lessons the very hard way over the years.
The other skill being imparted is that of business thinking, it’s amazing how a few items sold on Amazon or eBay can spark a young persons thinking as an entrepreneur.
Going from selling unwanted items to learning to take better pictures, trying to find the best words that sell, develop simple web skills to enhance adverts and even buying other items in order to re-sell them.
This urge to work and earn is now growing within them, a common discussion is them asking where they may find work, which, to be honest, makes me so proud that they actually do want to make an effort and work in a society that seems quite lazy at the moment.
As a parent, you do have some serious things to consider also, like it or not, your time is limited – as such you need to ensure that should the worst happen, you have insurance and protection in place to assist your loved ones. This can be costly too, but does need careful consideration.
I have learned some valuable lessons and ideas from people I’ve known and worked with over time, some that I hope to put into use. I do have some very wealthy and successful people around me right now, I am trying so hard to analyze their methods and lifestyles, I will share this as I learn.
To close this article, after covering many subjects quite quickly, yes, we’d all love our children to have no financial worries as they grow older, but this is not normally a reality we can enjoy. What is important, maybe more so, is teaching them how to handle money, how to save it, how to invest it and how to protect it.