A few weeks ago, my parents made a joke about a kitchen appliance they’d bought 20 years ago with some of the money my brother received for his holy communion in the 90s. “You bought a $300 microwave with my communion money?” my brother asked, pretending to be offended. “Imagine how much richer I would be if you had just left that $300 in my bank account.”
Of course, he was being sarcastic. A few days earlier, my brother and I had a conversation about money and its value over time. We shared stories we’d heard about siblings who made different decisions about their inheritance – one kept the cash in a bank account for years, while the other took some risks and invested it. We debated what we would have done in their shoes.
Like many Australians, my brother and I were concerned about rising interest rates and the impact of inflation. We saw families struggling to make ends meet, cutting back on nonessential expenses, and even contemplating selling their homes. These conversations made us realize the importance of thinking more carefully about the money sitting in our children’s bank accounts. In this economic climate, could we be more intentional with our children’s money?
Financial planner and money mindset coach Canna Campbell emphasizes the need to prioritize the overall well-being and future of the family. She suggests considering using some of the children’s savings to offset interest on the home loan, especially if it helps in preventing the loss of the family home. Campbell acknowledges that parents may put themselves in difficult situations for their children’s benefit, but sometimes the real priority is keeping a roof over their heads.
According to financial planner and ANZ financial wellbeing expert Jade Khao, the decision on how to use the money ultimately depends on personal preferences and aspirations for the children. She advises parents to start by identifying their values and what they want to provide for their children. This could include things like private school education, university fees, a car at 16, or occasional overseas holidays. Khao suggests itemizing the specific costs associated with these goals to better understand what is realistically achievable. She also recommends mapping out a plan to reach these financial goals, which may involve saving and investing.
Khao highlights various investment options such as high-interest bank accounts, term deposits, offset accounts, managed funds, shares, ETFs, bonds, and superannuation. The choice of investment vehicle depends on the specific goals and the pros and cons of each option. Khao advises seeking advice from a qualified financial advisor if the decision becomes overwhelming.
However, the amount of money involved should also be considered. Khao believes that if it is a small amount like $500, it may not be worth the effort, but for larger sums like $50,000, the benefits are more substantial.
Parents should also consider the money lessons involved for their children. Khao asks, “What money habit will this build in the kids?” She encourages parents to be mindful of the behaviors and habits they are modeling for their children. Teaching responsible money management, delayed gratification, and budgeting can have a significant impact on children’s financial literacy.
Although planning for the long-term benefit of the money in their bank accounts is important, it’s also essential to recognize that not being able to provide everything materially doesn’t mean parents love their children any less. Setting realistic expectations and avoiding the trap of thinking they have failed as parents is crucial.
In conclusion, being thoughtful and intentional about children’s money is essential in the current economic climate. Prioritizing the overall well-being of the family, identifying values and goals, and mapping out a plan can help parents make informed decisions about the money. Teaching children good money habits and showing responsible financial behavior is just as important as the financial decisions parents make.
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