Give your kids the best possible start towards a solid and prosperous financial future by instilling the right habits and disciplines NOW!

Unfortunately, we are now living in a credit dominated society which means your kids are growing up into a society where a credit culture is acceptable and normal (they don’t know any different). There is nothing wrong with credit if handled well, but as we know all too well, the rapidly growing ‘have it today, worry about paying for it tomorrow’ culture, can be a very expensive way to live!

“There’s potential danger on the horizon for your kids!”

WHY? We all think kids get it easy (they do!) but there is actually a lot of mental pressure on them today, especially as they go through their teens. They are expected to study and get good grades, their hormones are going crazy, they are being bombarded with clever manipulative advertising telling them what they should have & how they should look, but worst of all they are under enormous pressure from their peers just to ‘fit in’. This means they’ve got to have the latest clothes, trainers, games etc just to be accepted with the ‘in crowd’.

Add all this together and you have a child who becomes a very good salesperson and manipulator to get you to buy all of these things (the joy of parenthood!). The problem occurs when the child gets accustomed to getting everything they want as this causes 2 big problems ~

• they have no appreciation of the value of money
• they are very likely to continue this trend of wanting and having everything after they flee the nest (bring on the credit!)

They Need a Role Model

It’s highly likely that your kids will grow up and very closely model your attitudes, beliefs and spending habits with regards to money because that’s what they are familiar with, this may come as good news or bad news (only you know;-).

So….if your actions and the way you value and manage money right now as a parent is going to have a very large impact on your kids future…I’m sure you’ll agree, it would make sense to feed them with the right information where good money management and the right habits become second nature to give them a solid grounding for their future?

Keeping it Simple is the Key

Kids will find the subject of money very boring if they hear phrases such as Compound Interest, Investment & Dividend as these are completely meaningless to them. The key is to teach them concepts that are logical and inspiring to them, here’s an example

This is an excerpt from a discussion between a financial adviser and a classroom full of young children aged between 6 – 10, the adviser is attempting to explain compounding interest in a way the children will fully understand and embrace, here’s the conversation

Adviser: “How many of you have ever planted a seed?”
Children: (All hands went up.)

Adviser: “What did you grow?”
Children: “Carrots, sunflowers, lettuces, peas, flowers etc.”

Adviser: “What happens if you don’t plant a seed?”
Children: “You don’t get anything.” (Kids are smart! They looked at the adviser like he was an idiot for even asking such a stupid question.)

Adviser: “If your parents had planted a pine tree when you were born, how tall would it be now?”
Children: (Much discussion) 6 – 10 feet.

Adviser: “If your grandparents had planted a pine tree when your mum and dad were born, how tall would it be now?”
Children: (More discussion) 40 – 50 feet.

Adviser: “How tall would the pine tree be now if it was planted when your grandparents were born?”
Children: (More discussion) 100 feet.

Adviser: “Now, what happens if you don’t plant a tree at all?”
Children: (In unison…) YOU GET NOTHING!!!

Adviser: “What would you have if you planted a tree every year?”
Children: “A FOREST!”

The Adviser then explained to the children that he helps people grow money. One little girl piped up, “Oh, you grow money trees.” (“Yes, I help people grow money trees.”)

Adviser: “What happens if you ‘plant’ money every year?”
Children “You’ll have lots of money.”

Adviser: “What happens if you don’t ‘plant’ money?”
Children “You’ll have nothing.”

10 simple questions that explain the power of compound interest and all the children understood it perfectly. If you don’t plant any money, you’ll get nothing, if you plant just a little money (seed) every year, you’ll have a lot of money in the future. In other words, a forest of money trees for yourself and for your family.

Start Your Kids on the Right Track
If you would like a Free consultation with Darren to discuss Investments or Savings plans for your kids future, call us on 01522 540555 or simply fill in the enquiry form

Here’s another example

Explaining the concept of interest – telling a child to put their savings into an account to gain the interest is fairly meaningless. But if you explain that if they lend their money to the bank/building society, the bank/building society will pay them for borrowing it which means they will have even more money without doing anything – this is far more exciting and inspiring to kids.

Exercise 1 - Buy Your Kids 2 Piggybanks

“This simple exercise could potentially be worth Millions to your child’s financial future!”

In fact it can have such an impact it should be mandatory in every single school and it all boils down to just one thing - Habit

Before we get to the exercise, you first need to understand a little bit about habits ~

Q. Do you ever wake up in the morning and sit on the side of the bed and think to yourself, shall I get dressed today?
A. Of course you don’t, you do it automatically without having to think as you have formed the habit through constant repetition.

We are all creatures of habit whether we like it or not, here’s an analogy to explain how a habit forms in your brain –

Habits can either be conducive or destructive towards your well being, depending on what they are, the following simple exercise takes the power of habit and combines it with the power of compounding to produce huge financial potential for very little (automatic) effort!!!

The Exercise

Step 1. Buy your kids 2 piggybanks

Step 2. Label one of them Saving & the other Spending

Step 3. Decide the percentage split as your child’s is to split all income between the 2 boxes (It is suggested 10% savings as the absolute minimum)

Step 4. Label each Piggybank (example below) with the chosen percentage, e.g. 20% (savings), 80% (Spending).

Step 5. Under Saving write “I save (20%) of all my income as I know this habit will make me rich”

Step 6. Under Spending write “I am free to spend (80%) of my income however I like”

The Results

£1 a day will turn into a £million over 56 years compounding at an average of 12%, now bear in mind this exercise is to deeply instil the habit so your kids will automatically do it when they start earning themselves. In the early years it is far more important to just do it and focus on the long term potential (not just focus on the total accumulated).

Your kids don’t need to earn a lot of money to retire wealthy, its simply about saving/investing regular amounts over a long period of time, the sooner they start the bigger the results!

Just imagine if you had invested 10% of your income from the day you started work and then invested it wisely for growth! This exercise will become almost effortless because it will become second nature to your kids.

N.B. The word rich is being used in this exercise purely to inspire the kids to save and form good money management habits, it’s not to imply greed or guaranteed wealth.

Exercise 2 – Teach them Responsibility

The fastest way for your kids to learn about money is for them to take on some responsibility under your supervision

Try Benchmarking

This is an alternative if you are buying for kids who must have the latest trainers, mobile, clothes label etc. Set a benchmark price that you will contribute, for example, high price training shoes, you set and pay a benchmark of say £30.00, if they choose anything over that price they must pay the difference from their own means. Strangely enough, parents who have adopted this approach have found their children more often than not choose something less expensive than their original request. Once again, they will readily spend your money for their benefit but will think twice if it theirs.

15 Tips to Nurture your kids Financial Intelligence

1. Explain the use of money. Begin as early as age three. Show how things are bought and sold at the supermarket, toy store, etc. Children need to see the real world use of money.
2. Give children a weekly allowance. Most parents have children earn their allowance through good behaviour, responsibility and household jobs. If you attach money to chores, be sure you don't get manipulated. Don't take away allowance as punishment.
3. Increase allowances as children grow. Increasing responsibilities should result in increased allowance. Also, it is a good incentive to give extra allowance for extra work.
4. Introduce expenses. As allowance increases, the scope of expenses should widen. For example, teenagers should earn more allowance, but they should then have to use their allowance for dating and entertainment. Teens who insist on buying clothes with designer labels should pay the extra cost.
5. Teach home budgeting. Explain how a finite amount of money needs to be distributed for food, clothing, mortgage or rent, utilities, car expenses, etc. Include older children in family financial planning. Don't overprotect your children from this.
6. Teach wise consumerism. Have your children compare the same product in different size packaging to determine the best value. When children grow older, explain how and why you choose certain products. Compare prices at different restaurants.
7. Start a savings account. Most children can comprehend the need for savings by age ten. Remember that children are naturally impulsive. In this age of advertising bombardment, children have a tendency to be impulsive spenders. Encourage your child to save a certain percentage of allowance.
8. Start a current account. Some sixteen-year-olds are ready for a current account and a limited credit card. You want them to learn how to manage these tools while you are still around to keep things from getting out of control.
9. Set financial goals. Discuss plans for paying for university or college. Have them calculate tuition costs, living expenses, etc.
10. Encourage them to earn their own money. The best way for children to learn about money is to get their own job as soon as they are old enough. Help them find a job that is safe, has reasonable hours and includes friendly people.
11. Help them learn the differences between needs, wants, and wishes. This will prepare them for making good spending decisions in the future.
12. Introduce the value of saving versus spending. Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home; children can help calculate the interest and see how fast money accumulates through the power of compound interest. An excellent incentive is to offer to match whatever they save.
13. Teach the dangers of borrowing and paying interest. If you charge interest on small loans you make to them, they will learn quickly how expensive it is to rent someone else's money for a specified period of time. For instance, paying for a £499 TV over 18 months at £31.85 a month at 18.8 percent interest means the buyer really pays about £575.
14. Make sure any credit cards aren’t misused. Credit cards have a message: "spend!" Some students report using the cards for cash advances and also to meet everyday needs, instead of for emergencies (as originally planned). Many of those same students find themselves having to cut back on classes to fit in part-time jobs just to pay for their credit card purchases.
15. Teach them to set financial goals. Young or old, people rarely reach goals they haven't set. Nearly every toy or other item children ask their parents to buy them can become the object of a goal-setting session. Such goal-setting helps children learn to plan and become responsible for themselves.

P.S. Children need to learn the value of money, how to earn it and how to manage it. But don't over do it. Spending money on something impractical once in a while is always fun.

Start Your Kids on the Right Track
If you would like a Free consultation with Darren to discuss Investments or Savings plans for your kids future, call us on 01522 540555 or simply fill in the enquiry form

This page reflects the views of Eternal Growth and is intended for educational and inspirational purposes only and should not be construed as advice.