At Warwick Wealth, most of our clients have saved enough money for a comfortable retirement. But will your children and grandchildren follow suit?
No-one knows what kind of world the youngest members of your family will be living in when they reach their golden years. But one thing is for sure – it can’t hurt to encourage them to save from as early an age as possible. By teaching your children or grandchildren the time value of money, you can give them the head start you may not have had.
Here are three simple money management lessons that you can pass on to younger generations (and perhaps even learn from yourself).
- Delayed gratification
Teach young people the value of patience when it comes to saving and investing. Instead of blowing all their pocket money on sweets and stickers, encourage them to set a goal and save up some pocket money towards that goal each week. When they are able to afford a special toy after a few weeks, they will realise how worthwhile it is to forgo instant satisfaction for a bigger, better reward in the longer term. Learning how to delay gratification paves the way for saving and investing later.
- Start saving early
While it is never too late to save for your future – the earlier you start putting money away, the more your nest egg will grow from compound interest (interest earned on interest). When a child is old enough to understand the concept of saving and they have successfully saved for short-term goals, encourage them to save for a longer-term goal. This could be as ambitious as their first car or a deposit for their first home. Explain how compound interest works – even a small amount saved each month could add up to a significant lump of capital over a decade or two.
- Protect your credit history
When your grandkids land their first job, chat to them about how easy it is to slide into credit card debt. Teach them not to use a credit card unless they can pay off the whole amount they’ve spent each month. Otherwise, they could find themselves with the burden of servicing debt every month before they’ve even bought their first car or home. Late payments could also affect their credit history, which could prevent them from getting a car loan, mortgage or even a job in the future, as some companies run credit checks as part of the recruitment process.
If you would like more advice on how you can secure the future financial wellbeing of your heirs – contact Warwick Wealth on 0800 50 50 50.