Kids and money – it’s never too early to start

When teaching your children to manage their money you are helping your kids grow into financially savvy adults. You might even learn something about your own money habits along the way.

Children see money nearly every day, and as they become old enough to recognise the currency value on coins and notes they’ll want to start counting – just be mindful that  small children and coins don’t mix well.

If you decide to give children pocket money or  pay them for doing age-appropriate chores, encourage saving by giving them a moneybox. Get yourself a moneybox as well and each time your child puts money away, do so yourself. It could be beneficial for you too!

As they get older, open their own bank account. Explain how interest works and talk about their savings goals. If, for example, they want to buy a new bike, discuss how much it will cost and how much they will need to save each week.

When your child is old enough, introduce them to their bank statement and point out any fees and charges. Children of all ages often assume that ATMs supply unlimited cash. When making a withdrawal, show them the receipt and explain how the balance has reduced.

The humble mobile phone can be used as a great opportunity to teach kids about meeting financial obligations. Show them how to put aside money for bills, allocating the remainder for savings and spending.

Part-time jobs are a standard way for teenagers to earn money and choosing how to spend it. A debit card on their bank account will give your kids an early introduction to how “plastic” works – particularly when it’s  cool to ‘tap and go’. Except with a debit card, when there’s no more/nothing/no funds left, there’s no more/nothing/no funds left. Resist the temptation to top up their account if it is/becomes empty.

Learning early that plastic money is not limitless can avoid a lot of grief later in life. The Reserve Bank of Australia reports that there are currently more than 16 million credit cards in use in Australia. Across those cards, there is more than $31 billion accruing interest every month! Nobody wants their child to add to those statistics.

However, not all debt is bad; few people can buy a home without a mortgage.

Your child’s first debt will likely be a car. It’s tempting to help financially but you’ll probably do them a greater service by encouraging them to borrow. Not only will they earn their own credit history, they will understand the importance of borrowing, the effects of interest and price.

If you decide to lend money to your offspring, establish a repayment schedule and be strict.

Teaching your kids good money habits early is a lasting gift. And as the line goes – if you ever think no-one cares about you, try missing a mortgage payment!

Book an appointment today and begin planning for your children’s future.

Ethical investing – putting your super where your heart is

Millennials – take a bow. Not only are you concerned about how your super is invested, you are more likely than any other age group to act on your beliefs when choosing a super fund.

Research commissioned by the Responsible Investment Association Australasia (RIAA) reveals that 75% of Millennials prefer to invest in a responsible super fund than one that only considers maximising financial returns. Well ahead of Gen X on 66% and Baby Boomers on 68%.

Across all demographics, the proportion of people who would rather invest in a super fund that “considers the environmental, social and governance (ESG) issues of the companies it invests in and maximises financial returns”, as opposed to a fund that focuses solely on maximising returns, has risen by 27% since 2013.

That’s a significant trend which sends a clear message not only to superannuation and investment fund managers, but also to the wider corporate community – people care about more than just profits. They also want their investments to contribute to the greater good.

 

What makes an investment ethical?

Ethical investment funds may use positive screens to select companies that are doing ‘good’ things, or negative screens to exclude companies doing ‘bad things’. Or they may do a bit of both.

There are, of course, different views as to what is ‘ethical’. Someone with strong religious convictions may be interested in a very different range of investments than someone with deep environmental concerns. Typically, though, ethical funds tend to avoid investing in companies involved in weapons manufacturing, alcohol, tobacco, gambling or fossil fuels while favouring renewable energy companies, sustainable technologies or healthcare.

Even then it can be difficult to decide if a particular company is ‘good’ or ‘bad’. Many people avoid investing in companies that mine uranium, but those same companies may also extract the materials needed to build wind turbine towers. Or a bank that finances coal mines may also lend to solar farms and energy efficiency projects.

Given the wide range of ethical considerations, you may need to do some in-depth research to find the fund or funds that best match your values.

 

Is your fund doing the right thing?

While you may have an ‘out of sight, out of mind’ attitude to your super, it’s important to remember it’s your money and you get to choose where and how it’s invested. Start with your fund’s website or disclosure documents and look for the environment or/and social and governance section.

Most large super funds offer a range of investment options, only some of which may match your idea of ‘ethical’. However, there may be a direct share option, allowing you to construct your own portfolio of shares in companies that are compatible with your values. Or you may look to the increasing number of investment managers that apply ethical filters across their entire range of funds.

 

Advice moves with the times

Fortunately it’s becoming easier to track down the investment funds that suit you with advisers more switched on than ever to the needs of the ethical investor. Talk to your adviser about the issues that are important to you so they can help you invest your super suited to your preference/heart’s content.

 

Sources:
“From values to riches. Charting consumer attitudes and demand for responsible investing in Australia.” Responsible Investment Association Australasia https://responsibleinvestment.org/