One of the subjects closest to my heart is the legacy that we leave for our children. I’m pretty sure if you’re reading this you’re one of those parents who “hope” for your children to enjoy a fruitful and fulfilled life – but as we know “hope” without intentional action is a fruitless endeavor.
So at the risk of sticking my head above the parapet in what is essentially a pretty consumer driven society, I have listed a handful actions that we have taken to do things a little differently. To paraphrase Mr. Einstein (not for the last time in this post) we cannot continue to make the same financial choices for our children and expect that they will experience a different result.
Here they are – 5 ways we are intentionally creating a financial foundation for our boys from which to launch themselves:
1 – Double Toy Spend (Or Halve it)
One way in which Kerry and I have begun building the Boys’ financial future is by saying that whatever a “toy” costs we must put the same monetary value into the boys’ portfolio. This has proved to be a very valuable mechanism in preventing wasteful spending.
2 – Manage Gifting
Similar to the above concept we request that immediate family (Grand Parents, Aunts and Uncles) consider giving in the same way, of course this doesn’t always happen and one cannot impose their ideals on others but it helps to ask. This can be awkward initially but if you approach it with sensitivity and sincerity the extended family can often be surprisingly supportive.
3 – Manage Mindset
Of course, one of the largest spending occasions in the year for those who celebrate it, is Christmas. We have found it interesting how the rhetoric surrounding Christmas is always that the joy is in Giving and yet we teach our children to Want. So we are trying to do things a little different by offering the opportunity to Give – Instead of a “Wish List” we will write a “To give List” so our focus at Christmas as a family is not about how we can get or acquire but rather how we can give. This shifts the focus from the expectation of receiving to the fulfillment of giving. Of course as parents we are still then in the position to give to our children whilst keeping point 1 in mind.
4 – Think Value
For a while we have been explaining the concept of value to Matt (mainly due to his enamoredness with cars) and he is starting to use the lessons when choosing a treat. Does the large die cast model which costs 70% more provide 70% more fun (value) – probably not. This has led to our three-year-old son asking “is this good value?” when looking to make a purchase – this question opens a dialogue and enables us to illustrate our answer with rational explanation. Matt’s reaction is great to see as he realizes a decision was made together and was not “because I said so”, in essence he feels empowered by the fact that he owns both the outcome and the decision. We have seen Matt detach from the “bigger is better” mentality and instead lead himself to seek value.
5 – Invest in Assets
At Christmas we give each of our boys a gold coin, and a small present or two. With gold coins varying in size there is a coin to suit just about every budget. This isn’t about the size of the coin but more for the boys to have a tangible asset and investment that they can hold – a sense of ownership and of building towards their future. Each month we then invest a percentage of their savings in an index tracker fund, some more in managed funds focusing on particular sectors or markets and then we keep some cash for speculative opportunities. The power of compound interest is the 8th Wonder of the World, according to Albert Einstein – an initial lump sum into an account of £/$500 and monthly contributions of £/$100 per month over 18 years assuming a smoothed 10% annual return means that there will be an approximate £/$60k foot up per account, providing an asset base for the beneficiary to begin to leverage, resulting in an array of options. To see how small contributions over a prolonged period coupled with compound interest can result in a significant nest egg, check out this Compound Interest Calculator
This is a nod to the age old wisdom of making one’s money work for you instead of you for it. Hope this gets you thinking…
Disclaimer: This is not intended as financial advice, and should not be construed as such. These are personal thoughts and views and are an illustration of how we are taking steps towards building a financial future for our family. Please do not take any action based on our writing alone but rather explore what’s right for, your circumstances and risk profile