Tag Archives: Children

Should you lend money to family?

By Robert Wright /June 26,2017/

You’re probably fairly used to helping your family out with a little extra cash here and there. Whether it’s pocket money for doing chores, or money to pay phone bills, go see a movie or buy clothes, for example.

But what happens when they put their hands out for help to buy the big ticket items? They might want some money to buy a car, pay for a holiday or even get a deposit together to buy their first home.

The question is, even if you can afford to help your family financially, should you? It could provide them with a helping hand that’ll really make a difference, but you also must ensure your needs are looked after and you’re not leaving yourself short.

Here are some things to think about:

Discuss how the money is going to be used. Is it something they could save up for or do they genuinely need your help?
Decide if you want the money back. Even if you can afford it now, think about whether you might need the money for other expenses or commitments later.
Agree on the terms of when and how the money will be repaid. If you decide on a loan, discuss how and when the loan could be repaid by, plus whether you will impose any sort of penalty (such as interest), if it’s not repaid on time.
Write it down. This might sound overly formal, but it sets the ground rules for making a true commitment to repay the loan.
Talk early and often to identify potential issues as they come up. Don’t wait until minor issues, such as late payments, become more serious.
Give them a refresher on managing money. This is a good way to really embed the principles of needs versus wants. Ask your family to work out how much they could put aside by using a savings calculator or budget calculator.
Ask for advice. If you’re lending a significant amount of money, you might want to check with your solicitor if there could be legal repercussions, including what happens to the loan if your child gets married or is in a de facto relationship.

Providing financial support in other ways

Gifting

It’s great, tax-free way of helping your family when they need financial help.

Just make sure you think carefully about whether your gift will put a dent in your retirement savings and if you’ll have enough for the lifestyle you want to lead when you wind down from work.

Also consider the impact on your Centrelink entitlements. If you’re receiving benefits, such as the Age Pension for example, a loan or gift to your child may impact on your payments and your financial security. You must tell Centrelink about any gifts or transfers within 14 days of when they have occurred.

Going guarantor

This is one way to help your family own their tomorrow ─ whether it’s buying a car or first home, but be careful not to put your own home or lifestyle at risk in the process. Make sure you only go guarantor for an amount that you can comfortably afford to pay if your family defaults on payments.

What else to consider

Whatever option you choose to help support your family:

Make sure the loan or gift is within your budget and won’t affect your everyday lifestyle or retirement.
Consider taking out insurance to cover you, or your family member, in the event of unforeseen circumstances.
It’s a good idea to get in contact with your financial adviser. Contact our office for more information

Source: AMP.

The impact of the death of a parent on children

By Robert Wright /October 06,2016/

Findings from a recent study[1] explored the impact the death of a parent has on children and the surviving parent, comparing the results between insured and uninsured households.

What impact does the death of a parent have on children?

The study found that the death of a parent can have wide-reaching impacts on children. For example, among the children in the study:

67% took on more household tasks and chores
43% reduced their involvement in social activities
41% stated a worsening in academic performance.

Many children were forced to grow up faster than they would have otherwise, and unfortunately this often comes at the expense of their social lives and their studies.

It’s worth noting that the parents surveyed often underestimated the impacts on their children, so the changes are not always obvious.

The study also highlighted some worrying trends with children’s mental health, with 29% of the children studied experiencing anxiety/panic disorders, depression or abusing drugs and alcohol.

How does having life insurance help?

Among these upsetting findings, it’s heartening to see that life insurance had a significant impact in helping families cope with the loss of a parent.

The most obvious impact came from an increased level of financial stability for those families who had cover in place.

Among families without insurance, the percentage who rated their finances as ‘struggling’ jumped from 14% to 47% after the death of a parent. By contrast, among families with insurance, the percentage of families who rated their finances as ‘adequate’ increased from 44% to 56% after the death of a parent.

This financial stability had a flow-on effect to other aspects of the family’s situation. Families with life insurance were more likely to stay in the family home, increase the amount of time they spend together, and maintain childhood friendships than those without insurance.

Keeping your options open

When it’s something as tragic as the death of a parent, it’s always nice to have the financial freedom to make the best choices for yourself and your family. That freedom is why life insurance is such an important and valuable asset.

[1] ’Impact of parent’s death on the family’ – Research conducted by Ipsos, prepared for ANZ Global Wealth, June 2015

Source: OnePath

Helping your child understand the value of money

By Robert Wright /December 01,2015/

“I want that one,” is a phrase that most parents hear more often than not, particularly as we enter the pre-Christmas period where advertisers aggressively compete for your child’s attention and your hard earned dollars. Whether it’s the latest Lego incarnation, Barbie, or new release movie merchandise, there are plenty of childhood desires that eclipse the things they actually need.

There are plenty of demands for your spending over the holiday season, and the lead up to Christmas is an ideal time to involve your child in conversations about the family budget and how money works without spoiling the fun of the festive season. It’s also a good opportunity to explain some basic principles about money such as the difference between needs and wants, budgeting, and how to make sensible financial decisions.

Here are some instances when you can introduce your child to conversations about the household budget.

When you decide to say ‘no’ to something they want

Those familiar occasions when your child asks for something can be a good time to introduce the concept of money and how the household budget works. You can use this opportunity to explain that money comes into the household through work and earning an income, and is used to cover a variety of costs from the family’s home (rent or mortgage payments), household food, and utilities such as electricity and internet bills. You can outline the importance of prioritising spending, and if they are still determined to acquire the particular item, you can explain the concept of a savings plan and how this may help them to achieve their goal. Some parents initially offer to match every dollar saved by the child as a way to keep the discussion positive and to encourage them on their savings journey.

When they compare themselves to their friends

It’s normal for tweens to compare themselves to their friends, and from time to time they may complain that their friends have more things or more pocket money. This can be a useful time to explain that every family has its own budget, and some have more disposable income than others. While material assets are one thing, there are more important things in life including being part of a loving family. The key is to be thankful for what they have and when it comes to material things, there is a difference between needs and wants. Needs being those essential items we need to survive, and wants those luxury items or treats that are nice to enjoy once in a while.

Understanding the importance of prioritising needs before wants is a significant life skill we can apply from our early years of development right through to retirement. Learning how to differentiate needs from wants – and allocate money accordingly – will give your children a great head start in being able to understand and manage their spending behaviour further down the track.

For younger children, the regular grocery shop can be a great learning experience, particularly if you take along a shopping list that outlines all your grocery needs. Ask your child to help find the items on the list and tick them off as you go. As an added bonus, perhaps suggest that after the essentials have been purchased, there will be enough money left over for a treat – which your child can choose. It can be an easy and fun way to learn how to prioritise buying needs before wants, as well as weighing up and choosing from the many ‘want’ items available.

Juggling needs over wants is one of life’s ongoing challenges, and just like adults, children may not always make the right decision, but simply becoming aware of the thought processes and implications of our choices can be a valuable life lesson.

The more your child feels part of the household decision making when it comes to money, the more they will appreciate how important the family budget is. Next time you are planning a significant purchase for the family such as a new car or overseas holiday, engage them in the conversation and decision making process. Asking for their opinion will make them feel valued and can help them to develop a sense of responsibility when it comes to making financial decisions in the future.

Source: Capstone

Tips for Teaching Kids the Value of Digital Money

By admin /March 23,2015/

One in three parents agree digital purchases make it harder to teach kids the value of money. Here are our tips for overcoming this. It can be hard for kids to understand what they can’t see. And as there’s no visible exchange of cash for goods in digital purchases, teaching them the value of digital money can be challenging. Delving into the topic, we recently conducted some research which found that more than a third of kids (35%) don’t know how digital purchases are paid for. Our research also uncovered the most common myths kids believe about digital money, including:

40% of five year olds think you can use a card to get free money from the ATM;
61% of six year olds think you don’t have to pay money to watch movies on your parents’ tablet or smartphone; and
33% of five year olds think there’s someone behind the wall who gives your parents money when they put their card in the ATM.

So, it’s clear we need to adapt our money lessons to incorporate digital spending. From experience, I’ve found the most effective way of doing this is to involve kids in the digital purchasing process. Sit them down when you’re buying If you’re buying your child a game on your smartphone, instead of making the purchase yourself, sit them down and explain how much it costs. If the game costs $5 and your child receives $10 pocket money each week, explain that it’s worth half their pocket money, and potentially deduct the amount from their allowance or piggy bank. This way they can see that digital money has value, like cash and coins. Use day-to-day examples If your child often accompanies you to the ATM, explain that the money you’re withdrawing is from mom and dad’s savings and is of real value. Small lessons like these will help build their understanding of digital money over time. Other lessons that Aussie parents have used to help improve their child’s understanding of digital money include:

Showing them the value of an item in an online store (25% of parents);
Opening a savings account with them (17% of parents); and
Giving them a prepaid card so they can make digital purchases (16% of parents).

Teaching children the value of digital money is key to their overall financial literacy. It’s also important to continue with traditional methods, such as School Banking programs, which teach lifelong money management skills. Traditional and digital money lessons should work in tandem and complement each other. Source: Commonwealth Bank