You may think it does not really matter.
After all, you may look at what you have achieved financially and think if you managed it, so will your children. And you did not have access as a young person to the internet or Facebook or even Tik Tok.
But like us, our children will face some real financial challenges whilst young. But unlike us, they will also become rich so it will make us wonder why we were worried about them in the first place. But that will also bring them challenges.
Confused?
I’m not surprised. Many believe our children are struggling. They cannot afford a deposit on a home. Many think they do not have any chance of starting investments.
Many think that is because they consume too much-overpriced coffee with an avocado toast at the local savvy cafe. I don’t believe that but do think the younger generation spend more than we did but only because we as parents allowed it. Besides they have social pressures we never did.
But the reason their long-term financial prognosis is good because in the next 20 years they are going to inherit about $3.5 trillion – yes you are reading right – trillion.
And that in itself is where the problems will come. And that is why financial literacy is probably more important for them than it was for us.
Here is a statistic you probably do not know. 70% of lottery winners lose it all. 30% of them will go bankrupt. So, what are the chances that $3.5 trillion will be spent wisely?
And that is why when it comes to an inheritance, we need to make sure when they get it, it is spent wisely and protected.
I often get asked by clients what they should invest in for their children. And I always tell them to get their kids financially educated first. Then, invest for them but ensure their kids are involved.
I have set up 2 separate investment trusts for my kids, aged 15 & 17. The trusts invest only in 3 index funds. They understand what an index is, what dividends are, and what reinvestment of dividends mean. More importantly they understand that the market goes up and it goes down.
And a few years ago, I purchased a financial game called Cashflow, which we play. The idea of the game? Earn income and invest it. The investments generate income, and you can only progress to the next level when passive income equals employment income. My kids understand that when investing, they can earn money while playing soccer or footy, and that is better than exchanging time for money as you do when employed.
Our government believes our children need to calculate long division. That’s crap. They don’t. They will never use it in real life and rely on their Apple device for calculations.
But every child I know does need financial education whether they come from rich parents or are raised on the street.
Our children will work. They will have Superannuation and you can bet your bottom dollar they will be paying taxes. All these are complex.
And the chances are they will take out a mortgage and other loans, too.
They need to understand what these mean and what they must do to be one step ahead because I can tell you, your government won’t do it.
This is article 1 of 3 relating to wealth and our children and how to protect the inheritance you will leave them.
Investing is Step 7 and leaving a financial legacy is step 9 of our 9-step system if you want to work less, earn more and have real financial freedom.
If you would like to know more about our 9-step signature system, please contact the WOW! Advisors team on 07 3161 9548 or email info@wowadvisors.com.au.
