Financial planning is crucial, especially when talking about our children’s future, writes Nick Charalambous.
Many parents avoid discussing money with their children as they feel they are either too young or immature to understand it.
Parents have a responsibility to educate their children on how to be financially savvy and how to save and spend wisely.
Having spent my first 23 years in London, my financial education may have differed from those in Ireland. In the UK, there are government incentives that assist children when they might require funds.
One is a tax efficient savings plan, called a Junior ISA, and another is a pension for newborns, in which a relative — typically a parent or grandparent — can pay into a pension for a child from birth.
Here in Ireland, many remember the Irish government’s SSIA scheme, a five-year savings plan with a 25% top-up contribution from the Government. This scheme operated around 2001/2 to 2006/7 and was money for jam.
For a lot of children, they have to fund some of the third level education costs by working or going into debt. As a financial advisor, I talk to clients daily about financial planning for the future and following a roadmap to what they want to achieve.
Part of this is with regards to their children, whether it be helping them to get onto the property ladder or succession planning.
My son is 13 and it has given me useful insight into the mind of a teenager talking to him about the importance of money, even in situations such as buying items for the game craze Fortnite.
The way I can get him to understand the importance of saving is for something he is really interested in. My son just opened his first student savings account and received a bank card, and whilst potentially dangerous in the hands of a teenager, it has given him more education than my 20-plus years of experience could in months of discussions.
On the other extreme, trying to not make the mistakes a lot of us made during the Celtic Tiger days cannot be stressed enough. As an experiment, I put €50 into one of the online bookmakers for betting on the World Cup.
Given my son’s interest in soccer and ability at maths, he assisted me in betting on some of the matches. As the tournament progressed and our bets became more adventurous, we lost all the money, included gains made.
The feeling of the loss we suffered far outweighed the pleasure of the gains. Thankfully, he now has an aversion to betting. I am not advocating this strategy — it was a one-off controlled experiment for a lad that kept probing me about betting, typically only hearing from relatives when they won but not when they lost.
In helping our children being more financially savvy and encouraging them to save, even without these tax incentives, is the most important financial lesson I think we can give them.
Warren Buffett’s famously said to “only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”.
That gives in insight into the lesson of saving and investing over a long period.
Teaching our children to start young and save regularly is far more important than a haphazard short-term mentality.
Trying to get someone to do something by telling them generally isn’t a long-term sustainable solution.
By showing them what it can do for them is generally a much more powerful strategy. A picture paints a thousand words.
Nick Charalambous is managing director of Alpha Wealth and Alpha Heath in Cork and Dublin