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  1. #1
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    Default Helping Your Kids To Invest

    Hi All,

    I have a son who will turn 21 shortly and is committed to saving for his own house. He is an apprentice so savings are pretty small and the scope to do anything other than bank deposits is limited through lack of knowledge and costs associated with direct investments like shares. Plus the obvious emotional impact of a small investment losing value and that value taking a long time to be regained. He is not completely financially illiterate in that he actually did accounting & economics through to first year at university and as a family we have always been open about our financial situation and the choices that mum & dad make.

    I see him saving diligently and budgeting whilst still enjoying himself but understand his frustration at how far away it seems before he could ever hope to get his own home. We have discussed direct share investments but he doesn't have the capital to support doing this yet. So what are you advising/helping your kids to do. My suggestions to date have been:
    - Look to low cost fund investments like Sharesies as a way of getting some higher risk/higher return exposure
    - Do the research and pick a single investment in the $2-3,000 range (that then obviously opens the debate as to which one)
    - Consider peer-to-peer lending platforms as investments options
    - Talk very nicely to the bank of mum & dad to help fund enough capital to make direct investment worthwhile/practical

    One interesting observation is that his knowledge of the family financial situation is sometimes counter productive in that we are in the last phase of our working lives, he is in the first and so we are poles apart in financial status and that is sometimes hard to comprehend.

    Really interested in what others are doing.

  2. #2
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    Quote Originally Posted by jmsnz View Post
    Hi All,

    I have a son who will turn 21 shortly and is committed to saving for his own house. He is an apprentice so savings are pretty small and the scope to do anything other than bank deposits is limited through lack of knowledge and costs associated with direct investments like shares. Plus the obvious emotional impact of a small investment losing value and that value taking a long time to be regained. He is not completely financially illiterate in that he actually did accounting & economics through to first year at university and as a family we have always been open about our financial situation and the choices that mum & dad make.

    I see him saving diligently and budgeting whilst still enjoying himself but understand his frustration at how far away it seems before he could ever hope to get his own home. We have discussed direct share investments but he doesn't have the capital to support doing this yet. So what are you advising/helping your kids to do. My suggestions to date have been:
    - Look to low cost fund investments like Sharesies as a way of getting some higher risk/higher return exposure
    - Do the research and pick a single investment in the $2-3,000 range (that then obviously opens the debate as to which one)
    - Consider peer-to-peer lending platforms as investments options
    - Talk very nicely to the bank of mum & dad to help fund enough capital to make direct investment worthwhile/practical

    One interesting observation is that his knowledge of the family financial situation is sometimes counter productive in that we are in the last phase of our working lives, he is in the first and so we are poles apart in financial status and that is sometimes hard to comprehend.

    Really interested in what others are doing.
    For me its all about managing expectations and ensuring they are realistic
    His expectations:That he may not be able to, and it would likely be not wise, to expect to buy a house until he has a 10-20% deposit & he can pay x amount to pay back interest & principle for a mortgage.How he can earn more,save more if buying a house is what he wants.Remind him that 5% interest rates(and dropping) are more affordable than 8% interest rates that were around 10 years ago.
    Help him understand the value of compounding returns when saving.Enlisting in kiwisaver as soon as eligible for the Govt grant,18 and they can watch their deposit grow.
    That anyone's spending on car loans,HP,coffee,takeaways & booze is often why they can't afford the deposit for the house.If this was instead compounded over 10 years in a kiwisaver or another investment it would add up to a substantial deposit.Tell him the value of 7.5.This is an investment returning 10%/year will double every 7.5 years,that a higher return will take less time.
    That it is not reasonable for him to expect you to guarantee his mortgage or contribute all of a house deposit particularly if he can't afford mortgage repayments.
    That flatting for a few years is more affordable than sole renting and after buying a house helps to to pay off the mortgage
    The only way that you would assist him in purchasing a first house is by way of an advance and that the compounding interest at x% & principal is repayable on demand and with a signed agreement on this.This is his backstop for him for a partnership break up and for you if you need the money in the future.(in your mind you can write it off n the future but don't let on to him)
    Your expectations:That he is financially independent and he won't come asking for money other than what we have already agreed on.That he can have some/all my worth when I am gone.

  3. #3
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    Default

    Also have an apprentice in the family and I am working alongside him on financial literacy, slowly so as not to dump too much at once.

    Pocket money - the kids get decent pocket money paid by me, and when earning this continues to be paid but into an investment. Kiwisaver at the moment.

    Kiwisaver - I started him off with Kiwisaver when it started, and he is now contributing along with his employer and the 'pocket money'. Growing well, and the plan is to use it for a home deposit one day. Kids are with Fisher Funds.

    Restaurant Brands - gift of shares on 21st birthday, condition being short financial discussions couple of times a year. This year - ran through RBD market update, dollar cost averaging and DRiPs, briefly how body corps work.

    Interest free loans. They get these but again with conditions. First they are to be paid back with regular payments as agreed. Not bothered about the amounts but must be regular. Second I need to agree with the purpose. Cars Ok, holiday in Bali not. Third, if they get credit cards, new interest free loans stop. Debit cards Ok.

    Sharesies. Our apprentice was keen to invest more, but not a lot of money. We investigated Sharesies together, he signed up and is putting in a regular small amount. I paid first year fees. He is thinking about asking for deposits into Sharesies instead of birthday presents.

    Tracking net worth. We have set up a shared spreadsheet on Google Drive to keep track of balances, positive and negative.

    So the financial education has been going on for a long time, with almost no interest for years, but ... Osmosis.... He will one day be suddenly well off, so preparing for that now. Beginning to talk about being a self employed tradie, slowly, slowly ....

  4. #4
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    Having realistic expectations is something I would strongly suggest debating. Very easy to be overwhelmed if not achieving your goal. He may not remain in NZ. there may be better opportunities overseas. Increasing his skill in his job and possibly his own business will be one way of increasing his finances. He has time to have fun but be flexible and open for what might come along. When I was 21 the thought of working for the next 45 odd years was a concept I couldn't grasp! I lived for the weekend and riding m/c's. Now 61 and wondered how I got here!

  5. #5
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    Thanks for all of the responses, much appreciated and plenty to think about.

    Quote Originally Posted by G on View Post
    When I was 21 the thought of working for the next 45 odd years was a concept I couldn't grasp! I lived for the weekend and riding m/c's. Now 61 and wondered how I got here!
    I love this. I am not (quite) 61 but can agree I have no real idea how I got from where I was at 21 to where I am now. Quite a bit of luck I suspect!

  6. #6
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    Yes I just opened Kiwisaver for them when young, they got the $1000 and after they turned 18 I top up their kiwisaver by $1000 or so to get the full subsidy until they have a job that covers it. At uni I have left them to it except helping with transport home at holidays and occasional medical stuff but as they end their course I pay $250 a fortnight off their student loan. You just need their IRD number to do that, info on IRD website of bank account number. Grandpa left them $10 000 each in his will received at 21 which is cool (rather than all money going to Grandma who has enough). They seem to be frugal but more focused on term deposits than shares & property. ie low risk.

  7. #7
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    When I was 18 I made my first share investment of $4000 in Zintel and very luckily (I wish more skill and research was involved) madean $800 profit (20%) within around 6 months. At this time I was doing a lot of investment reading but not really typical at that age.

    IMO it sounds like he has the means but just needs a little inspiration to get fired up to take more control. I recommend showing him some youtube videos of

    Gary Vaynerchuk
    Warren buffet
    Maybe Jeff Bezos or Elon Musk

    and if you can get him to read or listen to (its short and also on youtube) The Richest Man in Babylon by George classon this should also help a lot.


    if buying his first home is of primary concern The importance of Kiwisaver and hitting that 1k p/a contribution cannot be stressed enough.
    Last edited by Patient Panda; 09-09-2018 at 11:05 PM.

  8. #8
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    Thanks for that PP, I will point him in the direction of those resources as well.

  9. #9
    Senior Member Toulouse - Luzern's Avatar
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    Smile Gary Vaynerchuk - An inspirational story

    [QUOTE=Patient Panda;728455]


    ...IMO it sounds like he has the means but just needs a little inspiration to get fired up to take more control. I recommend showing him some youtube videos of

    Gary Vaynerchuk
    Warren buffet
    Maybe Jeff Bezos or Elon Musk

    and if you can get him to read or listen to (its short and also on youtube) The Richest Man in Babylon by George classon this should also help a lot...

    Thanks for this Panda

    I had not heard about Vaynerchuk before your post and read the wikipedia etc since.

    An inspirational story

  10. #10
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    [QUOTE=Toulouse - Luzern;728691]
    Quote Originally Posted by Patient Panda View Post


    ...IMO it sounds like he has the means but just needs a little inspiration to get fired up to take more control. I recommend showing him some youtube videos of

    Gary Vaynerchuk
    Warren buffet
    Maybe Jeff Bezos or Elon Musk

    and if you can get him to read or listen to (its short and also on youtube) The Richest Man in Babylon by George classon this should also help a lot...

    Thanks for this Panda

    I had not heard about Vaynerchuk before your post and read the wikipedia etc since.

    An inspirational story
    Yes I think Gary V is the most appealling to a younger crowd, he has the most energy and is relateable. A lot of his best speeches and his show Gary Vee are on YT and very good. Hes coming to speak in a month or so in AKL and aussie but I bleive his AKL event is already sold out.

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