Money lessons for your adult children
For decades Australians have expected that they will live a better life than the generation before them but that might all be about to change. For the current cohort of young adults, good financial advice could make all the difference.
‘Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.’ The proverb is just as applicable to the world of wealth as it is to health. We can give our children all they need in life including financial security. But if we want them to thrive we must encourage them to learn their own lessons about investing.
Some of the finest financial advice begins with parents’ guidance around good money habits, particularly when children are very young. The developing minds of youngsters happily digest examples of monetary management demonstrated by their parents. But what happens when those children become adults, find jobs and begin their own financial journeys?
Let’s start with what research tells us, the fact that life is expensive for young adults. ASIC MoneySmart1 says single Australians under 35 spend an average of $869 per week (over $45,000 per year), including $278 on housing, $142 on transport, $104 on food and drinks, $24 on medical expenses and $23 on clothing and footwear. All of these costs will, of course, rise as younger Australians move through life stages.
Families with teenage children, for example, spend $314 weekly on food and drinks, $104 on medical expenses and $332 on transport.
Compounding the pain of this increasing expenditure is the fact that the younger generation, for the first time in Australian history, could be poorer in relative terms than their parents were at a similar age. A Grattan Institute report from 2014 titled The Wealth of Generations2 has revealed that “older Australians are capturing a growing share of Australia’s wealth, while the wealth of younger Australians has stagnated”.
This has partly been caused by the fact that older generations have profited handsomely from the housing boom. At the same time, increases in government payments to older people mean today’s younger Australians risk facing a lower standard of living than their parents.
The report states that increased government spending leads to an increased budget deficit. The deficit must be paid down by future taxpayers. But within the top-heavy, ageing population there will be less future taxpayers than ever when compared to the number of retirees and pensioners also supported by those taxes.
So what can parents do? Few adult children will react kindly to a financial lecture. But parents leading a discussion around their adult childrens’ future lifestyle and the financing of that lifestyle can lead to positive outcomes.
At the same time it is important to recognise the boundaries of parents’ financial advice. What worked for you may not work for your adult children thanks to individual preferences, goals and risk profiles, differing economic environments, changing regulations, higher house prices and costs of living as well as different market trends and new strategies. At the right time, it is a financial adviser’s role to provide practical direction to your adult children’s financial matters.
A financial adviser can help young adults with topics such as utilising their bonuses, pay rises and tax returns effectively, managing debt and paying it off more quickly and protecting assets and lifestyle. A financial adviser’s understanding of current market trends and different investment options also means they are best placed to help a young adult set up an appropriate investment portfolio.
You have experienced the benefits your financial adviser can deliver. Your adult children, who have the great advantage of time, are likely to benefit from professional financial advice too.
1 MoneySmart website (Source: www.moneysmart.gov.au/managing-your-money/
budgeting/spending/australian-spending-habits, 30 November 2015, figures from 2012).