Money Management From An Early Age With Alex Barnes
Alex Barnes - CEO - A J Barnes Financial
Money Management From An Early Age With Alex Barnes
Good money management starts in the home. However, when the education system and parents both “switch on” to good money management skills our future generation’s grasp of money matters is sure to have a better chance of creating a more prosperous future for themselves. After all, we all want the best for our children but with money and transactions today taking new shapes all the time how do we keep up?
Cash transactions have been on the decline for some time but when our children can’t hold or feel money in their hands anymore does this present a problem in teaching them the skills necessary to succeed in the future and Is money the new taboo? There are certainly reasons to think so. The OECD ranks the UK below-average for financial education*, despite its inclusion in the national curriculum. Teaching children about money can seem daunting, and even those parents who are trying to train their children financially often don't know where to begin.
The reality is that children learn young and, if they learn the wrong habits, it is much harder to unlearn them than to just get a few things right from the start.
Just talking regularly about money, shopping and pocket money can give a child the building blocks of a good financial education. Ultimately, these small steps can set them on the path to money maturity, enabling them to survive and thrive financially in adult life.
The key skills to impress upon our future generations can start anywhere from how to budget, what tax is, what retirement is and the concept of working towards a plan, but the key is initially to start with your own finances. Getting to grips of having a better understanding of your own finances from a budgeting perspective, to planning retirement to paying that mortgage off early will allow parents to have a real-world example to pass on to their children undoubtedly. In our practice we also spend quite a bit of time across the North West working with schools, their teachers, their support staff and then ultimately the children in what we call “Financial Education”. This is designed to create a supportive bridge from our world of financial planning across to aid schools wherever they see fit with helping the staff and indeed the children. This take s several forms from running seminars from the staff to actually helping with lessons depending on what level of support the school desires.
Then there is the question of investing for our children and the “secret” here should come as no surprise - successful saving for children starts early. It costs £229,251 to raise a child to 21. With stagnant wage growth and low interest rates, many parents feel squeezed to make ends meet, let alone think about funding future costs like university or a housing deposit.
Distant goals are generally easier to afford. Buying a first home or paying for further education or training can be made far more affordable by starting early. The principle is very simple: the longer the investment has to mature, the greater the benefit will be from the year-on-year compound growth of reinvested returns: investing £200 a month for five years can grow to over £13,000.**
“An investment in knowledge pays the best interest” ~ Benjamin Franklin
There are a number of government schemes to save for children. The tax-friendly Junior Individual Savings Account (JISA) is a very attractive option. Any returns are free from Income Tax and Capital Gains Tax. Savers can typically make regular or one-off payments up to the current annual limit of £4,368. Money held in a JISA is locked in until the child reaches 18, after which it can be converted into an adult ISA and continue to enjoy the same tax advantages.
Less well-known is that children can have a pension fund as soon as they are born. Setting one up can bring significant tax advantages since, as you save, the government adds a generous tax relief.
Contributions up to the maximum of £2,880 a year are automatically grossed up by the government to take account of tax at 20%, giving a maximum annual investment of £3,600. Even a few years of contributions can build a substantial pot.
Ultimately though empowering our children and future generations to make decisions which are right to them is the fundamental element. This takes shape through good financial planning so if that starts with the school, parents or direct to the children we have set up our practice to be able to help and support all three and help people plan for theirs and their future generations wealthier lives.
https://www.ajbarnesfinancial.co.uk/
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The Partner Practice is an Appointed Representative of and represents only St. James’s Place Wealth Management Plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk\products. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.
** Assumes an annual growth rate of 5% net of charges. This figures is an example only and is not guaranteed - it is not a minimum or maximum amount. What you will get back depends on how your investment grows and on the tax treatment of the investment. You could get back more or less than this.
