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Nivesh Jaagran Seven steps to bring financial responsibility in children

Seven steps to bring financial responsibility in children

Despite all the information about money and personal finances now widely available, young people do not seem to have learned the basics about hard work, savings and investment. Read on to find out how advisors can fix this.
Daya Ragunathan Jun 15, 2017

 

A whitepaper released by Cetera Financial Group says financial advisors have a great opportunity to help clients teach their children about the money you are managing for them. In fact, you may have to be the one to start this multigenerational conversation about financial responsibility; so here are some ways to get the conversation started:

STEP 1: Create a multi-generational conversation

Suggest an annual meeting for your clients at their home, your office—or at a hotel, if it is a large group. The family might involve the younger generation, asking them to suggest stock ideas or give a “research report” about a growing industry that interests them, likely a new technology or product their parents have not even heard of, is a great way of starting a multi-generational conversation.

STEP 2: Start the relationship process early

Jayant Vidwans of Vidwans Financial Services strongly believes that conversations about financial responsibility must start early in families. “Such conversations can start as early as 8 years (age of children). I encourage my clients to talk to their children about savings habit and investments so that they are familiar with the concepts by the time they grow up,” he says.

STEP 3: Get children involved in education planning.

Encouraging clients to start investing for their child’s education is not enough. Clients must be encouraged to have conversations with their children on how they can meet their educational needs by themselves. The first step to this could be by starting a savings account for the child. Also, discussions on how much a course costs and how these expenses could be met should be made by including the child in question. This will go a long way in building their financial responsibility says the whitepaper.

STEP 4: Advice on allowances.

Do not limit your financial planning to retirement withdrawals for the oldest generation. The kids and grandchildren need some money on a regular basis too.  Suresh Sadagopan of Ladder7 feels that once the child is old enough to add and subtract, sending them for small shopping errand and encouraging them to maintain accounts can be a fun way to introduce children to financial concepts.

“Giving a small pocket money and asking kids to maintain records of their expenditure is one of the many ways parents can interest their children in handling monetary matters. They can also be shown how net banking is done and the uses of having a debit/credit card,” says Suresh.

STEP 5: Help kids invest their own money from childhood through teen years.

Jayant Vidwans insists on the need for advisors to guide children on how they can invest their money. “When I meet my client’s children I ask them what they do with their pocket money. If they say they are just spending the money I try to interest them in schemes where children can invest so that they get a taste of the investment,” he says.

STEP 6: Ensure that nominations are updated.

As part of the financial planning process, you have likely reviewed your client life insurance coverage. However, have you checked the beneficiaries they named? The whitepaper says that regularly reviewing and ensuring the beneficiary list is as important as checking the policy itself.

STEP 7: Do not underestimate teenagers’ interest in money.

Since the same young teens that are spending all that money seem to live on their smartphones, why not introduce them to some money apps?

In this regard, Jayant feels that the best approach is to let children to maintain and manage their own bank accounts. “It is not enough to have a bank account in the child’s name, but actually instruct them to make a few basic transaction on their own. This way children will be more comfortable handling financial planning decisions,” he says.

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