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Finances-who will have the last laugh |
Finances: Who will have the last laugh?
Recession, it’s a dirty word and if you had told a City banker in 2007 that we would be in one by 2009 they would have laughed in your face. However, Britain is one of the last global super powers to be stuck in recession limbo.
'Easy money' guided the world into recession. Money in the form of loans for key assets such as property, was all too easy to come by; the baby boom generation and beyond are the credit generation. Their parents and grandparents however were used to 'saving for a rainy day', and that is what we should be encouraging our children to do now, so recession on this level won't happen again.
By teaching children from an early age the values of saving and the problems with buying things with borrowed money, they will learn to only buy things when they can afford to buy them, they will be able to manage necessary debts such as a mortgage and they will appreciate how good it feels to actually own something out right.
There are many ways to encourage children to save. First and foremost is weekly or monthly pocket money. A month to month piggy bank arrangement means children have to actively and consciously think about what they want to buy and save up for it. If they want a DVD which is £20 and a CD which is £10 but they only get £20 a month they will have to prioritise or save for two months to buy both.
You could also give older children a set amount of money to invest in stocks and shares which they can track online. This teaches them valuable lessons about the stock market, about how you can win big but lose just as much. The amount of money, say £100 doesn't actually need to be real, but if they do invest in a successful investment, then reward them for their efforts.
Finally, you can actually invest money on their behalf. Everyone in the UK is entitled to an ISA. These Individual Savings Accounts were designed to encourage people to save. Therefore they are tax-free investments. The total amount you can invest in a single tax year is £7,200 if you are under 50 and up to £10,200 if you are over 50. This can be divided between a 'Cash' ISA (£3,600) and a 'Stocks and Shares' ISA (£3,600). ISAs can provide a tidy nest egg, giving your children a head start in life which could help with university fees etc. Once a child is 16, they can even open their own cash ISA and start saving for themselves. There are several different types of ISA available, for more information you could check out Legal & General’s ISA range.
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