'Three money lessons I'll teach my daughter' blog discussion

meganmay

Is there anything I can do about the fact that LloydsTSB when paying out my PPI refund did not inform me I had to pay tax on the interest. I had a letter today to tell me and the payout was April 2012

sharrison01

More applicable to young adults but my friend decided not to go to university and instead to get a job when she was 18. Her parents decided that £50 per week was a reasonable sum for rent whilst still living at home and at the age of 25 she had met a partner and decided to move out. Her parents then presented her with a cheque for just over £20k which was all of the rent that she had paid plus interest. What a fantastic way to teach your child financial discipline with the reward of the deposit on your first home.

sharrison01

Another great lesson is the effect of compounding. The old calculation of 1p doubled for a month would give you over £10m can be applicable to many other non financial aspects of life. I always look at things like if you work harder or push yourself by 10% more this month than last month then you will very quickly become very good at something.

Also, be lazy with school. If you work really hard studying for an exam then you will only have to do it once. Work really hard for ten to fifteen years (secondary school plus university) and your qualifications will help you for the rest of your life.

Percy1983

sharrison01 wrote: »

More applicable to young adults but my friend decided not to go to university and instead to get a job when she was 18. Her parents decided that £50 per week was a reasonable sum for rent whilst still living at home and at the age of 25 she had met a partner and decided to move out. Her parents then presented her with a cheque for just over £20k which was all of the rent that she had paid plus interest. What a fantastic way to teach your child financial discipline with the reward of the deposit on your first home.

Surely that just encourages reward for nothing.

The rent I paid my parents went towards the bills as it did cost money for me to live there. I was taught the financial discipline that it costs money to live.

If they encouraged me to save £50 a month on top which would have then come in use as per you example and would have taught the deffered benefits of saving.

Giving a child £20k teaches them nothing.

sharrison01

Percy1983 wrote: »

Surely that just encourages reward for nothing.

The rent I paid my parents went towards the bills as it did cost money for me to live there. I was taught the financial discipline that it costs money to live.

If they encouraged me to save £50 a month on top which would have then come in use as per you example and would have taught the deffered benefits of saving.

Giving a child £20k teaches them nothing.

The reality of our society is that most young people will not be able to afford to buy their own home without help from their parents. Of course there were still bills to be paid but these were the same bills that her parents had been paying for the subsequent 18 years so for her parents the £50 per week made little difference. For an 18 year old that would rather spend their money more freely, like young people have always done, it was a large amount of money.

Percy1983

sharrison01 wrote: »

The reality of our society is that most young people will not be able to afford to buy their own home without help from their parents. Of course there were still bills to be paid but these were the same bills that her parents had been paying for the subsequent 18 years so for her parents the £50 per week made little difference. For an 18 year old that would rather spend their money more freely, like young people have always done, it was a large amount of money.

Back to my point why not just envourage them to save for themselves, if they fail they will learn.

sharrison01

Percy1983 wrote: »

Back to my point why not just envourage them to save for themselves, if they fail they will learn.

Because an 18yr old doesn't have the same discipline as a 60yr old and if they did then life would be very uninteresting indeed. What 18yr old would rather save what little money they earn than use it to enjoy life. This provided a happy medium by which she has learnt to budget her life without that money without ever feeling like she was choosing to miss out.

And as a parent is it not one of our primary aims to give our children a better upbringing than we had? It is a thought lost on a lot of people and a sad reflection on the depths of selfishness that our society seems to be falling to.

Percy1983

I agree in many respects, but surely its down to a child to make there own sucess or mistakes.

I say this as I made the mistakes and have come out better for it.

IE, I paid my rent/keep to my mum and dad and the spent the rest on fun (as you say).

As it is I was earning next to nothing so slowly built up debts while income was low.

Eventually income was up, paid debts saved a desposit and life is good.

Now I can see if I started saving sooner etc life would have been easier later, on the flipside I wouldn't change a thing as I had the time of my life while I was young.

Now at 25 if my parents gave me £20k all I would have is a reward for pee'ing my money up the wall for the 7 years previous.

Now here is the interesting point, if my parents sat me down and made a recomendation I save a little and pointed me to ISA's and recomended agaisnt gettign a credit card etc I may well have had some savings and the satifaction of knowing I had saved it.

At best you could offer a double what you save offer, ie if they save £10k you give them £10k, to which there is a reward for saving but they still have to do something instead of bringing up more children in the instant gratifaction x factor generation.

sharrison01

I think that the point that you may be missing is that my friend was unaware that her parents were doing this or were going to do this. She also didn't see this as a reward for living less frugally but simply saw this for what it was - a very thoughtful and generous thing for her parents to do. Maybe this will will make her a more generous and thoughtful person, which are possibly traits more important than anything to do with finances.

I suppose these things are all contextual to the individual, their upbringing and their parents' wealth and the negatives can be found in anything - offering to double savings is great if it teaches the right lesson to the right person but it is also just another way of giving your child money.

If at 25 you have managed to have a bundle of fun, pay off all of your debts incurred from earning less and save the £50k deposit for a property then you have done exceptionally well as oppose to being like most other young people.

The reality is that youth unemployment is high, bank lending is low, property prices keep going up along with rents and for most young people there will be a reliance on their parents to get themselves on the property ladder. The way that this money is given is down to the each person's own circumstances.

Percy1983

I guess you are right in context, my parents haven't given me anything (mostly because they couldn't afford to if they want to).

I suppose the problem with gifting such a large amount of money is as you say it could teach generosity or it could further feed a selfish attitude.

As it is a don't have children yet to which my children buying a house will be a long way off, but my judgement right now is if they work hard and try to save I would help, if they choose sex, drugs and rock and roll I would advise against it and not fund it directly or indirectly by buying them a house at the end of it.