FIRE Girls Pension Diary - Aim High & Dream Big

Kernowshep

Depends what he knows already

- Inflation (and real rate of return on savings/investments).
- Pension - put in the amount to get maximum employer contribution (worry about extra payments re tax thresholds later).
- Tax / NI - amounts and thresholds.
- Tax wrappers e.g. ISAs, LISA, Pension when you can access them.
- Cash savings vs shares (time scales / expected return).
- Debt / borrowing / mortgage / APR
- Cashback sites / cards.

Also depends how interested he is. 

After writing the above I thought of this https://www.moneysavingexpert.com/news/2018/11/financial-education-textbooks-funded-by-martin-land-in-english-s/
Aimed at a slightly younger age but would be a good starter that you could go into more depth on.

hugheskevi

I think the Reddit Flowchart is a good tool to use for education, setting out each stage of financial progression with links to learn more about each step to enable him to refer to back to things you cover.

If he is 18 he could be many years from buying a house, are you confident he will be purchasing somewhere costing under £450,000 given the LISA threshold shows no sign of moving.

Personally I wouldn't put money into a pension, as without the benefit of employer matching, salary sacrifice or higher/additional relief there is no incentive, so doing that is setting a poor example of financial management and encouraging doing things that are perceived to be the right thing to do rather than understanding why you are doing them.

Instead, I would go through what is an optimal set of accounts for him at the current stage of life, and how to choose the most appropriate account for his particular needs. That would cover current accounts, credit cards, savings accounts, and ISAs.

I think it can be beneficial for young people to manage some small investments of their own, in preparation for the future when the sums are much larger. An investment LISA or SSISA with a few thousand could be good for that.

It might also be good to cover some of financial traps that have been set for people down the years, eg, the Payday loan trap of having to borrow to repay past borrowing, car finance deals that end up with unpaid finance being rolled into the next car purchase, fixed overdraft charges that equate to a very high borrowing percentage, high costs to withdraw money overseas compared to specialist cards, the high cost of convenience/speed (eg Deliveroo costs compared to cooking for oneself), the cost of inertia/loyalty (new customer bonuses, escalating insurance renewal costs) and so forth.

michaels

I am also torn on LISAs for our kids due to the 450k max purchase price restriction.

cfw1994

michaels said:

I am also torn on LISAs for our kids due to the 450k max purchase price restriction.

Our offspring have done LISAs for a while, but are also worried about that limit.
Both in decent jobs in London, with partners who also are doing well, so there is suddenly the chance the LISA money will be unusable for their first house 🤦‍♂️

Kind of a first world problem, they know, and of course the LISA money could prove to be a useful lump to bridge any early retirement in their distant future before they reach State Pension Age (which we have to all assume will still exist, right?!)….
They are in S&S LISAs, so hopefully over the long term that could be a useful sum, and of course has benefited from the government contributions 👍

& yes, they are now filling ISAs as best they can.  

To think, I was the one who encouraged them to pop savings in LISAs 🫣

LL_USS

@Firegirl I am waiting to get a little bit of a bargain (a bit of a dip in the market, yes) before putting my cash in too. If not then I am not buying S&S so overvalued whilst there's still okay cash interest rates. Still need to jump in at some stage  though as my LISAs can't be used for anything else except waiting till am 60.

Regarding finance education for our children - my two are monkies, they are lovely but they joke to each other "run, mama is going to talk money" when I start to explain some money staff.

For the older one (he's one year older than your son) I asked him to keep a (simplified) version of excel to track my mortgage from when he was about 16, I think, and pretended that he "managed" the mortgage for me: how much to pay in each month, impact of rates, should I overpay, when to renew/ switch etc.

I drop in casual notes of inflation, saving/ interest, pension.... here and there for both of them. Have to teach the young one "spending money" can be an investment and we don't always minimise ALL the spendings.

It is a balance to strike as I still want them to be generous when it's right, and not too tight with money.

I grew up with very little money and sometimes the fear of running of out food in the household. Now I have made a substantial surplus and still feel uncomfortable spending anything on myself - that mindset is difficult to leave you. So I whilst I very much still try to instill financial knowledge in them, I want my kids to have a balance and a more healthy relationship with money.

LL_USS

Forgot to say I gave him 100 to open his first LISA just so he can see the app and different investing options - but the minimum fee is high for such as small amount of money so I suggest him holding the cash still

We have bigggg chunks going out towards his uni accommodation rent last year - they were put on a 2 year free interest card and I send him the balance (the money we would need to pay off the card after two years if no balanace transfer) for him to manage (by keeping in a best cash saving account he could find). He can keep all the interest accumulated in this two year period as well as some bonus I give him for learning how to do this.

I sat down with him to work out why a student loan works for us.

What else.... I don't think much more. Ah I still top up his maintenance student loan as it is not enough, and he keeps all the money he earns from tutoring, doing part time jobs for unexpected stuffs, emergencies, extra personal developments, and travelling with his friends. He keeps in this in an ISA and as long as I still top up his student loan, I am entitled to him showing me the balance there from time to time (just to make sure he does save money not just spending them all).

QrizB

Drifting off topic here, sorry:

LL_USS said:

We have bigggg chunks going out towards his uni accommodation rent last year - they were put on a 2 year free interest card ...

Did you get a card in his name? I'm not seeing how the typical 18yo will be considered creditworthy enough for a 24-month 0% cc?

Or is it on your name but you're letting him manage the repayments?

I've got an 18yo of my own going away to Uni in a couple of months, and novel approaches to student finance are of interest!

DT2001

Budgeting - When I started working I put money aside on payday and lived off the rest. When you get a pay rise increase your savings but also your own  ‘living’ budget - work/life balance.

If he is pretty savvy already ask him what he needs help with.

It is interesting that my brother and I had the same upbringing and our outlook on finances is at the opposite ends of the spectrum. The same can be said of OH and her brother despite father being an advisor. Maybe you have to want to learn?

 I have tried to install the value for money idea. As we have 4 children they soon learnt we would not be eating out on holiday so we could stay for longer and we took public transport rather than transfers. We discussed what and why which I think is the key. It is not English to discuss money but it is a key skill.

LL_USS

QrizB said:

Drifting off topic here, sorry:

LL_USS said:

We have bigggg chunks going out towards his uni accommodation rent last year - they were put on a 2 year free interest card ...

Did you get a card in his name? I'm not seeing how the typical 18yo will be considered creditworthy enough for a 24-month 0% cc?

Or is it on your name but you're letting him manage the repayments?

I've got an 18yo of my own going away to Uni in a couple of months, and novel approaches to student finance are of interest!

@QrizB oh no the card is in my name and the monthly repayment is set to take out automatically from a current account of mine too. For example for this month the balance on the 0% interest credit card is about 5K (in debt) so I have make sure I've "lent" him 5K for him to get the most interest out of it as long as after 24m he will send me back the balance, whatever it is at that time, for me to pay off the card. I may not transfer the balance to a new card if I cannot find a good deal then.

To be honest, the incentive of "keeping all the interest" is not the main thing he takes this deal. The main thing is so that he always has a pool of money to manage when student loans tend to arrive in his account AFTER he has had to pay the rents/ bills already. You know, for e.g. this year student loan won't arrive till 15 Sep but he already has to pay in advance for rent + deposit and also starting the tenancy contract earlier than September. In his first year at uni (last year) I did not have this type of 0% interest credit card so for the first few installments of rents we had to pay from my credit card then my son transferred the student loan back to me to cover these costs later. 

With this approach of giving him the money to manage, of course I am aware of the risk that he can lose the money and I have to accept that (but if he learns the lessons - managing money and trying not to lose money or to be scammed - then I will live with that).

MallyGirl

DT2001 said:

Budgeting - When I started working I put money aside on payday and lived off the rest. When you get a pay rise increase your savings but also your own  ‘living’ budget - work/life balance.

If he is pretty savvy already ask him what he needs help with.

It is interesting that my brother and I had the same upbringing and our outlook on finances is at the opposite ends of the spectrum. The same can be said of OH and her brother despite father being an advisor. Maybe you have to want to learn?

Same here. My brother often claims to have no money, despite having a decent job, but has a full Sky package and smokes/drinks a fair amount. He had no pension till auto enrolment and now just has the statutory minimum going in - he has long said to Mum that her house is his pension as some of it will likely come his way eventually. Charming ! I went into a more lucrative job admittedly and have contributed consistently to every pension available to me and that, along with a recent redundancy, has enabled me to retire at 58.