Investment tips for parents

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We all want the best for our children, and that includes securing the best possible financial future for them. Many young people in Australia today grow up without a grounding in financial knowledge or awareness, and without any money behind them to see them through their early years of independence. A lack of financial literacy is a major problem among young Australians

In fact, back in 2015, the University of Sydney Business School (USBS) reported that poor financial literacy leads to an increased risk ofpeople making poor decisions on important financial issues such as making the right investments and managing their personal finances.

With the cost of property rising all the time, it is also increasingly difficult for young people to get a footing on the property ladder, and many young Australians are having to stay at home well into their 20s before they are able to strike out on their own and get a house.

Many parents make regular payments into a savings account, but unless you have substantial funds to begin with, low interest rates mean that the amount of money you invest is unlikely to grow significantly to give your children a meaningful lump sum to help them start out on their adult life.

So, as well as teaching your children about the importance of investment and how to properly manage their finances, what is the best way to provide for their financial future through investing?

The first step is to set up a long-term savings plan. Many parents choose to do this through an equities-focused fund, run by a management team with a good record. Alternatively, you can set aside money in a separate cash account and use this to buy shares on a regular basis.

Investing in shares and other financial vehicles through stock brokers or CFD Brokers is not a risk-free activity, but you can minimise the risk by diversifying the type of investment you make and the types of stock that you buy. You will also have to account for brokerage fees along the way, but if you buy shares with the aim of holding them for a period of time, rather than attempting to trade on a daily basis, you can minimise the amount of money you end up paying in fees.

Investing in the stock market on a regular basis for an extended period of time, re-investing profits as they accrue, could enable you to build up a substantial fund to support your children through their early years of independence, even help them make a deposit on a new home.

And as your children grow older, you can involve them more in the investment process, showing them how you choose shares, and teaching the value of long-term saving and investing, which will enable them to become investors themselves, as well as instilling in them the importance of proper money management, lessons that will hopefully serve them well throughout their lives.

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