What Practical Help Can I Give My Child When They Buy A Home?

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For the past hundred years or so, children have always ‘had it better’ than their adults had it at the same age. But when you look at the instability in the world right now, it’s clear to see that this isn’t necessarily the case anymore. And parents of young adult children have a lot on their plates – not just financially, but practically, too.

One of the perfect examples of this is the price of buying a home these days. The ratio between the average property price and average wage has never been bigger. Work hours are longer. And parents who want the best for their children will need to contribute a lot, in many different ways.

So, if you are wondering how best to help your child buy their first home, read on. We’ve pulled together a few ideas for you that should help you negotiate the major issues.

Teaching

First of all, the best thing you can do with your kids is to help them understand the concepts of finances, mortgages, and interest from an early age. If you are new to this blog, please feel free to take a look around – we have hundreds of excellent advice for parents on teaching children about the value of money, and they can all help your child become financially literate and make better decisions.

practical help to buy a home - dream house image

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Planning

Parents should always be involved in the planning stages when their kids want to buy a home. It’s especially true if you are – like many other parents these days – contributing some money towards it. So, go through their finances with them, and look at a mortgage calculator with down payment details to see if the home they love will be a viable purchase. Don’t forget, while mortgage calculation tools will give your child a rough guide of what they can afford, the lender they approach might feel differently about their finances. With this in mind, it might be worth helping your kids find a professional mortgage advisor who can work with them to find a home that fits them best.

Contributing

There are various ways of helping your children out financially when they buy a home. You are allowed to gift them money each year, tax-free if below $14,000 (or $56,000 if both parents give to a child and their spouse), which a mortgage company will allow as a ‘gifted down payment.’ You can also offer a family loan – a sensible option if you want to teach your child a valuable lesson in lending and borrowing. This method means that your child gets a cheaper loan, while you can get your money out of a low-interest savings account and you could even charge your child slightly more to ensure you don’t lose any money. Finally, you can co-sign the mortgage. Using this method means you take away some of the financial obligations of buying the home – but bear in mind that you will then be under the lender’s microscope, too.

So, there you have it – any more tips to add? Feel free to let us now and join in on the conversation!

 

 

How To Get Out Of Debt & Stay Out

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The decision to get out of debt is always a good one, but it’s often hard to know where to begin – especially if the debts you have are quite large.

While the scary numbers will cause many people to bury their head in the sand and choose to ignore it, taking the first step to eradicating the debt from your life is a crucial step in the overall process, and one that, if you stick to it, will help create a much better relationship with money in the future, even if it wasn’t taught to you as a child.

Below are some tips on how you can begin to, not only get out of debt, but actually stay out.

  • Get honest with yourself: so many people are afraid to open bills as they start mount up, but this avoidant behaviour can lead to serious problems down the road, so no matter how scary it seems, you need to open those letters and face them head on. In most cases, the idea of something is much worse in our head than it is in reality, and you normally find that it’s a loss less intimidating once you know what you’re dealing with, and that it’s a lot less in terms of numbers, too. You need set aside a couple of hours one day and go through everything you owe, then either write it down, or put together a spreadsheet.
  • Make a plan: if you’re going to pay off all your debt, then you need to really make a strict plan for yourself that you know you’ll stick to. How you choose to pay things off is really up to you – you can choose to pay small amounts towards each debt, or you can focus on one debt at a time, but what’s important is that you have a plan with a deadline that you can realistically achieve.
  • Reach out to those you owe to: this is actually a pretty important step that many people overlook because they either find it too scary or don’t think there’s any point in doing it, but in actual fact, reaching out to those you owe money to can help you in a big way. All you do is either write to them or call them, and explain your situation.

You can ask them for a payment plan and really let them know that you’re ready to pay everything back. In most cases, they will be more than happy to work with you, and typically they will waive the interest as long as you stick to the payment plan you agreed with them. As interest that keeps adding up is really one of the biggest issues when controlling debt, then this can make a huge difference.

  • Consolidate: if you just want to be done with the debt as quickly as possible and bring everything into one single payment instead, then looking for a way to consolidate your debt is a good idea. There are a few ways to do this: one would be through a loan from someone like Enness Bridging Finance – the other would be to speak to a debt consolidation agency who work on your behalf with the companies you owe money to. Usually these companies can get the interest, and instead of giving you a cash loan, they basically take on the debt and then you agree to pay them a small monthly amount which they divide across all of the people you owe money to. Doing it this way obviously takes longer than a loan, but it’s a good way to go if you can’t afford to pay back a loan or have trouble obtaining credit.

Learn It To Earn It! Money Management For All Ages

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It is astounding that with the amount of focus that we place on money, as a society, that money management is not taught in all schools. When we look back on our youth, we never thought of money as important at all. In my 30’s I look back at just ten years ago and didn’t view money as all that important! As the magical overdraft would help me get my cash from the machine and the credit card as free money. In hindsight, this was a bad attitude to have. As I now have mounting debt that I could do without. The pressure to do more grown up things becomes more apparent. Buying a house, planning a wedding, the increase in fuel costs. These are all things that are tagged with the notion of being an adult. The shock of money responsibility just seemed to be slammed down in front of you as soon as you left university or gained full-time employment. So is there a way to help bridge the gap between a child and adult when it comes to money management?

Toddlers
When it comes to teaching toddlers the value of money, the best approach is to use a visual stimulus. The typical method is to use a piggy bank, which is an excellent idea in theory, but the child can’t see the money amounting. So the fruits of their labors go unnoticed. Seeing a jar fill up with coins and talking to them about how much more they’ve got than yesterday is a nice way to reinforce the idea of saving.

Young Children (8 and over)
The best method for young children and tweens is to let them make decisions about their choices in terms of what to buy. For example, if they wanted two items but can only afford to buy one, they need to make the decision. If they are unhappy with the outcome, then they have made their bed and must lie in it.

They also need to learn at this age that money is earned, not just given out. A simple method of teaching this is to reward them for doing household chores. Based on the task, you can give them more or less money. That way, the concept of pay grades is also introduced.

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image from Flickr.com

Teenagers
If you have been able to reinforce some of the previous values at certain stages of their life, then helping them get a bank account is the next logical step. Having their own bank account that they can withdraw money from and are solely responsible for will teach them how to manage their money. If your child hasn’t got a bank account yet, you can apply for new bank account here now. And, as a consequence, if they run out of financial resources, they would need to get a job. That marks their first foray into adulthood.

All ages have their own attitude towards money. So in teaching them the value of it on a level that they can understand, whether by visual stimulus or making sure they know the repercussions of overspending, it will go a long way to instilling the values and responsibility of money management.

How Your Children’s Love Of Technology Could Help Keep Their Finances In Check!

As parents, we want to ensure that as our kids get older, they are able to take care of themselves. This is because we won’t always be by their side helping them to think about their choices, such as their financial ones, for instance. If your kids don’t understand the importance of managing their money, financial problems could have a big impact on their lives. That’s why it’s so important that from a young age, you teach your children the importance of keeping their finances in check.
Many parents struggle knowing how to go about this. But the good news is this doesn’t have to be the case, as you can use technology to help. Believe it or not, technology can be a useful tool for teaching your kids how to keep their finances healthy. Here’s how:

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Blog posts

Today, a lot of kids read blogs on a regular basis, as a pose to reading books or magazines. Although it might not be a traditional form of entertainment, blog posts can be a great resource in terms of teaching kids about finances. By encouraging them to read posts about keeping their finances in order, you can help them to learn the best methods of doing so. As well as, why it’s so important to keep your finances healthy. If they’re not into blogs, vlogs can be just as beneficial. It’s just a case of finding the best vlogs about the topic.

Finance apps

Almost every child over ten-years-old has a smartphone or a tablet. Meaning that they have access to a range of different apps. As well as offering hours of entertainment, apps can also be a fantastic resource for helping your kids to keep their finances in check. From apps for keeping an eye on what money they have to apps for budgeting, there’s an app for every financial need that you child may have. There are various apps to choose from. However, some are better than others. With that in mind, consider these mobile apps to keep your finances in check, and teach your kids how to use them effectively. Whether you’re for or against smartphones and tablets for kids, there’s no denying that they can be useful. Especially, when it comes to keeping your child’s finances in order.

Money-management games

The Apple app store is packed full of various games and other forms of entertainment. This includes a range of games that revolve around money management. It may not seem like it, but games like Zoo Tycoon, The Sims, and any other games like these, require users to manage their money to survive. The Tycoon games are particularly effective because the player has to manage their money for their business to thrive and grow. Just like they would have to in real life. They might only be games, but for helping kids to manage their finances better, they can be useful.

So there you have it, a guide to how technology can help your kids keep their finances in check.

The 7 Money Mistakes That Parents Make

parent's money mistakesWhen it comes to teaching your children about money, there is no single right way. There are, however, things you can do to guide them along a path and empower them to learn good financial habits. Below are 7 common mistakes that parents make when teaching good financial skills and habits to their children.

Money Mistake 1 – Pocket Money.
A danger with automatically giving pocket money is that it can create an entitlement mentality.

A young person having money of their own however is an important rite of passage and can form the basis of excellent financial education in budgeting, saving and spending.

One of my favourite money experts, Loral Langemeier is emphatic on the subject:
“NEVER PAY YOUR KIDS AN ALLOWANCE”
She argues that the best investment you can give your child is to teach them the value of entrepreneurship and the way that every economy in the world works. So instead of paying pocket money every week, design exercises and activities that are truly focused on basic finance.
Martin Lewis founder of Money Saving Expert is a fan of both pocket money and financial education – and he recommends encouraging children to work for their financial rewards, in order to embed a principle that will serve them well throughout life.

Money Mistake 2 – Not Talking About Money
Stay silent about money and you risk leaving your children open to the pitches of TV adverts and peer pressure.
Parents are the main source of money information for children, but 74% of parents are reluctant to discuss family finances with their kids, according to the 2014 T. Rowe Price Parents, Kids, and Money Survey.
Even if money is tight, don’t stress about it in silence.
When parents are worried about money but are not communicating their financial situation, children pick up on the anxiety and associate it broadly with finances. Rather than learning money lessons from their parent’s mistakes or situation, children instead learn that money is ‘stressful’ and ‘bad’.

Money Mistake 3 – Magical Credit Cards
Studies have shown that people spend 30% more when they use cards instead of cash. When you’re using plastic, it’s easier to ignore how much money you’re really burning through.
Credit cards not only wreak havoc on our budget, but also set a bad example for our children. Kids seeing cards being swiped and in the child’s eyes, you haven’t exchanged anything for your purchases.
Children need to understand that when we buy something, the money we’ve spent is actually gone. There are alternatives; using cash everyday instead will give your child a more realistic picture of how money works. Or when you spend using a card take some time to explain that that creates either a bill, which has to be paid, or is taking the money from your bank account as in the case of a debit card.

Money Mistake 4 – Setting a Bad Example
How can we expect our children to save money for the future when we don’t do it ourselves?
It’s very important that not only is saving a habit but a highly visible one.
This can include a savings jar prominent in the home, labelled with the holiday, event or purpose that it’s for. If your kids at whatever age see you putting your spare change in the jar on a regular basis they may get the bug and start saving themselves.

Money Mistake 5 – Saying Yes for an Easy Life
Many parents are actively teaching their kids about money – but their children are learning all the wrong lessons.
David Bach author of the Automatic Millionaire believes that the biggest mistakes that parents make is not saying ‘no’.
“I will go to someone’s home that is $30,000 in debt and their children have piles and piles of toys. This creates children who don’t know how to hear the word ‘no’ and they become adults who want instant gratification and live beyond their means. Plus, they miss crucial lessons like budgeting, prioritising desires and saving for something valuable”.
Never forget your great influence as a parent.

Money Mistake 6 – Not letting them fail
How often do we rescue our kids when they make a financial blunder? No-one wants to see their child fall down, literally or metaphorically but by always bailing them out we rob them of the chance to learn from their mistakes.
Fast forward to the teenage years and you may become accustomed to paying off mobile phone bills, covering car insurance or in one case I heard of re-mortgaging your home to pay off a child’s payday loan debts.

Money Mistake 7 – Mind your Language
Children make many requests every day. Parents will often deflect another purchase request by saying “I don’t have enough money on me” or “we can’t afford that”.
The language used to explain this to a child is very important.
An honest dialogue with positive language will get you positive results. Explaining why you’re not making the purchase gets kids thinking about prioritising their wants and teaches them to be more aware shoppers in general.
Rather than saying we can’t afford it try how can we afford it? This gets the young person thinking about ways in which they can take charge of the situation rather than being a victim of circumstance.

This article is an extract from Daniel Britton’s book The “7 Money Mistakes That Parents Make” an eBook version is available for a limited time free from the Personal Finance Academy website