Wealth can easily distort a child’s view of money and possessions.  Without parental guidance and the appropriate education on money management, it can leave a child unprepared for living as an independent, productive, and responsible adult.  How does one instill healthy attitudes towards money and help these young children develop skills for managing it wisely, especially as these children may not be witness to the harsh realities of the less fortunate?  The goal should be that your child leaves home as a young adult with the tools to make financially sound decisions and possess the accurate understanding of the value of money.  How do you get there?  When is too early to start teaching your children? Obviously each child will be different and each families’ circumstances will vary and as such, your style will also be unique to your situation.  With these thoughts in mind, we hope you find these few guidelines to be helpful:

§  Focus on your values:  The best way to teach financial responsibility is to examine if you are following the same values that you want to instill in your children.  Are you savings and investing prudently?  Do you respect the value of the euro?   I would also challenge you to assess how you treat other people of other financial statuses.  Your actions send a daily message to your children.

§  Start early:   Teach money concepts early to your children.   Young children can understand the basic concepts of money, including what it represents, how to use it, and how to shop for competitive pricing.   Show your younger child how you put coins in a vending machine, pay tolls, and pay parking meters.  Take your older child to the bank and show them how you lodge money for savings and how you make withdrawals.  Show the older child how you compare prices in order to receive the best deal and upon a purchase, let them count the change for you.  You can take it another step further with an older child by giving them the task of comparison shopping for a specific household item.

§  Encourage good habits:  With children who have an allowance, you can teach them the basics of consistency and discipline.  For example, they could be responsible for a regularly occurring expense and/or a portion of their allowance could go to savings.  You can also show them how to prioritise, allocate, and choose between what they want and really need.  Help them develop a system that reaches for long-term goals but also offers little rewards along the way.

§  Teach the concept of savings and investment:   You can help your children create a strong financial foundation during their years at home.   Teach them what it means to save and the concept of interest.  Add more complex concepts as your children are older, like taxes, other salary deductions, and investments.  A popular idea is a household jar for change; upon accumulation, use the contents for a fun family activity.

§  Portray money as a limited resource:  Teach your children that money is a resource that is limited. Guide them to make tradeoffs but allow them the ability to make mistakes to learn.  If your child spends all their weekly allowance on sweets, then they won’t have anything left for a movie later that week.  It’s important to show children that there are limits and sacrifices.   You cannot have it all!  Show them the concept of consequences.   Involve them in the financial tradeoffs that you make as well in your own adult life.

§  Teach awareness and caution:    Teach your children that there are tricks often found in mass media advertising and how that our culture often encourages debt.  You can show your older children examples of promotional gimmicks and share stories of poor money management.   For example,  Show them a “50% off” ad and explain how that doesn’t necessarily mean one should go and purchase the item.

§  Promote work experience:  Your children can gain perspective through working, whether it is small household chores at a younger age or a part-time job when they are older.  This will assist in teaching the value of money and rewards of hard work as well as education.  Allow them to spend their money as they wish so that they can learn by trial and error.  Provide them with guidance and support along the way.

In our next blog entry, Part 2 of “How do you raise financially competent children?”, We will discuss adult children entering the workforce and how we, as their parents, can continue to guide them along the clear path to making sound financial decisions. www.lowcostlifecover.ie

Without knowing how to choose a financial advisor, many of us ask friends or family for a recommendation, or go to the bank or building society we have always dealt with.

You can get financial advice from:

• Tied agents who advise and sell products from a financial services firm they are tied to. They still have to give you a product that is suitable for your needs, but they cannot shop around on your behalf.
• Multi-agency intermediaries, such as investment brokers, advise on and sell products from a number of financial services firms.
• Authorised advisors are obliged to consider relevant products from all financial services in the market.
• A mortgage broker acts as an intermediary between you and mortgage lenders when you are applying for a mortgage. They usually work with a number of mortgage providers. Before you decide to use a mortgage broker, ask about any fees and charges for using their service. You can get a list of authorised mortgage brokers from the Central Bank's registers website.

The first time you deal with a financial advisor they must give you their ‘Terms of Business', which explains their authorised status and a description of the services they offer. It will also explain whether they are tied to one financial services firm for any products they advise on.

Mixed status

The number of firms an advisor deals with may vary from one type of product to another. For example, a financial advisor might offer pensions and investments from six financial services firms, but may be tied to one insurance company when selling home insurance.

Check if your advisor is authorised

Not everyone who calls themselves a financial advisor is authorised to give you financial advice. Some may even be working illegally. You can check whether an advisor is authorised by checking the Central Bank’s registers website.

Always make sure that the advisor you use is authorised to give financial advice before handing over your money or signing any agreement. If they aren't regulated and things go wrong, you may not have access to complaints procedures and compensation schemes. For example, the Financial Services Ombudsman cannot investigate complaints against an unauthorised firm or advisor.

All financial advisors that are authorised have to meet the requirements of the Central Bank’s Consumer Protection Code when dealing with you.

It is important that you take some time before choosing an advisor and look at all your options. You want to be confident that you choose the right type of advisor to help you make important financial decisions.

You need to find an advisor who

• Is authorised
• Listens to you and answers questions openly
• Has experience of situations like yours
• Is willing to take time with you and does not put you under pressure
• May be willing to negotiate fees and commission so you are happy with what you are paying
• Gives you advice on a wide range of products to suit your needs.
  

Steps to take when choosing an advisor:

• Get the list of authorised advisors in your area from the Central Bank's registers website or call 01 224 4000
• Talk to a few advisors over the phone or in person before choosing one
• Ask them about their services and what type of advice they can give you
• Find out how many financial services firms they deal with for the type of product you may need
• Ask how they get paid - is it by fees, commission or a mixture of both?
• Make a decision based on the advisors experience - have they dealt with situations like yours and can they give you the advice you need?