The end that opens new doors

Some of us are excited by the end of the year as it means warmer weather and maybe even a summer vacation. For others, it can be an emotional time as children finish the school year for the last time and enter the adult world of more responsibility, employment or further education.

Letting go of the apron strings and facing the prospect of a less busy home can leave a big gap in the lives of many parents. It DOES, however, come with some benefits. After years of personal and financial support of your children, you can now refocus on your own personal and financial goals. Remember those? You used to have them!

A new start for parents

As children leave school – and in most instances start on their own path to financial independence – parents may find they are in a position to take advantage of savings now they are no longer funding School fees, text books, uniforms, tutoring, sporting activities etc.

We all know we should create a budget at least annually but often fail to do so. As kids complete schooling there WILL be a change in your budget – make sure your new found savings don’t get swallowed up in your daily lifestyle resulting in a missed opportunity.

How could these additional savings be used to create a successful financial future?

• Make additional mortgage repayments to pay off your loan sooner and save thousands in interest.

• Reduced expenses mean improved serviceability for a new loan that could fund an investment property. You could use the equity in your home as security for the deposit.

• Take advantage of superannuation thresholds that allow you to make additional contributions into super.

• Concerned about your level of debt? Talk to us about debt consolidation. A combination of lower interest and extra payments could see you get on top of debt in no time.

There are many other options, but regardless of the option, you choose there is no smarter decision at this time than investing in your future financial independence.

Don’t forget the children

This time SHOULD also mark the start of the journey to adulthood for our kids. While many will go on to tertiary education it is never too early for them to learn financial skills for the future.

What are some ‘mistakes’ we make with our school leavers that may undermine THEIR path to financial independence while continuing to impact our OWN finances?

• We pay for everything!
  We think letting them live at home at no cost helps them get ahead when in fact we’re giving them a false sense of reality. Kids NEED to learn about everyday expenses and how to manage them. Solution? Charge board and have them contribute to utilities. Still, want to help them? Save part or all of the money to assist with a home deposit down the track.
  

• We pay their HECS-HELP loan
  With student loan schemes currently interest-free, does it make sense to use your cash to pay a debt that attracts no interest? Even with an upfront discount, it pays to do the sums. If you were to consider purchasing an investment property instead, you could not only be building your own wealth but also it may put you in a better financial position to help your kids later. The other plus? Your kids will learn the concept of ‘user pays’ if they are responsible for their own student loan.

From school to independence

Personal finance is not taught at school or university – much of what we learn comes from our parents. Below are some of the basics every teenager should learn BEFORE they start earning money. They are:

1. Create a budget

As a rule of thumb, you should divide take home pay into 50% to essentials, 30% to lifestyle and 20% to savings.

2. Avoid ‘dumb’ debt

Credit cards can lead to financial disaster – it pays to be disciplined about use and repayments.

3. Look after your credit rating

Poor financial habits COULD impact your ability to qualify for a home loan in the future.

4. Talk about superannuation

Ensure your kids know about the role super will play in their future. It should be a focus from their 20s – not their 40s.