Hi all,
First I'll start by detailing our families pocket money strategy to show how my 13 year old saved $1k.
My kids get a base allowance from when they start kindy, for keeping their beds made/rooms and desks clean and tidy. It's $1 per year of age, with the stipulation that a % must be banked/saved, they lose 20% of their allowance for everyday day they don't make their bed etc. Then each day one of them (I have 3) can earn extra money by doing chores (sort of like overtime), take bin out/feed dog/unpack dishwasher etc. Up until about 12 this savings is put into a junior savings account.
When they hit year 7 at school (about 12 years old) we check out how much free money they've got through interest, and look at how they could of made a bit more. The junior saver account gets changed to a regular high interest savings account and a youth account (not linked) with debit card and a max amount of $'s allowed on the debit card to be used for things like saving for bigger purchases etc. The idea of having the savings account is to show about saving and compounding interest (even at 2%), is better than keeping it in the piggy bank at home.
During year 7, and after the junior saver account has been changed to a youth/debit card and saver account, I add a little more incentive to save, after they have got their pocket money and put aside the mandatory savings percentage, if they would like to save a bit more out of their spending, I'll match it dollar for dollar, but that gets deposited in the savings account and can not be touched under any circumstances. I sat down with the eldest (13) and roughly worked out what her weekly spend is, it came to about $10/week. So we decided that before she starts saving extra she should have about 4 weeks of spending in cash (for going to cafe etc) and 10 weeks on the debit card account (for bigger purchases).
So I basically run the pocket money like they are my employees with a bit of salary sacrifice thrown in for good measure (there tax break is my extra contribution
)
Pretty much by 13/year 8 they should save around $1k and understand the value of saving and understand how compounding works. We look at how the high interest account earned more than the junior saver earned and start to look at different forms of investing.
My idea for the next step is a diversified share portfolio, $1k isn't really enough to start so I'm happy to match the $1k and open a minor trading account as a trustee, and purchase $2k worth of a LIC and explain why diversification is important, probably AFI. They won't receive over the $416 (or what ever it is) by investing in a LIC with $2k and the stipulation is they cannot cash out to spend it until they are 18, which then they can use it to fund a gap year, buy a car or keep it invested and use their savings account to fund these. They already have a TFN so that they can submit a tax return to claim franking credits, and will be reinvesting dividends into more shares, because compounding rules! After they save another $1k, I'll match that and buy more shares, maybe something in a company they have an interest in.
So I'm off to see my accountant next week and will run this past him, and I was hoping just for some input and ideas that I may not have thought about to chat to him about.
Cheers
First I'll start by detailing our families pocket money strategy to show how my 13 year old saved $1k.
My kids get a base allowance from when they start kindy, for keeping their beds made/rooms and desks clean and tidy. It's $1 per year of age, with the stipulation that a % must be banked/saved, they lose 20% of their allowance for everyday day they don't make their bed etc. Then each day one of them (I have 3) can earn extra money by doing chores (sort of like overtime), take bin out/feed dog/unpack dishwasher etc. Up until about 12 this savings is put into a junior savings account.
When they hit year 7 at school (about 12 years old) we check out how much free money they've got through interest, and look at how they could of made a bit more. The junior saver account gets changed to a regular high interest savings account and a youth account (not linked) with debit card and a max amount of $'s allowed on the debit card to be used for things like saving for bigger purchases etc. The idea of having the savings account is to show about saving and compounding interest (even at 2%), is better than keeping it in the piggy bank at home.
During year 7, and after the junior saver account has been changed to a youth/debit card and saver account, I add a little more incentive to save, after they have got their pocket money and put aside the mandatory savings percentage, if they would like to save a bit more out of their spending, I'll match it dollar for dollar, but that gets deposited in the savings account and can not be touched under any circumstances. I sat down with the eldest (13) and roughly worked out what her weekly spend is, it came to about $10/week. So we decided that before she starts saving extra she should have about 4 weeks of spending in cash (for going to cafe etc) and 10 weeks on the debit card account (for bigger purchases).
So I basically run the pocket money like they are my employees with a bit of salary sacrifice thrown in for good measure (there tax break is my extra contribution
)Pretty much by 13/year 8 they should save around $1k and understand the value of saving and understand how compounding works. We look at how the high interest account earned more than the junior saver earned and start to look at different forms of investing.
My idea for the next step is a diversified share portfolio, $1k isn't really enough to start so I'm happy to match the $1k and open a minor trading account as a trustee, and purchase $2k worth of a LIC and explain why diversification is important, probably AFI. They won't receive over the $416 (or what ever it is) by investing in a LIC with $2k and the stipulation is they cannot cash out to spend it until they are 18, which then they can use it to fund a gap year, buy a car or keep it invested and use their savings account to fund these. They already have a TFN so that they can submit a tax return to claim franking credits, and will be reinvesting dividends into more shares, because compounding rules! After they save another $1k, I'll match that and buy more shares, maybe something in a company they have an interest in.
So I'm off to see my accountant next week and will run this past him, and I was hoping just for some input and ideas that I may not have thought about to chat to him about.
Cheers
