Wealth Planning for Your Child’s Dreams

5 Sep 2018 | Back to Blog

Every parent that has walked into VM Wealth’s offices supports their children’s dreams. We are regularly regaled with stories of children who dismantle remote controls in preparation for engineering careers; are found covered in flour preparing to be the next Gordon Ramsay; or serve a ball like a young Serena Williams.

However, when we ask, “How prepared are you to help your children achieve their dreams?” we are often met with anxious looks and hesitant shrugs. Studies show that up to 60% of the average parent’s income is spent on their children, but when it comes to divvying up that spend, and making the right allocations to fund today and tomorrow, many parents are unsure.

Today’s parents face an overwhelming amount of financial considerations raising their children. How do we afford memorable family vacations? How can we support multiple children entering university just a couple years apart? How do we balance education and retirement investing? How do we encourage our children to dream while keeping them down-to-earth?

We believe the answers to those questions start here:

Involve your children

Chances are you know have heard this story or even experienced it, a child with big ambitions to be an artist or an inventor is steered towards something more ‘practical’ or ‘safe’ by their parent, who encourages them to, “Major in accounting,” or “Be something sensible – study medicine.” And on the other hand you may also know a few forty-something year old working people, desperate to get out of the career path their parents encouraged years ago.

While it might be frightening to hear your child’s dream is to be a YouTube superstar, or something along those lines, it’s important encourage them to pursue the areas that interest them. Children who are made to follow the ‘safe’ path may lose the opportunity to learn who they are and how tough they can be.

The aspiring Youtuber, for example, is due a conversation with a parent, not about Principles of Accounts, but one that is more about the benefits of studying web development, so they can build a site of their own, or studying film in order to produce content. They should be tasked with researching how to monetize their channel and be taught how to invest their earnings as an entrepreneur.

Do some goal planning

From a roof over their heads, and clothes on their backs to funding hobbies and family vacations, costs for today’s parents add up quickly, so you need a concrete strategy to budget for this year and plan for the next decade. That’s where working with a Financial Advisor comes in, they will work with you to build a flexible strategy that integrates all aspects of your financial life.

In the case of our budding YouTube star, perhaps her parents might want to invest in a laptop and some camera equipment to get them started, and needs a short-term plan for US$2,500 by the holidays, plus wants to invest for a family trip to New York (where there happens to be a YouTube Conference next summer), and also needs to invest for their university. Choosing a unit trust fund for short-medium term investments and another fund with a stock portfolio for the long haul, while calculating the likely cost of a four-year degree given a tuition inflation rate of about 8% per year, is a big task. Try to balance that with your current cash management needs, and you could be tearing out your hair. But like any financial goal, investing even small amounts regularly adds up, and it’s why VM Wealth Advisors are there to make your financial life easier with goal planning sessions and a full suite of investment options.

Have a backup plan

As we all know, having children means dealing with the unexpected. Planning for the future necessitates planning for unforeseen events. Create a risk protection strategy which includes insurance, estate planning and building a solid emergency fund. And just in case your future YouTuber decides to become a future neurosurgeon, ensure that you are meeting with your Advisor often to make adjustments and rebalance your investments to suit your evolving needs.

Build for your own future

In case you haven’t travelled in a while, remember what the flight attendant says, “Put on your oxygen mask before you assist others.” Your personal plans, especially those you have for retirement, should not stop because you have children. Work on a comprehensive plan, so your golden years keep their shine even if Junior’s plans don’t go as intended.

Our Advisors will help you implement strategies to safeguard what you have now, and grow your wealth so it meets the future needs you, and your little ones, imagine for yourselves.