When it comes to money, some kids are given a big advantage over other kids. Some of this advantage comes from how much money parents physically give to their kids, however, that is not the biggest advantage which can be given. The biggest advantage is how much a kid's parents know about money and what knowledge they pass on.
Let me tell you two very short stories to help explain this.
The Unfair Advantage Story - Part 1
There are two friends who turn 18 at the same time.
As they are turning 18, they get access to savings their parents have been making on their behalf.
Friend 1 receives £6,000 and Friend 2 receives £10,000.
🗣️ Friend 1: “Your parents must have saved a lot of money for you and that’s why you have more money than me?”
🗣️ Friend 2: “My parents saved £20 per month since I was born”
🗣️ Friend 1: “Strange! My parents opened my bank account and saved £20 per month since I was born too. I don’t understand, why do you have such a big financial advantage over me?!”
🗣️ Friend 2: “My parents put my savings into an investment account rather than a bank account so it has grown at lot over the 18 years”
Why is this money story important?
This short story shows that some kids are being given a large financial advantage, not due to the amount saved each month but due to the fact that their parents have learned to invest savings for the long-term.
All parents, regardless of their earning potential, have the ability to learn how to invest and give their children this advantage. I have written blogs and even set up a guide to help as many parents as possible learn about investing so they can give their kids this advantage. It's an unfair advantage as so few parents believe they can learn about investing, let alone how to actually starting investing for their kids.
Please take the time to give your kids this advantage. In less than an hour you can learn the basics of investing and open an account for them (I note that I am in no way compensated by any investment fund/Manager for this - I am providing this as education as I believe it is so important to help kids learn that money can grow).
This is only part of the story!
The Unfair Advantage Story - Part 2
The two friends are now 65 years old!
Friend 1 has £627,000 saved for retirement. Friend 2 has £3,090,000 saved for retirement.
🗣️ Friend 1: “Wow! Your job must have paid you a lot of money as you have so much for retirement? You have nearly 6 times as much as me”
🗣️ Friend 2: “On average, I saved £500 each month since I was 18 years old”
🗣️ Friend 1: “Strange! I saved around the same amount! That seems so unfair!”
🗣️ Friend 2: “My parents didn't only invest my money when I was a kid, they also taught me the basics of investing. This means I kept investing my own money as I got older.”
🗣️ Friend 1: “My parents always saved money into a bank account so that's what I kept on doing. With inflation, my savings won't last long.”
Why is this money story important?
The second part of giving your kids an unfair advantage is to teach them about investing. Over the long term, your kids need to learn how to make their money grow and this means teaching them about investing their money.
As mentioned at the very start of this blog, it is not the amount of money that you give your kids that will make the biggest difference to their financial future. I've heard many stories of rich families giving their kids lots of money and their kids subsequently wasting all the money very quickly due to a lack of financial knowledge. The key is to help your kids learn how to look after their money.
Sadly, if you do not educate your kids about investing then there is a good chance they will never learn. It's not taught in most schools. To help teach your kids about investing, using McDonald's and Lego, please read my blog 'How to teach your kids about the stock market'. Additionally, you can buy your kids a copy of my book Grandpa's Fortune Fables so they can learn about investing via fun stories.
[For the purposes of the calculations in this story, I assumed a long-term rate of 3% per year for a savings account and 8% per year for an investment account on average]
Give your kids two unfair advantages when it comes to money:
Set up an investment account for your kids - Read the investment guide here to learn about investing and setting up an investment account.
Teach them about how money can grow - Read my blog 'How to teach kids about the stock market' and spend time teaching them. Or get them a copy of Grandpa's Fortune Fables. The book will teach them about investing using fun stories.
Compared to many other kids, even those who come from wealthy families, you can give your kids a massive advantage by teaching them about money. This is an unfair advantage as teaching kids about money isn't taught in most schools (sadly).
Don't forget to subscribe below as next week I'll be releasing a blog about how I taught my daughters about the 2008 Financial Crisis - I'm sure you'll find it interesting as there are so many important lessons there.
Thanks for reading!
p.s. Grandpa's Fortune Fables will help your kids know more about investing than the majority of most adults!