Great parents want nothing but the best for their children. We want to nurture, protect and provide for them. Yet also serve up ‘tough love’ when needed so they become resilient, independent adults.
In the process, we’ll discover ‘teachable moments’ about school, friends, family and work.
One area where they’ll gain a crucial education is in finance and investing – and there are few better chances to tackle the subject than through homeownership and property investment.
Here are the first 3 essential life lessons delivered to kids through real estate ownership. We’ll share the other 2 in our next article.
1. Good things come to those who wait
One of the fundamentals of investing is the advantages of time in the market.
Kids are in a great position to profit from this advice…but of course, they first need to get into the market before they can start making returns.
How kids can save up a 10% deposit
- First homeowner grants
- Stamp duty discounts
- Building boosts
- Equity in their home and going guarantor
- Gift or loan
Some of the more cynical members of society are quick to condemn parents who do this. “It’s a handout!” they cry.
We don’t see it like that.
Firstly, it’s a way to show your children the advantage of getting in early on a property – especially in the current environment where vacancy rates are tight, rents are sky-high and interest rates are low.
It often costs less each week to own a home than rent one.
But here is the real lesson:
Kids will learn the value of the long game over time.
Many investment savvy parents will encourage their kids to enjoy their first home for 12 months or so, then keep it as an investment as the upgrade to their next property.
It’s a savvy move called ‘Livevesting’:
- Reduce their capital-gains tax burden
- Use the property’s equity gains to finance the next real estate purchase
Best of all, as the years pass, your kids will see how smart it was to hold onto that first asset and enjoy the magic of compound growth.
2. Budgets and finances are more important than you realise
Despite pushes by others in this industry, schools still don’t teach kids enough about the mechanics of budgeting and planning for financial challenges.
But as a homeowner, an an investor, they soon get the gist.
Property assets require ongoing monitoring and upkeep. They must plan out when to do works that ensure their home retains value, or their investment generates maximum rental and minimum fuss.
They’ll need to financially allow for such activities as future repainting, air conditioning servicing, floor covering replacement.
They must also learn about setting aside funds for emergencies. A broken hot water system or leaking pipe can be expensive to repair or replace.
These can hit their funds hard if they haven’t learned to put aside contingency money in advance.
Good relationships are essential in your life
Networks and relationships are keys to success in life and career, and property ownership is full of opportunities to forge valuable contacts.
Once your kids own an investment, they’ll need to deal with people from all walks of life: conveyancers, accountants, agents and mortgage brokers.
They’ll also be talking with property managers and learning about the ways of tenants. They might also need to deal with buyers, sellers and renters as part of their journey.
Then there will be people like investment advisors and property mentors on their speed dial.
All these relationships will help them build confidence and create connections that will help them in future endeavours.
They’ll also learn about assessing the people around them – determining trustworthiness, and the value of advice.
The ability to strategise is important
As mentioned, property investment is a long-term game.
Those who start early and catch the bug rarely want to sit idle once they see how well their property is doing in terms of value.
They’ll be keen to grow their portfolio and monitor its progress. To take advantage of opportunities.
Talk to your children about what their journey will look like. Ask them:
- How long they plan to live in their first property?
- When would they like to buy their next home?
- What about investing?
- Will you need more cash flow or can you go for capital gains in your investments?
- How will real estate purchases fit in with the various stages of the life you imagine for yourself?
Ask them to plan ahead for properties three and four. What will they look like? What kind of freedoms will they deliver to you?
Real estate ownership and investment can help them foster a strategic mindset they can apply to other aspects of their lives as well.