Why You Should Introduce Your Children to a Financial Adviser

We want to look after the generations to come, but we can only do this if we’re protected, too. Brett Schatto writes about the interconnected nature of family finances, and why the best monetary support you can provide for your children is encouraging them to speak with a financial adviser.

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Good financial planning is all about the ‘what ifs’.

What if you can’t work anymore?

What if you get injured?

What if you can’t pay the mortgage?

To protect our lifestyle and not have sleepless nights worrying about money we need to have contingencies for every possible scenario. When the improbable or unthinkable happens, it’s important that we have a robust and agile financial safety net that we can fall back on.

Protect your children – and yourself

Every. Possible. Scenario. This, of course, looks different depending on who you’re talking to. For some people, we might ask the above questions again, but with a twist:

What if your children can’t work anymore?

What if your children get injured and lose their income?

What if your children can no longer pay their mortgage?

A significant percentage of parents are heavily involved in the financial lives of their kids and grandkids. This ranges from helping out with groceries, acting as guarantor, contributing towards the mortgage, or even providing full room and board well into their adult years.

Whatever the case, the reality is that our financial lives are well entwined with those of our children and grandchildren. When an adult child gets injured or becomes sick and can no longer work, it’s increasingly the parents who are leaned upon to fill the gap left by a lack of income.

To be in a position where we can help our kids is a privilege; we want to be there for them, we want them to be safe and healthy and enjoying life. But we need to make sure we’re protected too, and introducing the next generation to a financial adviser makes all of this achievable.

Your children and grandchildren need a financial plan

When your kids come in to chat to a financial adviser, we run the same ‘what if’ scenarios with them as we do with you. This tells us many things about their situation and yours, and it gives us ideas on how to bolster the financial safety net that’s protecting your entire family.

Here are some common considerations:

Your children’s insurance

What is the state of your children’s insurance, be it personal, life, trauma or TPD? If it doesn’t provide adequate cover for their financial obligations, you’ll probably be called upon to help out when the hospital bills come through for or when they temporarily cannot earn an income due to illness or injury.

In some circumstances, it’s financially savvy to fund your children’s insurance to make sure they’re properly covered; if something unexpected does occur, this is often a cheaper path.

Your grandchildren’s insurance

Are your grandchildren covered by your children’s health insurance policy? If they aren’t, who foots the bill when an unfortunate accident occurs or illness diagnosed? If it might be you, we need to look at the best way of doing this.

There is such a thing as child trauma insurance, which can be taken out by parents, guardians or grandparents, and provides a lump sum payout if a child was to experience a traumatic injury. Again, this might be a financially prudent move depending on your situation.  The payment allows parents to take time off work to care for their children and to seek out and pay for treatments and rehabilitation as required.

Your estate

There are some things in life we don’t want to consider, but have a responsibility to nonetheless. Your children’s marriage or de facto relationship is one such thing. If it ends, what happens to the inheritance you have put aside?

Too many clients have found themselves in the unenviable position of seeing a portion of the money they put aside for their children and grandchildren go to former in-laws and the new families they join or start. You need to protect your money from these occurrences, and there are practical ways to do so.

Improve the next generation’s financial literacy with a financial adviser

Perhaps the most beneficial aspect of having your children speak with a financial adviser is that it gets them thinking about money. People walk away from a chat with us more knowledgeable and more capable of dealing with their finances. 

Your children may think they know all there is to know about money because they deal with it every day. But driving a car doesn’t mean you know what’s happening under the bonnet. Encourage your children (or grandchildren) to come in for a chat and start expanding their financial literacy – for their sake and yours.   

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