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Five ways you can build a financial legacy for your children, together

Regardless of gender, children should learn the same lessons about money and be given equal opportunity to establish and grow their wealth.

Five ways you can build a financial legacy for your children, together

Good money management can be inculcated in children as early as primary school. (Photo: Shutterstock)

Long gone are the days where wealth was considered a man’s game. Year on year, women are gradually increasing their share of wealth. A recent report by Agility Research showed that women in the Asia Pacific region are joining the workforce in record numbers, steadily closing the income and wealth gap with men.

In fact, research by Boston Consulting Group indicates that women may well be the new face of wealth in Asia, with women’s wealth growing at 10.4 per cent annually in the region. If the trend persists, Asian women will hold more wealth assets than any other region in the world except North America by 2023.

As the world shapes up to be a level playing field for women, parents shoulder a particularly critical responsibility in ensuring they instill the right values in the next generation starting from an early age.

Here are five ways for parents to establish a sound financial roadmap for their children.

1. INVOLVE AND EDUCATE YOUR LITTLE ONES

Research shows that children begin forming financial habits as early as seven years old – that’s right about when they start primary school in Singapore.

When it comes to financial education, parents should start teaching their children early and cover a range of topics to promote holistic financial literacy, according to Ms Vivian Kiang, managing director and head of Wealth Planning and Fiduciary Services, Asia, for Royal Bank of Canada (RBC) Wealth Management in Hong Kong.

“I see gender equally, and parenting techniques should be the same. There are boys who hate stock markets and girls who are chartered financial analysts,” she quipped.

“It’s always recommended to educate children early about money management – teach them matters like the meaning of money, how to value money and how to save for a rainy day,” she said.

Driving home the importance of good financial habits by taking the time to equip children with the tools, resources and skills will not only help to inspire confidence in decision-making, it might also give them a head start on the future.

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One great option to kick start financial literacy is through educational videos on platforms like YouTube. Creators use relatable short-form videos and eye-catching graphics to help the next generation understand topics like the power of compounding and investing in the stock market.

2. BE A STRONG FINANCIAL ROLE MODEL

Being a positive role model as a parent extends to financial matters. Showcase behaviours that your children can emulate and teach concepts by practising what you preach.

Mr Rohit Bhalla, executive director and team head at RBC Wealth Management in Singapore, shared that his personal experiences with his daughters went a long way towards creating awareness of financial matters and understanding the role of budgeting.

“Children subconsciously pick up what they see around them. I used to get the girls involved in meticulous budget planning around family activities such as a holiday – the price of tickets, hotel stay, food, entertainment and sightseeing. That made them learn what their parents do for them, and taught them how to stretch that dollar,” he shared.

Budgeting and financial decision-making do not have to be taboo subjects. Make them a family affair by talking about goals, celebrating when you reach them and talking about how they were achieved.

The onus is on parents to invest time into sharing knowledge with the next generation as they begin to form mindsets and behaviours from a young age.

3. SET CLEAR GOALS

As you work with your children on a journey of mutual learning, remember to establish milestones to keep the family on track to meeting goals.

This is now more important than ever for parents who want to raise daughters who will go on to stand on a level playing field at work. “A solid understanding of finances can be the key to breaking stereotypes and empowering the child,” said Mr Bhalla.

Whether it’s saving for university or setting a target age for retirement, having clear and achievable goals will help keep both parents and children focused and motivated to grow wealth to meet their objectives.

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A trusted wealth manager can also guide you in discovering areas that matter most to your family’s financial situation. Your advisor can help you build a tailored wealth portfolio to ensure the decisions made to meet today’s needs won’t compromise your goals for tomorrow.

“Financial goals are the key to empowerment – the ability to think long-term and balance how you spend your money on things today versus planning for things one, five or 10 years from now. I have always encouraged the girls to list down their goals, the timeline to achieve them and distinguish among short-, medium- and long-term goals,” offered Mr Bhalla.

4. INVEST AND STRATEGISE WITH THE FUTURE IN MIND

Building on his point, Mr Bhalla added that when it comes to wealth planning for the next generation, it is important to think about the future and work backwards from there.

For starters, have conversations with your children about what assets they would like to build, timelines to achieve those assets, and strategies to go about achieving them. Reflecting on his experiences with his elder daughter, Mr Bhalla shared that they discussed how milestones like purchasing a car or property were achievable with proper strategy.

“She made a detailed spreadsheet with her revenue and cost lines. I was happy to see that she didn’t stop her contribution into the investment fund while working out her ability to pay her loans,” he added.

Ms Kiang added that in the process of investing and wealth planning, every family should diversify their portfolio into different asset classes to manage risk. “Children should learn the concept of balancing return and risk – what is considered a reasonable return and how can we mitigate the risk?” she pointed out.

5. SAFEGUARD YOUR LEGACY

At the end of the day, building wealth for your little ones is a long-term process that runs more like a marathon than a sprint. A disciplined approach to saving and investing is essential – but families must also make sure they do not falter close to the finishing line.

To that end, it is crucial to adopt strategies to ensure your family’s hard-earned wealth is preserved. For instance, solutions like trusts and fiduciary services help pass on your wealth while protecting your assets, personal estate and privacy.

Mr Bhalla also highlights the importance of proper insurance coverage for their families. Medical, total and permanent disability, and critical illness policies are necessary to protect against low-probability yet catastrophic events that could derail your plans.

“Life insurance is particularly important while your family is dependent on you financially,” he added, noting that it is also an invaluable tool to equalise inheritance between sons and daughters alike.

Map out the next generation’s financial future with the Royal Bank of Canada.

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