Doctors have the opportunity to set their kids up for life or pass on bad financial habits.
When you’re earning good money you can feel even more inclined (or obligated) to help out your children out financially, especially if they’re struggling. And while you can provide sound financial lessons, emotional support, strategies and advice in abundance, it’s when you become a ‘money pit’ that things can go south.
Giving your children everything isn’t necessarily good for them. You could actually be damaging their development as a financially independent individual and jeopardise their way of life for the long term future. You could also put yourself, your goals, your dreams and retirement at risk.
There are many ways you can support your children financially and set them up for the future from a young age – and it doesn’t involve the giving of money.
Be a good example
Remember there are four crucial aspects to using money – spending, saving, investing and giving. Your job is to be a role model for your children in all four areas and set a good example. Young children are heavily influenced by their parents, and you need to be careful about how you use money in front of them. Doctors can themselves often be prone to having poor financial habits, so make sure you don’t fall into this trap – for both your own and your children’s sake.
Be a smart spender around your children, especially with discretionary spending. Teach them the difference between needs and wants, particularly during financial challenges. Manage your debts well and showcase the importance of balance. Where possible, try to use physical cash as opposed to credit cards.
Teach them financial literacy
Make sure they understand the basics of finances and how to spend, save, invest and give. The earlier you can empower your children with good money principles, the more control they’ll have over their future lifestyles, finances and well-being.
Key concepts to cover include budgets, wealth plans, emergency funds, mortgages, loans, credit cards and debt. Strategically, it’s important to look at goal-setting and how to work towards these short term and long term outcomes. To tackle these areas, they also need to understand good practices in research, networking, using finance management tools and capitalising on other resources.
Finance certainly isn’t a simple task, so ensure you engage in knowledgeable conversations and don’t treat your children as if they won’t be able to understand.
Provide a good education
Educating your children at a young age will assure they fall into good money habits early on and become financially independent as an adult.
A great financial education can come from everyday life, not just a good schooling experience. Use every opportunity to teach your children financial lessons, even if it’s when doing your weekly grocery shopping or household chores. Finding the best deal on a product can suddenly become a valuable lesson on savvy shopping, budgeting and cutting costs.
There’s also nothing more valuable than life advice and imparting knowledge on good decision making from your own successes and mistakes.
But remember, even if you aren’t directly engaging in a financial conversation with your child, your own actions with money will always send a message. This is particularly the case if you give in to their demands as a child or continue to ‘save’ them when they’re in financial strife as an adult.
Cut the cord
You may feel guilty or uneasy, but cutting the cord and teaching your children self-reliance is the best way to improve their financial independence and capabilities.
For your own financial security and retirement, you can’t afford to save them from every crisis. Your children need to embark on their own financial journey and learn from their own mistakes.
However, there’s plenty of other ways you can support your children instead of giving them funds. You can provide them with valuable skills, support, strategies and resources.
If you’re in a situation where you need to help them out, thoroughly assess how much you’ll give and how it will help them long term. You could even turn it into a loan instead – this way, you’re helping them while also setting boundaries and not putting yourself out.
Embrace the culture of generosity
Money isn’t just about our needs and wants. Teach your children the valuable lesson of ‘giving back’ and using their money to help others. Encourage your kids to share their money, whether it’s donating to a cause, participating in fundraisers or helping someone in need.
As a doctor, you’ll have exposure to a number of health-related fundraisers, foundations, research projects, charities and organisations, so what better way to help others and help your children at the same time.
Team up with an expert medical accountant and wealth expert who can guide you, and your family.
Contact DocWealth, specialists in accounting, financial planning, investment and finance, investment and business for medical professionals. We operate in Adelaide, Sydney, Melbourne and throughout Australia. Managing partner Kym Nitschke is available for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.
– Kym Nitschke
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on DocWealth’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
DocWealth specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.