Okay so you’re a long way off from retiring and needing to downsize your home, but now is a great time to start educating your children about money and how to save it wisely for future goals, and it’s the perfect time to start thinking about your retirement. If you don’t, then you’ll soon discover that the years have flown the past and that there is little time left for thinking about educating your children to save or building up funds for your retirement, you’ll just have to make do.
Let’s look at how you can do prepare your children to buy their own home as you save for retirement, and how you can do both with ease.
Good money management skills are learnt when we are young. Research shows that approximately two-thirds of Australian children receive pocket money, with pay rates ranging from $5 to $15 a week depending on the child’s age.
In fact, money smart parents are teaching children to save their pocket money by opening a savings account when they are babies. Most parents will also encourage their children to do household chores for money that can then be banked.
According to research, children learn the basics of money management when they are young. Cambridge University suggests this may be as young as 7 years-of-age. The same research suggests that children learn their money management habits from their mum and dad. This is why it’s important for parents to have a sensible approach to money.
Parents can encourage their children to adopt good money management habits by:
- Rewarding children with payment for chores carried out.
- Talking to children about how to save.
- Setting-up a savings account for children.
- Encouraging children to save their money.
- Teaching children to goal set by talking about big ticket items that they can purchase if they save.
As your children get older and while they are still living with you, encourage them to consider buying their own home. Living rent-free is a great way to save a home deposit when you’re working. This allows your children to save for their own home faster.
In addition, you can encourage your children to start budgeting so that they can save more of their pay. It is also a good idea to suggest that they open a high investment account or a term deposit. This type of account will give them greater interest. This will allow them to save faster.
For parents who are in a strong financial position, contributing some money towards a home deposit for their children, enables their children to save for a home faster. This, in turn, makes their goal easier to achieve. However, it is recommended that you only consider doing this if you can afford it, and your children are showing signs of being able to save for a home deposit themselves.
While it may be tempting to give your children enough money for the whole of their home deposit, just remember that by encouraging them to save some of the money themselves you are helping them to develop sound money management skills that will be with them for life.
Once you’ve got your children on the right home deposit saving path, then it’s time to think about downsizing to a smaller home. Downsizing is a part of the lifecycle. You’ve had a family, nurtured your babies and watched them grow. Now they’re ready to start a life of their own. This is when you typically start thinking of selling your larger, family home and buying a smaller property that’s easier to maintain.
Many Australians who are downsizing are electing to buy villa-styled homes or a unit. A popular trend for many Australian home owners who are downsizing is to find a smaller home in the area where they currently live. This is because many home owners feel comfortable in an area that they have known for many years, which gives them a feeling of added security as the age.
As with any form of property buying, there is an art to downsizing. Directly after the Global Financial Crisis there was little downsizing to be done, this was due to the fact that property prices and superannuation stagnated and the stock market not performing as well as expected. This made many potential downsizers reluctant to make any changes financially as many wanted to improve their financial situation before they looked at selling the family home, and did not want to risk losing too much capital in the change-over.
If your family home is paid off and you own it, then you may have enough to buy a smaller home and put the money in the bank for your retirement. But, if you still owe money on your existing property, then it’s time to work out how much you’ll be left with when you sell.
When looking to downsize you should review your financial situation before making a move. This means asking yourself several questions, these being the following:
- What is my current level of debt?
- Do I need to borrow to downsize?
- How much can I afford to borrow?
- If I need to borrow, how will I service my loan?
Planning to downsize, before you need to make any changes to your lifestyle, will enable you to make a smooth transition from your larger, family home to a smaller, more manageable property. It will also give you financial peace-of-mind.
Want to know more about home loans? Then contact eChoice and find the right home loan for YOU today.