Financial advice every parent can share with their child.

With 2016 in full swing, several thousand 2015 school leavers across Brisbane are now seeking full or part time employment as they commence their career, start an apprenticeship, or join the workforce to support tertiary studies. While their new-found income might be a source of freedom and excitement, for many young adults it also introduces new responsibilities and decisions, with results that can be financially disastrous without the right education and advice.

A recent article in the Brisbane Times reported many school leavers lack the financial skills to survive in the real world, drawing on a study conducted by the Queensland University of Technology that shows everyday money matters like budgeting, inflation, credit card interest and rent can leave young adults stressed and confused.

Echoing the concerns raised by the study, Elston Brisbane confirmed they are frequently asked by clients the best way to teach their children good financial habits that will assist them to manage their income independently.

Damon Bensein, Head of Private Wealth at Elston Brisbane, believes financial education for the younger generation needs to start at a grass roots level, yet be relevant to the real life pitfalls and traps they can fall prey to in our modern climate. Explains Bensein, “A lot of young adults fail to budget or save. The current generation is used to job security, a robust economy, and ready access to credit. This has generally meant they spend what they earn and fail to put money away for a rainy day, or have money available for unexpected events. This nonchalance generally leads to higher levels of debt, impacting on stress levels and cash flow.”

So how can parents educate their children to be savvy managers of their own income and avoid being caught in the credit trap? Bensein offers the following strategies: “The common rule of thumb is to save 20% of your take home earnings. This can be done via a combination of reducing non-deductible debt – such as personal loans or mortgage, tax effective contributions to superannuation, and setting some cash aside for a rainy day.” Bensein also advocates avoiding using a credit card for expenses, saying it frequently leads to bad spending habits that are hard to stop. “The pain of this is usually compounded through the high rates of interest payable on outstanding debt owed to credit card companies. Once the debt balloons it is very hard to ever pay back due to the interest cost which can often be up to 24% per annum.”

In addition to the dangers of credit cards, Bensein recommends preparing for the unexpected by putting in place funding for serious injury, illness or death. “Often the best form is by having comprehensive insurance plans that provide funding in these circumstances. This is generally one of the best pieces of advice we can give to younger people.”

A financial plan, even in its most basic form, is the foundation for ongoing financial success for every young adult. It not only highlights the importance of superannuation, regular savings, and understanding the right level of quality debt; a financial plan will also accommodate funding for the unexpected, reduce the risk of spending what is earned, and provide long term savings on insurance premiums.

Parents often ask when the right time is for their son or daughter to access the services of a financial planner. Bensein believes establishing a relationship with a Brisbane financial planner early is highly beneficial. “It means having someone that they can trust and turn to as their lives evolve, to ensure they make the right decisions at the right time.”

The benefits from this alliance will continue to unfold as families face the inevitable challenges associated with ageing. A trusted financial adviser can help children navigate the complexities of estate and succession planning, and aide with the transfer of wealth should parents become mentally incapacitated. It’s a partnership that will take them through every aspect of financial management – from young adulthood through to retirement.

If you’re interested in learning more about how Elston Brisbane can help your school leaver or young adult with financial planning or investment advice, please call 1300 ELSTON or email info@elston.com.au to get them started on the right path.