The next generation of home owners
If you want your children to grow up to buy their own home, start helping them now. There is still home ownership hope for the next generation.
There are many young people out there who have managed to buy their first properties – with or without parental help. The reality is that BNZ has paid out more than $18.5m from KiwiSaver to first-home buyers, according to Donna Nicolof, Head of Wealth and Private Bank at BNZ.
“Parents can help with more than just money or being the guarantor on a home loan,” says Nicolof. “Start by instilling good spending and savings habits in children. That will make it a whole lot easier when the time comes to get on the housing ladder.”
Nicolof takes time out from her role to share her financial knowledge with schoolchildren. “I started by going to secondary schools,” she says, but turned her attention to primary-age children after reading research by Director of Massey University’s financial education and research centre Dr Pushpa Wood about the benefits of financial literacy education for primary-age children.
“If you teach young children basic budgeting and savings skills they will retain (the knowledge) for life,” says Nicolof. Her lessons cover subjects such as where money comes from, needs versus wants, and how to budget by splitting income between spending, saving and giving. “I also teach them about the time value of money and the benefits of compound interest.”
Nicolof now uses her BNZ Closed For Good volunteer day to share her knowledge with primary-age children. Many of the lessons Nicolof teaches at schools can be replicated by parents at home and will help with the ultimate goal of bringing up financially literate children who are able to buy their own homes.
It’s never too early, or too late to start. The best time to begin is from birth. Open a savings account and deposit christening, Christmas and birthday money into the account, says Nicolof. Make sure you have conversations with the children about how this money is growing. “They will see the money starting to add up.” Likewise, open a KiwiSaver account for them and at the very least encourage the children to deposit a small percentage of pocket money, part-time job pay, and windfalls into it. Talk with them about how that KiwiSaver money will form the basis of a first-home deposit. Explain the benefits of locking their savings away so they can’t touch it for perceived emergencies. They’re never too young to dream of owning their own home and KiwiSaver is compelling for this reason, says Nicolof.
Teach your children the importance of planning and habits and to re-prioritise spending. Encourage them early to save their money for goals such as buying a Lego set. Small savings goals teach children that saving can lead to better things than frittering away their weekly pocket money. “Parents need to be aware,” says Nicolof, “children learn from what they see their parents doing as well as saying.” If you can, share your budget with the children so that they begin to see how you allocate money between needs and wants. At the supermarket talk to them about how much the essentials cost and let them choose what to buy with $10 or $20 on wants. “Supermarket shopping is a really great way to teach powerful lessons about budgeting,” says Nicolof.
Start money conversations around the dinner table and turn day-to-day events such as buying electronic devices for school into teachable moments. Have discussions with your children about why they need to contribute some of their savings to these devices to have some skin in the game and/or why you need to wait for the sales or choose a cheaper device.
Finally, giving your children a can-do attitude will help them be realistic rather than pessimistic. It might not be as difficult as it is now to get on the housing ladder. “It has always been hard to buy your first home,” says Nicolof. “I bought a very small apartment when I was 19 years old. The mortgage freaked me out, but it taught me really good financial discipline. Buying a property or investment when young is a really good way to start building wealth.”