While the baby boomer generation of postwar Britain benefitted from numerous privileges including free university education and full employment, soaring house prices and generous final salary pensions, it’s been a trickier ride for those that came after. Indeed, millennials are staring down the barrel of a far bleaker financial future. How can parents protect their children from downward mobility reality?
According to Deloitte’s Global Millennial Survey 2019, optimism is reaching ‘troubling levels’ among this demographic. Millennials, described as ‘a generation disrupted’, are ‘expressing uneasiness and pessimism – about their careers, their lives and the world around them’. Of course, climate change is a major factor but the present economic, social and political landscapes are all deeply concerning for them. And financial precarity plays a huge part.
‘Young people growing up today are increasingly likely to have lower living standards than their parents.’ is the stark warning from two leading experts on social policy from the London School of Economics’ Centre for Economic Performance (CEP) in a paper in which they call for radical policies to improve the life chances of Britain’s young people. And the UK is not alone. The World Bank reported last year that ‘mobility has stalled in recent years in large parts of the world’.
Parents who have lived through privileged times of upward mobility will want to protect their children against the current downward mobility trend. Here are some ways that generations that have thrived can bolster younger generations against the more challenging financial landscape that they are facing.
1. Teach them the financial basics
Instilling healthy financial habits in your children from a young age will mean that they start life with a toolbox of knowledge and skills to act as a buffer against the financial difficulties that they may face later on. Key elements to cover – in an age appropriate way – are how to budget, the importance of saving, being able to delay instant gratification, the dangers of debt, how interest works, distinguising good debt from bad, financial protection through insurance and the importance of long term financial planning and saving for retirement from a young age. If there are gaps in your knowledge, there is no shortage of resources online or finance for dummies-type books to explain these basic financial concepts.
2. Education fee planning
One of the greatest gifts you can give your child is a debt-free university education. With university fees soaring, average graduate debt is reaching dizzying levels. Total student loan debt in the US alone is estimated at $1.53bn. Yet in spite of the cost, the benefits of a university education are numerous. According to the OECD, these benefits are both financial – higher employment opportunities and income – but also social, including improved social status, access to networks, increased likelihood of voting and even higher life expectancy. Education fee planning while your children are transitioning from toddlers to teens is an effective way of being able to cover their fees upfront and avoid the need for hefty student loans. Building capital over the long term with a regular savings plan could mean that by the time your child spreads their wings to study you will have accumulated a large enough sum to cover their university fees, and maybe even living costs too, enabling them to graduate without the weight of huge debts on their shoulders. That means that when they start earning, their money can be put towards building their financial future by, for example, getting a foot on the property ladder, starting a retirement fund and investing to build wealth rather than paying off interest on debts.
3. Estate planning
If you are lucky enough to have accumulated assets over your lifetime, the last thing you want is for your children to lose out to the taxman. Estate planning is key to finding effective legal solutions to minimise the inheritance tax levied on your estate and ensure that as large a proportion as possible will go to your children. Of course a will is also essential to make sure your legacy goes where you intend it to. This is a complicated area – often especially complex for expats – and we would advise taking professional advice on this early on to protect against all eventualities.
These latter two points are areas you should tackle with professional assistance. Infinity has helped thousands of people to protect, build and maximise their wealth for the future security of them and their families. Why not get in touch and let us help your family buck the downward mobility trend?
A leading provider of expat financial services and wealth management services across Asia.