What to teach the kids

Teaching is a difficult skill and I have increased respect for the brave souls teaching a classroom full of kids. Thinking of my 8-year olds teacher, she deserves a medal, as my little angel is interested in anything but education.

Mrs Duffy and me are doing our best to home school our kids (during the current Pandemic) but it is difficult and our worry is that they fall behind. The school is in touch and have re-assured us that anything they do is a bonus and that they will have the chance to catch up when the schools re-open.

I am going to take this opportunity (home schooling) to teach my kids the importance of being financially literate from an early age. This is a process that takes years as I am finding out myself.

Although schools are brilliant at teaching subjects like Maths, English and Science, they don’t teach the kids how to learn (Jim Kwik). They don’t teach the kids about money (Robert Kiyosaki) and how to be financially literate.

This is where I come in. If I can get my kids to be financially literate from an early age, they can avoid all of the mistakes that I have made over the years.

In theory, both my girls (due to their ages) have minds like sponges so I should be able to educate them effectively.

Looking at the basics of the brain, it can be split into two when we are concerned with learning and in this case home schooling. The left side is thought to be the more analytical, logic side. On the other hand, the right side is the creative side.

To make the most of both sides, I am going to educate my kids through a well-known game called Monopoly (Robert Kiyosaki). The theory is that games engage both the left and right side of the grey matter. With both sides of the brain engaged, this helps any information stick as the brain operates more effectively when we use our logic side and our creative side together.

Monopoly can be used to teach kids about passive income. It is all about building houses and hotels on property and this generates a regular source of income. This is the strategy that is going to win you the game.

A common mistake with Monopoly is to hold onto your money and not buy properties. This is a mistake I have made in real life as I left money in Premium bonds for about 5 years instead of buying more rentals. This money could have been used as deposits for 3 rentals but I try not to cry over spilled milk.

If I have £50,000 and hold on to it for 5 years or even 10 years, that money devalues over time due to inflation. This means that I have less spending power after 10 years.

With a little bit of education that money can be used to buy 2 rentals or could also go into a stocks and shares ISA. Both are good options depending on your preference when it comes to investing.

Using the property example, I am going to use the £50,000 to buy 2 rentals at £100,000 each (25% deposit required for each). There are other costs involved but they are excluded for simplicity.

From experience, I know I can achieve a £200 pcm profit on each property by using an interest only mortgage. There are positive and negatives to both repayment and interest only but in this case we are looking for cash flow.

That £200 profit pcm is £2400 per year. With both rentals factored in that is £4800 profit per year. This £200 profit I am referring to has already taken into account mortgage payments, tax and maintenance.

After 10 years, this profit becomes £48,000. So added to the original £50,000 (deposit money) we now have £98,000. As an added bonus, we will probably get capital appreciation so we would likely be well over £100,000 but I am going to be cautious and say the property prices haven’t gone up.

Now even with inflation thrown into the mix, having £98,000 instead of £50,000 means that our money has almost doubled and we will be in a much better place financially and will have more spending power. More spending power than you would have by holding onto your money and being too cautious.

This example would be too much for my kids at this stage but it is what I will be working towards in years to come.

Like the vast majority of parents, I want more for my kids not just in terms of finances but also happiness. I believe that a good financial education will help them and give them a massive advantage in life. Unlike me as a clueless 18-year old (last weeks post), they will be able to make informed financial decisions that will hugely benefit them in their 30s and 40s.

Going forward, I am aiming for 1 game of Monopoly a week as it is up to me to provide the financial education my kids need. When I am eventually financially literate, my kids will also be financially literate.

Leave a Reply