Last Saturday was an interesting experience for me when I gave a talk about preparing for Financial Future before an audience called the SoMoms (Social Media Moms).
SoMoms is a group of mommy bloggers who discuss different topics like fashion, food, Down’s Syndrome, breastfeeding, care for environment, entrepreneurship, and of course parenting. Interestingly, there is one daddy member of the SoMoms. He’s the group’s “muse.” (See below for the list of their blogs.)
Since it was from one Mommy to other Mommies (and a daddy), responses were more expressive. There were “Awww!’s” and laughter, and some tears were shed along the way.
I wish I recorded the event so I could share all the questions asked and discussed during the event, but I didn’t. So I will share a few of the Q&A discussions that I recall plus additional insights:
Question 1: My young son came up to me and said, “Mom, I want to invest in your company.” What should I do? Will I take it and just give him a fixed return? Of course, I don’t want him to lose his money. But let’s make it clear, my son is still very young and he’s only talking about his P5,000 savings.
Answer: It was probably the sweetest thing for you to hear that. It shows your son’s desire to help you grow your business, and also his confidence in your business capabilities. Now my answer may sound very technical but hey, let’s start them young and this is an opportune time to teach him about investing. As what we always say in parenting, your child is ready to learn about something when he starts asking about it.
Discuss with him whether he wants to come in as a creditor or investor. If it’s the former, then he is a lender just like a bank and in which case you two will have to agree on the terms and conditions of the loan – the interest rate, the tenor, and manner of payment of both the interest and principal.
If he wants to come in as an investor, then explain to him that an investor is a part owner of the company. That means that if your business makes a lot of money he will have a share in the earnings. This can be more than the interest he can earn from the loan. On the other hand, if your business loses money, he may also lose his investment. In other words, there is no assured investment return on his P5,000.
This is also a chance to tell your son that start-up businesses have a very high failure probability. But this should not discourage him from investing. If he wants to partner with seasoned investors, he can also try investing in a blue chip listed company. A company whose products he patronizes will be easier to understand and more interesting for him.
The above discussion may seem like too much to some for a child’s P5,000 savings. But you see this is the best time to teach a lesson to a child – when he is interested because he has a stake in it. You are sure that you already have his full attention, if not keen interest, on the subject matter. Compare that to sitting him down one day and telling him, “Son, I want to teach you about investments…” especially if he’s busy playing with his favorite gizmo.
As we parents should always remind ourselves, “Seize each opportunity as a learning experience!”
Question 2 – “Is it better for me to purchase lots for our children now or invest first and then buy them their lots later on?
Wow! Lucky kids. They won’t have to worry about saving up for their own lots. However, my first question here is why do you want to purchase lots for your children? Are you all set for your own retirement?
Here’s the difficulty when we purchase lots and assign right away to our children, even if we say that it’s a form of investment for us. Suppose a family financial challenge comes your way and you will have to liquidate one of these properties, do you think anyone would be happy to volunteer his “assigned lot?” However, if you really want to buy them lots or any real property for that matter, maybe it’s good to make it clear to them that there’s a possibility that you may need to sell them if a financial challenge arises. This way, they will not have a tremendous sense of entitlement to it.
I must say that there is also an advantage to giving lots as gifts to your kids where they can build their homes someday. You can choose to buy somewhere close to your own home and increase the probability of your future grandchildren visiting you regularly. However, as my own sons would say, “We’re not yet sure whether our future wives would like to live here.” Ouch! but understandable.
Of course, you can tell them of the advantages of having grandma nearby, especially when they have young children. I always remind my sons that we were lucky to have Lolo and Lola live nearby because whenever emergencies happened when they were little and I was still working away from home, they came to the rescue in a jiffy. It was also easier to check on them when both Papa and Mama were out of town.
But the more important thing I want to emphasize here is the fact that gifting our children with lots should be considered only when we are all set in our retirement funds. If we want to make these lots as part of our investments for our retirement, one alternative is to buy the properties now and give them the option to buy at very friendly terms (presyong anak) in the future. This way, you also give them the pride of buying their homes on their own.
(To be continued tomorrow)
The SoMoms Blogs: