AS MY colleague Sue Dunne said, in her August 8 blog – which can be found on the Investment Collective website – the right time to seek financial planning is always “as soon as possible”. You are never too young or old, too debt-ridden or cash-flush to deserve the expertise of a planner in planning how to manage your affairs.
The very act of compiling your documents, in readiness for a planner’s analysis, can be an invaluable eye opener – a reckoning with your true self, to wax poetic – into how you conduct yourself when it comes to preserving or exhausting the resources that come your way.
“For young people, a tailored financial plan will set them on a path to growing their wealth, perhaps via a savings plan,” Sue said.
“For pre-retirees, it is essential that you consult with a planner to ensure that what you have worked a lifetime for will support you in the way you want during retirement.”
But what of the “young, young people”, the school children who don’t yet have reason or indeed the right – financial regulations dictate a client must be over 18 years old – to seek expert opinion? Who can they rely upon to set them up with reasonable skills to understand financial prudence and the right mindset to practise it when their time comes?
I read, last month, on The Morning Bulletin’s website, about a 10-year old girl who, having inherited her grandparents’ love of gardening, has started up her own botanicals mini-business.
She sells succulent arrangements in recycled pots, as well as fresh veges and herbs, out of her back yard, via social media.
Now, obviously, this is an undertaking that requires parental supervision. Her parents have given her the space to grow her wares, her grandparents the expertise. No doubt her after-school interactions with clients are supervised and her cash is safely banked by an adult. But what really impressed me is the revelation that “all her purchases and profits get entered into a spreadsheet as (her) parents aim to teach her lifelong lessons in budgeting and saving”.
Indeed, when you first book an appointment with a financial planner, their first step is to build a spreadsheet based on your incoming and outgoing money, before taking into consideration which of your assets appreciates or depreciates over time and whether those changes attract some kind of rebate or subsidy under Australian law.
Simply by keeping track of all her purchases, this 10-year old girl is quickly learning, for example, how she can take a $2 pot and turn it into a $10 profit. If she then spends that $10 on a bag of potting mix, then she will learn to calculate whether that bag equates to 20 or 30 new projects, and how much she can make from them.
This kind of exponential growth lies at the heart of compound interest, the mathematic principle that works hard either for you (in putting extra payment towards your mortgage, for example) or against you (in failing to pay off your credit card bills).
And the genius of this particular business is it’s “rooted” in a product which gets cheaper and cheaper each generation.
“If I want to buy a succulent,” she says, “I calculate how many baby plants I can get out of the adult plant”. (See above.) That’s a significant insight into the economics of investment.
If, perchance, the demand for her product drops and she’s left with unsold pots, then she’ll find out the hard way what it means to hold a clearance sale by slashing her products’ prices close to their net value, or lower if she needs the cash. By tracking her small business’s activity from the get go – what we in the biz would call a profit and loss (P&L) analysis – this young entrepreneur is going to at least gain a very effective understanding of sustainability and financial responsibility.
I wholeheartedly commend this girl’s family – her grandparents for teaching her a sustainable skill via which she might in the future grow her own food to eat, barter and sell, for instance. In another newspaper article published around the same time, Rockhampton was introduced to a newly arrived permaculture consultant, a mother-of-two who “puts her money where her mouth is”, so to speak, in pickling and preserving her own vegetables and organic vanilla pods. I was little surprised to learn she came from a refugee background because it’s often the people who’ve gone without who make the most of what they can get.
But kudos to the 10-yearold’s parents for giving her not only the space to hone her craft – it stands as a stark, welcome example to the archetype of a pasty, inattentive child stuck indoors in front of a screen – but also the discipline to let her take pride, at such a young age, in making her own money.
In an era when it’s considered near tantamount to child abuse to not give a child pocket money at all, let alone as much pocket money as their school friends get, this girl is off to a flying start to learning the skills which will, in time, provide for her to own her own home or business, to stay out of credit card debt or remain clear of toxic relationships she might otherwise endure because she wouldn’t know how to take care of herself.
After all, isn’t that still what we all want for ourselves? The dignity to make our own decisions, to celebrate our own imagination, to put our skills to work in making us more money than we are just given? Just remember, it is never too late for you to make a new start when it comes to looking after your money. The rules of mathematics can exponentially benefit those who begin to manage their money younger, even well into retirement, and getting a guiding hand from a competent financial planner will always put you in a better position than if you’d gone it alone.