“The trend for young adults to stay at home longer may actually be a good wealth building strategy,” according to Rick Collova, director of PEB Group.
“As long as it’s done with a sound plan, this is a very smart move by the Millennial generation.”
Research has shown that Millennials, those born between 1980 and 2000, are staying at home longer, often well into their thirties.
Subsequently they are putting off major life commitments such as getting married and buying a home till much later in life.
“There are some real wealth benefits to this, as well as a huge financial downside,” Mr Collova explained.
‘If they have a disciplined savings plan and a proper budget, then they can accumulate a substantial deposit and buy their first investment property while still living at home.”
“On the other hand, if they don’t have a savings plan and wait until their thirties before buying a property, then they will have missed out on about a decade’s worth of building wealth through property.”
“It’s not just about capital growth, but there are tax credits for investment property which after a few years add up to a considerable return,” he said.
Education is the Key
Mr Collova said the key thing was education about money and investment.
“Schools generally don’t teach kids about money management,” he said.
“Those young adults that do invest early have usually been educated by their parents, or have taken the time to educate themselves about money.”
“Unfortunately so many young people enter the property market without knowing what their investment options are.”
Mr Collova said that while the First Home Buyers Scheme gets all the attention, and is many people’s first step on the property ladder, it may not be the best one for long term wealth building.
“With the first home buyer option they can get a one off payment of up to $15,000. But if they buy an investment property they have an ongoing tax credit of over $100,000 depending on how long they hold on to the property,” he said.
“Even if they hold on to it for three years they will still get back more than double the first home buyers grant in terms of tax credits, variations and deductions.”
“This is why I say the Millennials preference for staying at home longer could be a very smart wealth building move as long as they have a sound investment strategy set up.”
“Because the sooner you invest, the better your long term wealth generation will be.”
How to Raise Investment Smart Kids
The obvious question then is when is it too young to start teaching your kids to invest.
“I think as soon as they start high school you should start teaching them about the value of money,” Mr Collova said.
“And you should definitely get them saving as soon as possible.”
“Once they leave school and start working this becomes a must, because when they eventually apply for a home loan a solid savings history is a must, and is the first thing any bank will want to see.”
“And the key to saving is having a proper budget.”
“Our budgeting guide is a good place to start.”
“Or as a parent you can take them to see a financial planner, go to one of the many free workshops held by property investment services or help them self educate.”
“The main objective is to get them started early; otherwise they may get a rude awakening once they become adults and start wanting the things that adults want,” Mr Collova said.
*This article is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser.
PEB Property Group is a complete property advisory service for Perth families. Offices are located in Inglewood and Willetton, Perth, Western Australia and offer service in - Financial Planning · Finance Broking · Property Management · Property Sales · Property Investment · Development
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