Dadviser!
As the need for financial education grows, more parents are helping their children to build investment portfolios
FINANCIAL education may be moving into the nation’s classrooms, but many experts believe that money lessons should begin at home. Parents who talk to their children about saving and investing are more likely to help them get into good financial habits for when they are older.
Research by Santander has found that parents are the biggest influence on money behaviour for 43 per cent of people. Two thirds of those aged 18 to 34 wish they had received more.
Laith Khalaf, senior investment analyst at fund broker Hargreaves Lansdown, says: ‘Financial education is one area that parents can really give their children a head start in life. Young adults are often thrown in at the deep end of finances, faced with high levels of debt and the steep climb to get on the housing ladder, so a little financial know-how can go a long way.
‘The dangers of paying high interest on borrowing and the benefit of putting money away for the long-term are life lessons best not learned the hard way.’
Semi-retired advertising agency owner Stephen Thomas, 58, has been investing on and off for the past 30 years. He made money in the dotcom boom but got his fingers burned when the bubble burst in March 2000.
When he got access to his pension he decided to start investing again, this time with the help of his son Sam.
Now aged 30, Sam, a plumbing and heating engineer, says: ‘I did not see my dad every day but he would tell me about his investments and what money he had made or lost. It was really interesting to hear about and seemed better than just keeping my money in a bank account that did not pay any interest.’
Stephen adds: ‘At first Sam helped me with my investments but I said he should open an investment account too so he could make money for himself – I was not going to share what I was making.’ Now the two meet up most afternoons at Stephen’s home in Sandbach, Cheshire, to talk investments. The day starts at 7am when Sam looks online at company announcements.
THESE regulatory announcements can include a firm’s accounts, general updates or news of mergers or acquisitions. Sam flags up companies he thinks look interesting to his dad, who then does some more research.
Each has an Isa with AJ Bell, which they use to buy individual stocks and shares. It is a risky way to invest but the two like doing their own research on companies and Stephen makes an effort to go to investor presentations and try to meet the chief executives and directors of the firms they invest in and to speak to other investors in the companies.
Mostly, they invest in shares on the Alternative Investment Market (AIM), a stock market where fledgling businesses can often have share prices of less than a penny. They have invested in oil companies, lithium miners and pet care businesses, to name just a few. Their best ever investment was in a Russian miner, whose shares climbed from 4p to 44p. But while the investment portfolios of the two men are similar, they do have different approaches.
While Sam likes to hold shares for the long term as he is saving money for his future retirement, Stephen likes to crystalise any profits he makes.
Sam says: ‘We do not argue because we have separate Isas. It means ultimately we make our own decisions about which shares to invest in. The only time we might have a disagreement is if we both want to use the login for the news service at the same time.’
Bookkeeper Louise Wickham, from Guildford, Surrey, learned everything she knows about finance from her dad.
James Carleton, 71, was a fund manager in the City in his working life and has been putting money aside for his daughter since she was young. But it was not until Louise, 40, started a business in 2001 that she became interested in finance.
She says: ‘I had to learn about lots of financial issues I had never thought about before such as setting up a pension, and I soon realised I was interested in finance. So I started talking to dad about money matters more and more.’
James likes to put his money in investment trusts which pay good dividends, such as City of London and Caledonia. He then sticks with them for the long term. He has created a portfolio of investments for Louise and she adds money to the various investment trusts when she wants to.
She says: ‘I am not yet confident enough to pick out my own funds. There is still a lot I do not understand. If the papers say the stock market has fallen I will phone dad in a panic and he will calm me down and remind me we are investing for the long term.’
While the pair do not discuss investments every day, they will regularly sit down with a cup of tea and log in to their online accounts with Hargreaves Lansdown to check how their investments are doing.
James says he learned his basic investment principles from his dad and has passed them on to Louise. She is hoping her son and daughter, aged ten and 12, who already have Junior Isas, also catch the investment bug when they are older.
Louise says: ‘I think investing and the stock market are intimidating. Without my dad, I would never have got involved, I would have just put my savings in the bank and effectively lost money – the difference investing has made to my financial situation has been huge.’