Today’s money matters no longer revolve around cash and checks, but rather, they are based on a deeper understanding of economics than what our education provides. From taxes to profit and inflation to equity, it can seem unbearably challenging to teach new generations all they need to know.
You can start during middle school or high schools by showing kids the basics of financial literacy and economics. After all, learning how to handle money and
investing wisely is critical to their success as adults.
As parents, you may often ponder:
- When do I start giving children an allowance?
- How much should I give and when to start a savings account?
- How do I show my kids to save money, invest, short and long term?
- How do I make a distinction between their “wants” and “needs?”
- How do I teach them to make wise buying choices?
- How can I be generous without spoiling my kids?
- How do I teach them to work for money or show them how their money can work for them?
Let’s start by showing kids the basics of financial literacy and economics. After all, learning how to handle money and wisely investing is critical to their success as adults.
Earning Income – Kids need to understand how people earn money and what they can do to increase their income. Discussions will range from information about income, expenses, cap rate, appreciation, compound interest, and other factors can affect net operating income.
Buying Goods and Services – Children also need to recognize how money is used to purchase goods and services. They may be living in a single family rental after moving out of their
Saving – Putting money aside for future plans is an essential concept for younger generations because they need to understand that deposits and down payments are vital contributors to any real estate investments. Their savings is one means to use as a downpayment on any types of properties they chose to invest.
Using Credit – The concept of credit and the ways it’s used are both essential concepts that teach kids the benefits and deficits of debt so they pay closer attention to how they can become more financially responsible.
Financial Investing – This is another important concept that focuses on purchasing financial assets to create future income and wealth involving any investment strategy.
Protecting and Insuring – Finally, children need to understand that protecting one’s self and financial investments helps reduce the risk of financial loss.
“One of the best ways to guide your kids to understand financial literacy and economics is through investing in multifamily real estate. ”
Ways to Teach Your Kids About Real Estate Investing
One of the best ways to guide your kids to understand financial literacy and economics is through investing in multifamily real estate, one of the most enticing investments among others primarily due to the benefits that it provides. Multifamily Investing does not only help you out financially, but it will also provide an exemplary method of teaching your children about finance and how to grow their money. The Simple Truth About Multifamily Real Estate Investing is that it works. Here are some great ideas to begin with:
Buy a piece of multifamily property after the proper due diligence.
Make sure to select a property carefully; it needs to be in a good location with job growth, potential to improve its performance. After your child learns and witnesses enough about the finance world, grant them access to your real estate portfolio.
Have the tenants pay off the mortgage while your child lives in one of the units.
The leasing phase involves many aspects of finance which may require a management company. Properly managing the property is crucial to ensure its continued value and balancing maintenance costs using the monthly rent from tenants, all of which to monitor its cash flow. Keep in mind the professional management will come with a cost, but it is crucial to ensure the upkeep of the property and the bookkeeping are done properly.
As your investment property appreciates, sell or refinance.
As the mortgage is being paid down by the tenant, you can help your kid sell or refinance the property which may potentially fuel your child’s dreams to become a real estate investor.
Investing in real estate whether single family home or multi family properties also grants you with many other monetary benefits, such as:
- Tax Advantages: Taxes are one of the most significant expenses for people, but one of the best ways to combat the loss of money in taxes is real estate. Rental houses, apartments, vacant land, and other forms of property all offer their own variation of tax incentives.
- Cash Flow: When your tenants pay you to rent each month, you use that rent to pay off your mortgage, taxes, repairs to the rental property, and other expenses. Cash flow is what is left over in your pocket after expenses are paid off.
- Hedge Against Inflation: Inflation is an increase of the general level of prices for goods and services, and causes every dollar you own to buy a smaller percentage of a good or service over time. For instance, stocks require more money to purchase them when there is an increase in inflation, so inflation prevents your money from going as far as it could. Real estate, on the other hand, works as a border against inflation because it reacts proportionately to inflation. As inflation increases, so do rents and home values.
- Leverage Funds: You can purchase a property using leverage without using your own money. Leveraging capital means that you can start multiple real estate deals without having all your funds focused on a single project. So, yes, you can buy a $500,000 property with only $100,000.
- Equity: If you borrow money to complete a real estate deal, you will need to repay it with interest. Each payment gets you closer to paying off your principal payments, which means that you are building equity and wealth for your future.
Real estate—including buy, hold, refinance, and sell —is a vital concept for younger generations to learn and apply even if it seems like an “adult” concept. Only you can help your kids learn life skills in money management so they too can become smart, financially responsible investors and successful adults.