Why & How We Can Teach Our Children on the Merits of Property Investment

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Editor’s note: This guest post contributed by Jack Photon

One of the best things a parent can teach a child is how to manage their personal finances. Parents teach this both through words and actions. Beyond the basics such as how to manage a credit card, balance a check book and budget, parents can also teach their children the merits of property investment.

Owning a home can be a rewarding experience, or it can be a devastating experience that can ultimately lead to bankruptcy. Financially savvy parents can teach their teen and teenage children several important lessons when it comes to buying a home:
1. Save for a down payment. Many of the homeowners who find themselves having difficulty paying their mortgage currently are in trouble because they took out two loans, one for 80% of the home’s price and another for 20% of the home’s price because they did not have the 20% down payment recommended. True, it does take time to save up a down payment for a home that will cost several hundreds of dollars, but home ownership should not be rushed.

2. Have a hefty emergency fund. Home ownership involves more than just the mortgage payment. There can be expensive repairs such as a new heating and cooling system or a new roof. If children are taught to have an emergency fund, as homeowners, they will be able to afford these unexpected repairs.

3. Check home loan comparison sites. The home loan interest rates can vary from institution to institution, and the lower interest rate one can obtain, the less one may pay on a monthly payment and the less one will pay over the life of the loan. When I was young, my mom showed me every month how much of her payment was applied to the home’s principal and how much was applied to interest. This was during the 80’s and record interest rates; I still remember the shock of how little actually went on the principal.

4. Consider buying a two or three flat. One of the most economical ways to own a home is to buy a two or three flat; live in one of the floors and rent out the other ones. Savvy parents will teach their children that the renters will then be paying most, if not all, of the mortgage. If there is a surplus every month, it could be used to begin investing in more properties, which will then generate more monthly income.

Parents have so much more to teach their children than just the basics. If they focus on teaching them the ins and outs of property investment, their children will be one step ahead of their peers and on their way to a wealthy future.

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