Our 17 YO wants to start IP's. Advice Please

Our 17 year old, 18 in july, has decided to accept an offer with Coles to be the 2IC produce manager full time, small country town. Salary starts at @ $13+ ph
He wants as many IP's as he can get as soon as he can get them.
My wife and I have 5 IP's plus ppor, late bloomers, geared to 80%
Can I please have advice for him on the best way to start and keep going in his goal. He will live at home.
We are willing to get involved with joint ownership, morgage insurance guarantor etc
Can we please have some dot point advice/timetable on getting his first ip, maybe the best type as a start and additionally advice on the best way for enthusiastic parents to help out bearing in mind our gearing position.
Your advice will be shown and discussed with him and plans made
Many Thanks
GC

 

Hi GC

Good on you firstly for being so pro-active with your son and wanting to help him at such a young age on his way to what will hopefully be an early financial independence- great stuff!

My thoughts:

* Get him started on a savings regime as soon as possible so that he gets into the habit of "paying himself first". This can be as simple as transferring funds directly from his pay into a nominated account or giving the cash (if applicable) to you to do on his behalf.

* After a period of saving consider using some of your equity to partially fund his costs/deposit for his first property purchase. It's up to you to decide the terms and conditions of his payments back to you (perhaps you could wait until enough equity of his own has built up before collecting?). Speak to your broker about the best way to structure this.

* If he's at all handy or is able to "add value" to property and create equity faster, then encourage him here. After all, there should be an incentive for the fastest return of equity.

* As to type of property, this will largely depend on budget and location, as to what is likely to perform the best over the long term and provide the highest possible growth as well as a realistic enough yield for your son to afford to hold the property in his own right.

Good luck with it all and keep us posted as to his progress- we would love an update or two!!

 

Hi Jacque
Your post was timely.Our intent with this forum post is to show him the value of advice from knowledgeable others, rather than just parents, and also encourage him to start.
We had explained the Money tree concept to him and he half heartedly started a money tin system but with little success. Recently I helped him to open an internet bank account linked to his normal card account.
He immediately got the idea. Every pay day he now grabs the laptop and transferrs up to 40 % of his casual pay into the net account. The idea is for him to get enough in there to then buy into a managed fund, then save more and buy more funds etc. From that fund of course comes the IP deposit Hopefully by the end of this school this year the habit will be ingrained.

I know this is all basic stuff but the struggle for parents is often greatest at the beginning for kids starting out on their financial journey. The internet account for him was/is a revelation and being able to transfer across then not touch is a huge perception shift. Any parent struggling to get their kid to just start may want to try this. The net banking makes it far easier for teens to act rather than having to physically go to the bank, transfer etc.

Thank you for your response, he has read it and this helps cement the advice we give him
GC

 

My pleasure GC

Often starting is the hardest part, as the rewards are not easy to see, particularly in one so young. Often the most challenging aspects is to avoid the old "Analysis Paralysis" syndrome, which I come across quite often. I have a friend, for example, who simply can not make up her mind about when to invest in IP's, and this conversation has been going on since 1999! According to her words of wisdom, the timing isn't quite right and she hasn't done enough research yet In the meantime, however, she's dabbled in shares (and lost- though doesn't like to discuss it) and done little else. For her, everything is put in the too hard basket as she's waiting for something that will probably not exist. Though I've shown her examples of properties that I consider to be a good investment, her list of nitpicking is long, wide and deeply entrenched.... plus she's waiting for the market to rise

Good luck with your son and please keep us posted as to his progress.