A great 21st birthday gift

Earlier today I received this question by e-mail:

Hello Matt

My partner and I would like to buy shares for my son’s birthday. He will turn 21 on 9 November and we want to buy him something that he will have for a very long time. Eventually we came up with the idea of starting him off with his own share portfolio, but we have absolutely no idea how to go about this. We also don’t know if it is possible and whether it is a viable, long-term plan.

Regards, Jane (name changed for privacy)

My instinctive thought of  a gift that would last him a very long time is that of financial literacy. The knowledge on how to make smart, appropriate financial decisions will last a life time and will both make and save him hundreds of thousands of dollars. However, it’s hard to gift financial literacy for a birthday as you can’t force a horse to water let alone force them to drink.

A really useful gift

Following the financial theme my next instinctive idea was to gift him an opening balance in a First Home Saver Account. I think this is a great idea for the following reasons:

  • It’s likely that he’ll want to buy a house some time
  • A house and a mortgage is something he’ll have for a very long time
  • The Government gives you some free money when you contribute to the account
  • Giving him a boost on saving for a house will improve his financial position
  • You can’t easily withdraw the money and blow it on indulgences

When I spoke to Jane she said they’d also considered buying a gold bar.

The problem with giving shares

Buying shares, a manged fund or a gold bar all have a certain novelty factor. But there’s no guarantee your 21 year old will have any of them for a long time. They all can easily be sold.

In fact once your child finally leaves the nest and buys their own home it would make good financial sense to liquidate all other financial assets to reduce their mortgage.

If giving your child a financial gift like shares, managed funds or gold bars has a spin-off effect of increasing their interest in managing rather than just spending their money then terrific. But I suspect that is luck and not something you can manufacture. Opening a First Home Saver Account could have the same affect and be more aligned to what they foresee in their future.

As it turns out Jane’s son is already diligently saving to buy a house, but not using a First Home Saver Account. So I suggested she investigate that route as fitting her criteria of a viable, long-term plan.

How to give the gift of financial literacy

For those parents whose adult children live in Perth you can give them a gift of financial literacy by enrolling them in my course: DIY Wealth Creation for Busy People. In fact two of the current participants who are aged in their 20s told me they are attending because their Auntie raved about the course, insisted they attend as “it would set them up for life” and even paid their course fee. 🙂

Certified Financial Planner professional, Matt Hern has three times been awarded as one of Australia's Top 50 Financial Planners by The Australian Financial Review Smart Investor. He is passionate about guiding you on the right financial choices to achieve what you really want. Matt Hern is an Authorised Representative of Charter Financial Planning Limited AFSL 234665. All information is general advice only.

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