Accounting & Finance

Giving to Children

One of the dilemmas of being a parent is deciding how much financial assistance to give your children.

Published

14 years ago

November 2, 2009

One of the dilemmas of being a parent is deciding how much financial assistance to give your children. It is every parent’s desire to be able to provide whatever their children need to live a full and happy life, but how much do you give them? Can you give your children too much and what is the best way to help them?

Very often, giving money or gifts is associated with giving love and the first point to make is that the amount of love you give your children has very little to do with the amount of money or gifts you give them. Money buys neither love nor happiness. Parents who do not put limits on what they give to their children often do so for a psychological reason that has more to do with themselves than their children.

Perhaps they feel guilty about not spending enough time with their children, or perhaps they want their children to have a better life than they had themselves. Single parents can find themselves giving too much to their children to help remove their guilt over their failed relationship.

It is the duty of every parent to raise their children in such a way that they are able to lead independent and successful lives, no matter how you might define success. An important part of parenting is instilling the values and beliefs in your children that will enable them to achieve what they want in life. There is an old adage ‘give a man fish and you feed him for a day; teach him how to fish and you feed him for a lifetime’.

Giving too much to a child creates dependency and most importantly, it allows your child to develop a lack of respect for money that can lead to financial problems later in life. Lack of respect for money usually goes hand in hand with wastefulness, an inability to save for longer term goals and sometimes a life burdened with debt.

While most parents are prepared to make huge sacrifices for their children, this can be taken to extreme and some parents incur huge debts or forego their own longer term goals in order to give their children a good life. This is undesirable for both parents and children. Parents who lack financial stability may find that their ability to help their children becomes more limited over time and they are less able to help their children with really important things later in life such as buying a house or setting up a business.

Spending too much on your children is not desirable, but saving on behalf of your children also needs to be done with careful consideration. It is common for parents to want to set up an education fund for their children to cover the costs of going to university. If your child has access to an interest free student loan then it is best to make use of borrowed funds rather than use invested funds on which you are earning a return.

The best ways of helping your children save for the future are to enrol them in KiwiSaver, which will entitle them to tax credits and employer contributions once they turn 18, and to help them save a deposit for their first house.

So before you give money or gifts to your children, think about what values you are teaching them, your own financial stability and how you can best help your children achieve their longer term goals.

Accounting & Finance

Low Interest Rates Winners and Losers

Published

5 years ago

May 13, 2019

PropertyBlogs

Lower mortgage interest rates is a big deal for most homeowners and buyers.

Existing homeowners can hunt around for a better deal with the same or another lender and in the process save hundreds, if not thousands of dollars on interest payments. Even if a borrower is locked into a fixed rate deal on a fixed term, it often pays to break it and reap the rewards of paying a lot less interest.

For first time home buyers, lower interest rates can be the difference between renting and owning a home. Existing homeowners trading up or down, see lower interest rates as a great time to sell and buy too, Therefore there is always a frenzy of activity in the mortgages sector when there is movement in interest rates and there will be winners and and there will be losers.

Winners and Losers

Lower interest rates sends a signal to vendors with homes to sell, that there are more buyers in the market. This can get unsold properties sold which is a win win for vendor and buyer.

More buyers in the market, however can also push the sales price up, as vendors aim to get the best price and there can be only one buyer, the one who is willing and able to pay the most.

In this situation it’s more of a win for the vendor. The eventual purchaser is likely to have paid more than they were comfortable with and thus borrowed more to get the property. Plus there were many buyers locked out by the higher price.

First Home Buyer Tip

The tip for first home buyers is to always be ready to take action as soon as the timing is right.

For first home buyers, it’s always a good time keep a financial advisor or broker up to speed on your personal financial position. This way when the timing is right, like a downward move in interest rates, you can just ask the question:

“What can I afford to borrow, now the interest rates are lower?”

There is no such thing as one size fits all when it comes to borrowing money. Your position will determine how high risk you are to a lender.

A trusted advisor in the know, can act fast on your behalf when lending conditions favour you. Lenders who see you a good ‘investment’ will be keen to move quickly too, to secure your business and thus beat their competition, i.e. other lenders.

Recent news of an OCR rate drop by the RBNZ, spread like wildfire around the country and the early worm is sure to get the best deals.

Homeowners with advisors already up to speed on their current position, will be busy acting on their behalf, to find the best deal saving their clients hundreds if not thousands in interest repayments over the term of their loan.

Property price increases have cooled in Auckland, increasing by just 1.7 percent compared to the previous year. Listings too have been lower, however that’s all about to change. More buyers, trigger more listings and with more buying power, higher property prices.

Timing is everything, so whatever your circumstance, talk to your mortgage advisor and act on the deal that’s right for you.

Accounting & Finance

Property Listings Drought Adds Fuel To Fire

A property listings drought is adding further fuel to our over-heated property market. Property prices are increasing everywhere except Taranaki according to Trade Me Sales Price Index and that’s got the RBNZ considering further action to curb demand.

Published

8 years ago

May 18, 2016

PropertyBlogs

A property listings drought is adding further fuel to our over-heated property market. Property prices are increasing everywhere except Taranaki according to Trade Me Sales Price Index and that’s got the RBNZ considering further action to curb demand.

The RBNZ’s LVR restriction on Auckland property investors has done little to dampen their appetite and many have also moved their focus to other areas where property prices have been on the increase since October 2015.

The listings drought suggests most home owners are electing to improve their properties using the equity in their homes over moving house. Some Aucklanders have chosen to leave the city for change of lifestyle and Tauranga has been one of the main benefactors as well as the region of Hawkes Bay.

Curbing demand is how the RBNZ want to deal with the property market and they’re considering a variety of measures. Bernard Hickey in a news item on NZHerald believes we’ll know more on the RBNZ’s next move in the second half of 2016. Bernard mentions two dates in particular: 19 August is the deadline for Auckland Council to accept all or some or reject all the Unitary Plan. The Government is hinting at wading in if the Unitary Plan does not meet their goals of an Auckland growing up and out to meet new housing supply targets.

The other date to watch out for is 30 November. On this day the RBNZ presents it’s Financial Stability Report. One of the measures under consideration by the RBNZ is the fixing of the income to loan ratio.

From the news item on NZHerald

“The Reserve Bank helpfully included a chart in this week’s report that showed around 35 per cent of owner-occupiers and 60 per cent of investors had borrowed more than 5 times their income.”

New rules are coming and if what’s happened to date is anything to go by the RBNZ is not shy at taking action so keep these dates in your diary. No doubt investors are now very aware of their income to lending ratio and will be taken the necessary steps to survive the next round of RBNZ restrictions.

This blog article was written for PropertyBlogs by Mobilize Mail.

Accounting & Finance

How Low Can Mortgage Rates Go?

News of lower wholesale interest rates suggests we may be in for another round of super low home loan interest rates as early as next week. A news item on interest.co.nz provides examples of the correlation between swap rates and the mortgage rates with one example being SBS Bank’s one year rate as it was back in November 2015.

Published

8 years ago

February 11, 2016

PropertyBlogs

Fast forward to February 2016 and SBS Bank’s one year rate is at 4.35% while the one year swap rate is currently lower than it was back in November, its currently 2.58%. A downwards move is predicted and SBS Bank could move back to where it was in November 2015 at 3.99% or go even lower.

It really just takes one lender to make a move and the other lenders are sure to follow. Borrowers in the know are regularly speaking to their mortgage broker to keep up to speed on the best deals and terms on offer.

So how low can mortgage rates go? Possibly lower than they were in 2015.

This blog article was written for PropertyBlogs by Mobilize Mail.