Once you become a parent, striving to offer your children the best you’ve got becomes a second nature. Whether you are raising the kids with your spouse or you are parenting alone, doing everything within your power to ensure the children have a secure future is your biggest responsibility.
If you want to give your kids a good start in adult life, you need to plan early. When you take action early enough, you have some leeway to prepare for important decisions and events in your child’s life. But you also need to have a clear picture of the financial goals you intend to achieve and at what stage they are most relevant.
Determine all the future costs
Securing the future of a child entails understanding all the necessary costs to establish a strong and reliable foundation. Nevertheless, it’s not possible to get the exact figure since you are planning for events that will take place over more than a decade in the future. But if you have a rough idea about the most important expenses towards building a better future for your child, you are on the right path.
Basically, education is one of the most crucial investments for a fulfilling life amongst other important events like marriage. Depending on the number of milestones you intend to achieve, you can estimate the tentative costs accordingly. In your calculations, it’s important to factor in the effects of inflation.
Open a child’s savings account
A savings account offers low-interest rates to the amount you deposit but it is a very effective tool for helping kids learn about money. However, if you are diligent in putting money into the account, you’ll soon have a reliable source to supplement other financial plans towards securing a better future for the child. Before choosing the bank, make sure they offer relevant educational materials for teaching the junior account holder about the important principles of money. In addition, some banks will also give you attractive waivers on charges.
There are providers who are quite lenient and will even give your kid a gift upon opening the account. To make the learning more effective, the child will be allowed to operate the account when they are at least seven years old. Unless you’ve specified your expectations, the bank may allow the junior account holder to withdraw some cash if a need arises.
Invest in stocks
By the time a child attains the age to start schooling; they are ready to start learning about saving money and investing. One of your obligation as a parent is ensuring the kid is well provided for. This includes availing pocket money regularly.
While the stock market has a reputation for volatility, it is a form of assets that are quite resilient to the forces of inflation and you can count on them for a long-term financial goal. You could take away some of the pocket money allocated to the child and use the cash to make stock investments for them. Over time, this will build a solid portfolio and you will have helped them grasp the idea of reaping from the stock market.
A term insurance cover for yourself is critical in safeguarding the future of your loved ones against any event that is unforeseen. While the probability of sudden events that decimate you can’t be quantified, it’s always wise to be protected. This ensures that everyone in your household is covered and their dreams will still be facilitated even after you’re gone sooner than expected.
Normally, it can be very hard and depressing to a child when a parent dies before they have finished school or achieved other important life goals that require parental support. By taking a life insurance, the future is secure because the benefits can cover expenses like education and medical checkups.
When shopping for the insurance cover, make sure that your dealer will cover most of the expenses that affect the security of your children’s future. For instance, it should cater for education, living expenses up to adulthood and marriage.
Opening a college savings account
If you are looking for the most appropriate method to save for college, a 529 plan is your best shot. This is an account that is sponsored by the state and it will enable you to make investments with your after-tax cash and it will keep growing without being taxed provided that you spend the money to pay for college education.
When you are starting off, aggression is recommended until the funds have started growing on autopilot. By this time, the child has grown up and you can slow down and focus on other things. Basically, most employers will allow you to contribute money to this account directly from the paycheck.
However, these accounts have some limitation regarding the amounts that you can put towards the investment irrespective of how much you are earning. But the plans are quite flexible across different states and you can sign up for a plan from anywhere. Therefore, it pays to be proactive in researching the most appropriate option for your needs. There are also a few companies that are linked to this scheme and you can get shopping rebates channeled to the account.
If the total amount you’ve saved in the account falls short of the estimated costs, you can consider an installment loan to help you settle the tuition fees. The good thing is that you will have paid the bigger percentage of the fees. Normally, just right installment loans offer flexible terms so that you can organize your finances and pay back the loan on time.
Start acting now
Whether you have enough income or not, the future of your child is not something to gamble with. The earlier you start laying down a strong foundation, the better. It’s true that life can surprise you at times, but if you have prepared financially, there’s a high probability that your children will be safe. In conclusion, choose a starting point and keep at it until the goal is achieved.