Parents always want the best for their children. So, we decide wisely for their bright future – may it be for their education or financial security.
Unfortunately, every day we face a lot of stressful expenses. It hinders us from preparing a solid foundation for them. Saving for our kids’ college fees seems impossible.
Parents are torn between paying significant expenses, the children’s tuition fees, or their own retirement plan. Luckily, you can start to nest eggs for your little ones even though they are still young.
Follow these seven simple ways to invest in your children’s future. For sure, you don’t have to worry about them when they are older.
Open A Bank Savings Account
A bank savings account is one of the best ways to squirrel away your kid’s money. Look for institutions insured by FDIC for safekeeping.
A regular savings account pays a minimum interest. It’s not as much as you imagine but it still earns in time. Suppose you have higher funds to save; opt for a high-yield savings account. It pays double, if possibly triple, compared to your regular savings.
Or you might also consider opening a CD with your bank. It gives higher returns, and it is incredibly safe. It’s like lending your money to the institution—the latter loans the money to its customers. Afterwards, your account receives a set rate for a term, which can range from months to years. Once the term is up, you receive your initial deposit, including the interest accrued.
Opening up a bank account seems to earn relatively low. But it is a great start to invest in your kids’ future.
529 College Savings Plan
Your financial concern for your child has high regard for their education. It is the top priority of any parent. If you want a bright future, try out the 529 college savings plan.
A 529 savings plan works by contributing funds on any schedule you prefer. Then, you choose an investment option like mutual funds. Afterwards, you can withdraw the funds tax-free. But, we should use it to pay for qualified education expenses only. Finance your kid’s future school tuition fees, books, requirements, and board and lodging.
The good thing about 529 plans is their flexibility. You can apply for it regardless of how much you earn. The limit of maximum annual contribution depends on your chosen plan. Nevertheless, you can go over six digits per student.
Remember, 529 funds belong to their owner. If you plan to save for more than one kid, open an account for each of them.
UTMA/UGMA Account
Your child’s fortune is not all about their education. If you want to secure money for non-school-related expenses, choose a UTMA/UGMA Account.
UTMA means Uniform Transfer to Minors Act, while UGMA means Uniform Gift to Minors Act. These two accounts permit investments for minors under the care of an account custodian. Creating trust lets minors own an investment. It’s the safest way for parents to transfer assets to their minor children.
Most banks and brokerage firms set up a custodial account. Apply for it and make necessary withdrawals for the child’s benefit. Once they become an adult, either 18 or 21, the trust assets transfer automatically into your kid’s name.
Start Building Credit
Jumpstart your kid’s future by building a positive credit score as early as today. These numbers come in handy when they reach adulthood. Healthy credit history can make loan applications and mortgage negotiation more convenient.
Here’s how to do it.
Authorise your kid on your credit card
As you’re making your way into impeccable credit history, adding your kids’ names to your account lifts theirs as well.
Being an authorised user, your children reap the benefit of diligent credit card payments. It is a simple activity that establishes a strong foundation for their credit history.
Provide a secured credit card
A secured credit card is suitable for individuals with no credit history. Plus, it is free from annual fees. But banks secure the cards with collateral.
Secured credit cards are an excellent starting point for your kid. It provides learning on how to manage monthly statements and limit debts. Nevertheless, guide and explain to them the terms and conditions inclusive of their card. Ensure that they agree to these before they use their credit card.
Let kids pay for their student loans
On-time payment of student loans builds a good credit score. Whether or not you’re paying in during school or after graduation.
Be mindful that paying diligently is a big step to a fantastic credit record. But if you miss a single payment, it can break all your hard work.
Building a solid score might be challenging when you’re an adult. So, assist your kid’s future today with these tips.
Teach Responsible Borrowing
There is no better time to teach responsible borrowing than now. There will come a time when your children will grow into adults and will need to get a loan or a mortgage for various reasons. Teach them how to choose the right licensed lender cash mart like the Toa Payoh money lender.
Get A Life Insurance Policy
A life insurance policy serves as affordable protection now and in the future. It applies to both adults and children.
You pay for either monthly or annual premiums. If the policyholder dies, the insurance provider will hand the death benefit to the beneficiary.
Getting life insurance for your child is straightforward. You don’t have to drag your kids for physical assessment. Instead, complete the application form and pay off the premiums over time.
Apply For Health Savings Account (HSA)
If the 529 college savings plan is all about your kids’ education, HSA goes toward medical costs. Plus, there are no taxes to pay on every contribution.
An HSA focuses on any of the children’s medical expenses. It includes dental, vision, and prescription drug care.
To invest in your kids’ future with HSA, determine your eligibility. Qualified applicants don’t have health coverage and Medicare benefits. Also, your child must be HDPD certified and not dependent on tax returns.
HSA is a beneficial investment for your kid. It secures their health just like 529 in their college.
Explain The Importance Of Investing
Among all the ways to invest in your kids’ future, discuss why investment is necessary. Educating them about investing with them takes time and patience.
Investment is not a topic tackled in just one sitting. Talk about it often and consistently. Nurture interest in mutual funds, the stock market, real estate and research on how to invest in cryptocurrency. Talk about the differences between these different asset classes. Explain the pros and cons, like how real estate is a long-term stable investment while others, like cryptocurrency have price volatility. Explain every detail in the children’s understanding. Avoid using jargon; rather, converse with straightforward language. It will be more fun and engaging.
Also, apply investing examples based on their daily lives. For example, discuss how their favourite TV series create episodes with investment capital. It can pique their interest. They might even bring overarching ideas you never thought of.
There’s nothing in this world kids won’t understand if explained clearly. Spend time and effort so that your kids can fully comprehend how early investment can affect their future.
Parents are naturally anxious about their children’s journey to adulthood. One of the essential aspects of their lives is finances. Money plays a critical role. Save your child from the hassle of finding funds for education and medical expenses. Build your kids’ future with these simple ways to invest.
