When you become a parent, there are moments when the sheer responsibility of providing for your children’s future becomes completely overwhelming. Where do you even start? Other than trying to raise good humans, how can you make sure your kids have a pleasant, enjoyable life?
Let’s explore the financial side of that equation and look at five ways you can invest for your children.
Open a children’s savings account
A good way to invest money in your children’s future is to open a savings account for them. This type of account is very similar to regular (adult) savings accounts. They usually have a low interest rate, which might frustrate you, but this means the money is safe and will not be affected by market fluctuations.
You can look at this account as a piggy bank. You place a certain amount in it every month, there’s a bit of interest generated over the years, and your child will be able to access it when they are 18.
Most banks offer these types of savings accounts, so visit several of them and see what kinds of interests and conditions they offer. Make sure to talk to a specialized consultant who can give you the most relevant figures.
Invest in stocks
The stock market provides plenty of stable, sound investment options you can also consider. This type of investment will involve some research, and you will need to learn a lot about the best stocks available. Ideally, you want to invest in blue chip stocks that are not likely to crash and burn. Investing in untested, volatile stocks can lose you money in the long run.
If this is the investment method you choose, use a stock average calculator to better understand the cost basis for all the stocks you own. It will help you judge your next investment move. This is a very profitable investment option, but it will require a fair amount of involvement on your part. You’ll need to keep track of the stock market and make choices about buying and selling stocks.
Set up a trust
You can also set up a trust for your children. This is a legal agreement where you place certain assets, like money or a house, into a trust for your children. You will also need to nominate a trustee to manage these assets.
While trusts sound incredibly posh and like something only rich people do, they can be a good way to invest in your children’s future (provided that you have assets available already).
Make sure your will is in order
Making a will is quite an unpleasant subject to consider, but nonetheless, set aside some time to write one. You never know what life holds in store, and you want to make sure your kids are provided for and that there is as little legal fuss as possible.
Writing a will is actually fairly simple, and you can even do it without a lawyer. However, it’s best to hire one to make sure everything is in order and perfectly according to the law.
When your kids are old enough, tell them where the will is and what it means. Understanding what the future holds can help them make better plans as they get older.
Have a piggy bank at home
Finally, don’t forget about that good old practice, the piggy bank. While it’s not actually an amazing way to invest, it is a great tool to teach your children about money and savings.
Depending on how you manage your household’s finances and your kids’ pocket money, set aside a certain amount or anything that’s left over and place it in the piggy bank. It can be a simple envelope if you prefer, but make sure to clearly label it as a savings account.
Center stories about saving up for something they want (like a new toy) around the piggy bank. Explain to your children how to set aside some money for their immediate wants (like sweets) and long-term wants (like Christmas presents). You can also teach them about saving for a rainy day at the same time.
It’s important to get the kids involved in the process of saving for their future and investing in it. If they are just left a certain amount of money, they won’t understand what it took you to save it up and how much you had to work for it. Instead, teach them that hard work is required in order to have a stable income.
Before you choose to invest for your children, consider the current state of your finances. Settle for the option that won’t impact your quality of life while still ensuring that your kids have a nest egg to fall back on or are able to attend the college of their dreams.