If you ask any parent about what they want for their children, you’ll probably get a lot of different answers, but, the most common one will probably be that they only want the best things for them. And because of that, most parents will do everything in their power to ensure that they set their kids up for success.
However, if you are thinking about investing in your child’s or children’s future, you might be wondering – what are my investment options? Well, luckily for all people searching for an answer to this question, this article can help. Let’s take a closer look at the 5 smart ways that you can invest in your child’s future:
1. Open a ‘Savings Bank Account’
A savings account, particularly one that can reap high yieldings is a must when looking to save some money for the future. Now, you should remember that it needs to be separate from the regular account that you most commonly use. For instance, you can choose to open one with a bank that is FDIC insured – which will give you security and safety – that will provide you a 1.5% rate.
Additionally, you might want to consider giving the account a specific name such as “Child’s Future Funds”. Why you might be wondering? Well, doing so can encourage you to not give up and to keep adding cash to it until you reach a specific objective that you had in mind.
2. Opt For a ‘Kid’s Savings Account’
If you do some digging, you’ll see that there is a wide range of credit unions and banks that offer these accounts. Now, keep in mind that these are most commonly co-owned with the parents in order to assist with developing a saving habit among kids, and it is also a useful tool for teaching them how to manage their money.
When they get to a specific age, they could then have a teen account and they can also ask for a debit card. As a parent, you won’t have to worry about your kids overspending the money since the cards often have a withdrawal limit and lower spending as well. Of course, you’ll still want to keep an eye on the amount left.
3. Learn About ‘Custodial Accounts’
Another option that you can choose is to open a custodial account. What does it do? Well, it will keep the savings safe that you gathered for your kid tuition, house, or car until they become an adult. It is, of course, funded and managed by the parents, however, your kid is actually the holder of the account.
There are various companies such as loved.com that offer programs and apps that can be managed by parents. With such platforms, you’ll be able to plan objectives, manage the funds, decide what your savings plan is, and so on. By utilizing such apps, you’ll also be able to build a portfolio where you can add different investments.
4. You Can Opt For a ‘Prepaid Tuition Package’
One of the things that you definitely might want to contribute to is a 529 package plan that will allow you to start saving for your kid’s university tuition. This means that you’ll have to put cash aside in the plan and you can use it later on for paying for your kid’s education, including private universities and schools.
5. You Can Utilize Your ‘Roth IRA’
You won’t want to spend your retirement savings in order to pay the tuition fees that you might have. Hence, you can set up a Roth IRA based on the type of tax you want to have. Again, it will belong to your kid, however, you’ll have control over it until they become adults. Once they are 21, you can create a penalty-free plan that will allow them to withdraw money for their education.
Things to Consider Before Opening Any Savings Account
Before you opt for any of the aforementioned investment options, you’ll need to consider several things in order to determine whether or not you can actually start saving for your child’s future. Some of the things that you’ll want to consider, do, and keep in mind are:
- Understand Your Budget – before you do anything else, you’ll want to create a detailed budget of all of your earnings and expenses. Once you do that, you’ll be able to see how much you have left, which means that you can then determine how much you can place in the savings account.
- Consistency is The Key – there is no point in opening such an account if you are not planning on being consistent. Of course, there will be times when you cannot place any money into it, however, you can always ensure that you cover than missed payment as well. So, try to be as consistent as possible.
- Investing Early is Wise – the more you spend saving, the more you’ll gain at the end. There is no point in saving if you start when your kid is 15-years old. This means that you’ll want to start investing as early as you can, especially since this will ensure that the amount grows and that there is enough for their education.
- Sell What You Do Not Need – as your kid grows, you can choose to sell the items you no longer need for them. For instance, when your child overgrows their stroller and crib, sell it, and place the money into the savings account. This can help you with saving more – as well as with decluttering your house.
As you can see, there is a wide range of options when it comes to investing in your child’s future. Of course, there are other options as well, however, the ones mentioned above are some of the smartest and best options that you’ll come across when searching for investment options.
So, now that you are aware of all of the things you can choose in order to ensure the success of your child, you should not waste any more of your time. Instead, you should go back to the beginning of our list and go through it once again in order to determine which option might be suitable for your needs and budget.