Making sure your child is ready financially is one of the most important things to do. As a parent, you want to make sure they’re ready even as a child for what’s in store for when they graduate high school. Financial planning means that they would have funds available for college, have a good understanding of budgeting, have a certain amount of savings. Below are a few tips to help you prepare.
Talk To Your Kids About Money
Finances seem to be the least talked about in schools these days. I remember my first accounting class being in high school and my senior year. Otherwise, the concept of financial literacy was non-existent. This is why we as parents need to talk money at home. Talk to your kids about the basics, opening a bank account, and how to budget. When it comes to managing their own money they should feel comfortable seeking your advice.
Open a custodial account
A custodial account is simply a savings account in your child’s name. They will only have access to it until the mature adult age of 18 or 21. You can grow the account quickly but once you reach a certain limit it will start to be taxable. I believe most custodial accounts become taxable at $950. It’s best to teach budgeting early in age because once they mature they would have full access to those funds.
Start an educated savings account
An educated savings account allows you to put aside $2,000 annually. These funds you can use for your children’s college tuition, Elementary and or Secondary School costs. This particular savings account is tax-deferred. If $2,000 is not enough try considering opening a 529 savings plan.
Opening a 529 Savings plan
When you open a 529 plan you can either try prepaid or a savings account. The prepaid account allows parents to buy tuition credits. The downside is that you can only use it towards tuition, not room and board. The 529 savings plan is a mutual fund account that grows interest over time. It is recommended to invest heavily when the child is Young and to conserve when they get older. The sooner you can start putting money into the account to better. That’s why it’s best if you start when the child is born. He would have more funding when it comes time for use.
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Have a Life Insurance Policy
Life insurance is not only important for you but for your children’s future. Should anything happen to you if you were to pass you would be taking care of. You don’t want the responsibility to fall on your children. Start a whole life policy for your children as well. The best option for you is to speak to a certified financial planner about different life insurance policies. You can also do some price comparison online, but do it sooner rather than later.
We want to give our children the best life. The cost of raising them has only increased. We need to prepare for the change they face 10 years from now. Some of that which is free is lessons we passed down. Save your children the stress of not knowing anything to secure their future. If anything it will give you peace of mind.
The costs of raising children will likely only increase in the future. When your kids grow up, the financial landscape will look much different than it did 10 or 20 years prior. Starting with, teaching about and saving money to secure your child’s future. Give them the advantage they need to help them succeed in life.