Prep For Your Child's Financial Future
College tuition, rent, car payments, groceries… it’s great that children don’t have to worry about the same expenses that we do. But it’ll be no time until they do. It’s never too early to start thinking about your child’s financial future, and there are many ways to make the transition into adulthood easier. Here are four ways to give them a head start.
Open a Savings Account
Emergencies happen, and spare change can add up to something they’ll be thankful for years later. Putting a piggy bank on your child’s dresser or nightstand will remind them of their goals and encourage them to drop in a dime or two occasionally. Teaching your child how to save money early and use their money responsibly can contribute to their future endeavors substantially.
For starters, being a custodian for your child’s savings account will allow them to open an account and start putting money in to save for the future. A good idea to get your child more involved in managing their finances would be to ask them what they would like to do or spend money on in the future and have them save up towards that arbitrary goal, whether or not it changes over time. However, similarly to checking accounts, it is always best practice to read the fine print in order to ensure that there are no pitfalls like account minimum fees or accidentally picking a bank that is not FDIC insured. Teenagers don’t usually have a credit card, but providing them with a card under your name can help them build credit at a young age.
Prepare for The Worst
It’s grim to talk about, but having life insurance and a will are important to ensure your family is prepared for unprecedented times. Naming a guardian under your will designates someone to take custody of your child and someone else to take care of your child financially. Life insurance will help support your family in the unfortunate case of your passing. The coverage can take care of funeral expenses, losing your income, and taking time off work. If you think about life insurance for your child, there are plans that can ensure a rate that won’t change as they age. The sooner you take care of these things, the more secure you’ll be knowing that your child will have one less thing to worry about in the future.
Teach Money Management
Money management is one of the subjects neglected by most schools. So, parents should take the responsibility in teaching their children this vital skill.
An allowance can be used as a reward for good behavior and chores, which can be allocated toward saving or spending. Teaching your child about budgeting could aid them in thinking about money differently. For example, taking them grocery shopping allows them to apply the budgeting skills that they were taught.
Providing your child with a debit card or pre-paid gift card can also help them manage money and learn that there is a limit to spending. “Digital” money can be more difficult to manage than physical money, but starting these conversations earlier will make children familiar with concepts they’ll interact with frequently when they grow up.
Invest for Your Children (and in your children!)
Preparing your children for the future should be a priority. Start by creating a separate savings account (if possible) to begin saving for your child’s college fund. If they choose not to attend college in the future, they could always use that money for whatever other plans they have in store, or even to use as an emergency fund.
Even though retirement is many years in the future for your child, opening a Roth IRA for them would do so much for your child. Of course, speak to your bank or financial advisor for proper guidance on how to invest and accumulate earned interest.
Finally, purchasing bonds for your child can add a little more money for them to use at a later date.
Teaching your child these financial skills will pay off later in life and are meant to give them a basis by which they can enter the world and navigate through it better as adults. Financial security is the bedrock of a happy life. If you want to help set your children up for success, giving them your financial wisdom and providing them their own tools will give them a head start towards a better future.