It is any parents wish to give the best that they can to their child, especially when it comes to preparing them for their future. But how do you go about planning financially for their future and when is the right time to start?
Here are three important things to do when it comes to investing in their financial future.
Start with a Tax-free savings account
The best time to start saving towards your child's future is now. It's crucial to seek financial advice that is tailored towards your current finances to find ways to work around saving without putting a strain on your finances. One of the available options for parents who are looking to start an investment portfolio that can be beneficial to their child is opening a tax-free savings account.
The benefits of such accounts is that whatever amount of money the account has accumulated will not be taxed. It also means that you have more control of when you would like your child to receive the money you have been putting away. But keep in mind to have the account under your child's name instead of your own to avoid things such as capital gains tax which can reduce the amount they will receive.
Always compare your available options along with the cap on how much you can save. It can be a much-needed capital for future expenses such as a university, buying a house or a car.
Unit trusts
An alternative route that is available for parents looking to save towards their child's future is opening a unit trust account. Unit trusts allow you to invest in important assets such as global stock market shares and other assets to help grow the funds that you have stored away. You will be assisted by a portfolio manager or financial adviser who will assist you in making an informed decision on what to invest in to see better returns. Most unit trusts are tax-efficient by providing you with an exemption on interest income and capital gains tax, but make sure to check with your financial advisor or portfolio manager.
Have a life insurance policy
Like any good investment, it is pivotal to have a life insurance policy in place. When is the best time to take out a policy? As soon as possible. Life insurance is cheaper when you are still young and healthy.
Leaving this until it’s too late can be costly for you and your children. While it is not compulsory to have it, it can provide a financial safety net and secure your child's future if you die while they are still young or when you are faced with a critical illness and no longer able to earn an income to cover various expenses. Not sure how much life insurance you will need to cover you and your loved ones? You can use our life insurance calculator to assess and see if you have enough life cover.
