Learning how to invest in your child's future to start them off right in life is something that most parent's want, but where do you start?
Investment planning can be achieved by speaking to a financial advisor or an investor who will be able to advise you on the best route to take. We have put together five steps to get you started when it comes to protecting your child's financial future.
Please note!
The tips that are given should not be seen as financial advice, but as a general guideline. It does not take into account your personal financial circumstances; therefore, we encourage you to speak to a financial adviser to help create a financial plan that will work with your financial situation and goals.
Investing in an education plan
The cost of education will be one of the largest expenses that you will face as a parent. However, planning by finding ways to invest and save towards their education can make it affordable to cover costs. There are plenty of plans offered by financial institutions such as banks and investors for which you can start putting money aside for. It is crucial to have a set goal of what you would like to achieve with any investment to find an educational plan that works for you and your child. Look for accounts that offer compound interest, are tax-efficient and investment features that are beneficial for your situation.
Buy life insurance
What will happen to your child when you die? Who will take on the financial responsibility to ensure that they are protected? No parent wants to imagine a future where they cannot provide and protect their child, especially when they need it the most. Life insurance is key for any parent who wants to create a financial safety net for an unpredictable future. Having peace of mind knowing that the payout from your policy can be used towards taking care of their education, living expenses, moving into their first apartment and more is an investment that you will not regret.
Endowments & tax-free saving accounts
The best time to start saving and investing is now. A common misconception is that you will need large amounts to do this, but putting aside a sum of money that you can afford to maintain each month can help compared to putting nothing aside at all.
Some of the common ways in which parents can invest in their child's future is through endowments and tax-free saving accounts. Endowment plans can act as a life insurance policy or a financial goal you set and contribute towards and will only be paid out once it has matured, upon your death or when a minor has turned 18 years old.
You will have to consider how tax will affect this method. Tax-free savings can also be used as a way to set aside an amount that will not be impacted by the tax should you withdraw the amount. Make sure to read the terms and conditions that come with any investment plan you choose to make sure you fully understand how it works.
Work with what you have
As a parent looking to protect your child(ren)'s future, it is vital to work with what you have. What might work for one person may not work for you, especial when it comes to creating an investment portfolio. Assess your needs, your financial goals, and speak to accredited financial advisors who will be able to help you find investment funds that will work for you.
Diversify
As the adage goes, 'don't put all your eggs in one basket,' the same goes with any investment you have. Diversifying your accounts can strengthen your investments in the long run, but also avoid taking on too much risk too soon. Taking on more risk than what you can afford could end up costing you. Always remember that investing is a journey that will see you reaping the benefits in the long run.
