5. Invest a pool of money
The optimal way that ensures you're saving money for your children’s future is by investing your money. This is a fantastic option that allows the sums of money you’re pouring into your child’s future to grow over a long period of time. Whether investing in stocks, shares, ETFs, commodities or other mutual funds, you can set your children up for long-term success from the get go. In the same way as interest in the bank, any growth or dividends that are in your child’s name could be potentially taxable once they exceed $100. To avoid these tax burdens, many people use structures like trusts. If you think this could be beneficial for you and your children, it’s worth speaking to an expert as they’re quite complex matters.
Nonetheless, the good news is that you don’t need a lot of money to get started investing. You can invest as little money as $50 a month if you need to. And providing you have a well diversified portfolio of investments, then you can benefit from the average growth of 7-10% of market growth every year. Want to learn more about investing? Get started here.
6. Set up a pension fund
Saving for your child’s retirement might seem a bit too far into the distance. But the benefit of saving for your child’s pension is that they’ll only be able to access the money, depending on the country you reside in, from between 50 and 60 onwards – aka, when they might really need it.
Consider setting up a junior pension where you consistently put a certain amount of money into a pension fund every month. By saving into a private pension fund for your child, there’s potential for long-term financial growth. So it’s a great way of building your kid’s nest egg – but a nest egg they can’t touch until the more mature and wiser years of their life.
How can kids save money?
If you’ve decided you’re in a financial position to save for your child’s future, that’s great and kudos to you for making the sacrifice. But it’s also a good idea to get your kids involved in the process of saving – they’re never too young to contribute to their own financial success. Plus it helps children to understand the value of money and instil financial discipline – they should learn that money doesn’t grow on trees! Here's some tips to consider:
1. Give kids a dedicated place to save
When your children are young, they can save small amounts of money – whether that’s money from the tooth fairy or birthday money from a family member – into a piggy bank. And when they’re a bit older, you can help them set up their own bank account where they can start storing small amounts of money which builds up over time.
2. Encourage them to apply for jobs
It’s important for children to save their own money, and one way they can do that is by getting a job as soon as they’re old enough. This way, they can generate their own income, paid directly into their private bank account, and then store some of those earnings into a savings account which sets them up with the car they want to buy or the holiday they want to go on with friends.
3. Encourage them to apply for scholarships and grants
When applying for school and university, ensure that your children are aware of scholarships and grants which can slash the cost of their tuition significantly. Some children might have great academic or sports skills which can pave the way to a scholarship. And if they come from a low-income family, there will often be grants available which will assist them on their path to educational success.
Final thoughts on saving for your child’s future
For the parents out there, it’s likely you want the best for your children. And if you have the financial means to get started, then adopting one or two of these saving tips set you, and your children’s future, on the right path. Whether it’s saving money into a bank account, investing a pool of money into an investment account, or contributing to their pension, there are lots of different ways to build up your kid’s nest egg over time and which one you choose is ultimately down to you. And don’t forget that the little ones can play their part too!
The bottom line is that saving early on can also lead to more substantial gains in the long run, as interest can compound and multiply over the years. That means you don’t need a huge income to do it! Even small contributions make the world of difference over a long period of time, ultimately building financial stability for their education, their first car, and even their down payment on a home. And finally, remember this: when thinking about their future, remember that every penny adds up. Early planning can make all the difference.
