Saving and investing for your child’s financial future whilst they are still young, is one of the best presents you can give them. With the majority of millennials only half as likely to own their own home by the age of 30 as Baby Boomers at the same age, and average earnings 3% less than they were 11 years ago, starting to plan your child’s future now will provide them with more opportunities and choice in the future.
1. Open a savings account
In the UK, and many other countries, you are able to open a savings account on behalf of your child. If you do this as soon as they are born then you will be able to deposit all the gifts they receive throughout their childhood, such a Christmas or birthday money.
Once they come of age they will then have a small nest egg, which they can then decide to spend how they will; be it on life experiences, putting money towards a house, or paying for their education.
2. Open an investment account
It’s never too early to start investing for your child. The longer the account is open, the more time the money will have to grow for their future.
Make sure you do your research and choose the best type of account for your child’s needs and ensure that as they grow you involve them in the management and balancing of their own portfolio.
3. Educate them
Make sure that you take the time to systematically teach them about money and how to maintain good financial health. By opening a savings account for them you can use them to teach your child about the benefits of saving now in order to reap rewards later on; rather than simply consuming now for instant gratification.
Similarly, you can use their investment account as a vehicle for investment education; sitting down with them and explaining basic concepts such as compound interest, liquidity, and risk management (once they are old enough to understand them). Making them comfortable with investments in their youth will make them more likely to invest effectively when they are older.
4. Pay into your pension
Take care of your child’s future by taking care of your own. Paying into your pension means you are safeguarding your own future, and ensuring that you are self sufficient in your later years. By failing to do so you may become a financial burden on your child in the future, and therefore inadvertently limit the choices they are able to make with their lives.
5. Arrange your will
This may sound morbid, and not the sort of thing you want to be doing when you’ve just welcomed a new life into the world, but taking care of the future is imperative.
Make sure you name a suitable guardian for your child in your will who will be able to give them emotional and financial stability, and ensure that you have properly arranged the inheritance of all your valuable assets so that your child does not have to go without in the event of your passing.
Oval does not provide financial advice. If you need further information we suggest you look for expert advice.