No one needs to tell you that children are a HUGE responsibility. But you can get so caught up with right now – diapers, food, schoolbooks – that you forget to put things in place for their future. So, what must parents do to help their children on the path to success?
You’ll want to save for your little ones’ university education. Our first piece of advice: it’s never too early to start. It can be easy to say, “I have time”, but you’ll be surprised how quickly the years fly. There’s also a financial incentive to starting early: savings will have more time to grow, investments are more likely to withstand market fluctuations and overall earnings will be higher.
A savings plan is important – but we’d like to advise you to look beyond the savings account. Savings accounts are great places to keep money that you’re going to use in the near future, but your children’s education is a long-term investment. You’ve also got to consider inflation; your child may be going to university in fifteen years’ time. $10,000 then won’t go as far as $10,000 now. Savings accounts frequently offer returns well below the rate of inflation; why not talk to a financial advisor who can help you maximise your investment potential?
One saving option to consider is an annuity. We know, you associate annuities with retirement savings. However, an annuity is simply a financial product where you make payments and then receive regular funds or a lump sum upon maturity. Why not start an annuity that matures in time for your child to start university? Annuity contributions are also exempt from income tax, up to a specific amount each year. So you can save for your child’s education and save on tax payments too!
When planning for your kids’ future, you also need to consider life insurance. It can be hard to even think about a time when you won’t be there to care for your children. But you need to consider what will happen if you pass away unexpectedly. Your children will already be coping with the loss, they shouldn’t also have to worry about money. We’ve written about life insurance before, but you should ensure that yours is up-to-date to provide for your dependents if needed.
Remember, planning for your kids’ financial future doesn’t just mean putting savings and insurance plans in place. It also means making sure they’re equipped to make the best financial decisions. Start teaching them important financial lessons today. If your children are very young, this may mean talking to them about the importance of saving. If they’re a bit older, you can start giving them an allowance to put these lessons into practice; you may teach them about budgeting or even investing!
Finally, review your financial plans periodically. Maybe you just had your first baby this year… but you may have another one in a few years’ time. Suddenly you’ve got to plan for two kids. Maybe as your children grow, their goals start to influence your plans. You may have been saving for college but your daughter wants to be a professional tennis player. The most important thing is that you act to build a better life for your children – we promise they will thank you someday.