UNITED STATES—With more and more young people finding themselves in an unstable financial position, it is no surprise that parents are taking more steps to try and give their children a bit more of a financial cushion. If you’re a parent, doing this might be easier than you think. Interested to hear more? We have put together our five top tips to help you ensure your child’s future financial stability without jeopardizing your own.
Set Up a Savings Account and Start Using It
It’s always a good idea to open a savings account for your children as early as possible. If you have close family members that you know would like to contribute, why not give them the details so they can deposit money come Christmas and birthday’s instead of giving gifts? Doing so will save them the hassle of shopping and the fund will grow much quicker when there are several people making contributions.
If you don’t have access to a lot of cashflow each month, it’s time to explore other ways to free up money to put into the account. If you currently have a life insurance policy, you could look at a life settlement, which essentially involves selling your policy to a third party. This is a more financially appealing option if you want to end your coverage as surrendering your policy would give you a smaller overall pay-out. In fact, a life settlement allows you to get four times more cash as it would from surrendering.
Set Up a Retirement Account as Soon as Possible
If your child is young, it may seem like it is a bit too early to be thinking about their eventual retirement. However, setting up your child’s retirement fund as soon as you can will be extremely beneficial for them, as it gives their account even more time to grow, ultimately leaving them with more money when they retire. If this sounds like an option you would like to explore, we recommend talking to providers who offer junior plans, as these will be aimed at those looking to get started early and will feature benefits to match.
Teach Them How to Save
Saving is perhaps the most important skill to have when it comes to being secure financially. Despite this, so many people can’t even put a few dollars aside each week. The key here is to instill these life lessons when your little ones are young. Put a savings jar in the bedroom and put a sticker with your child’s name on it. Explain the concept of saving and how the money in the jar is going to be used to buy something that he/she really wants. It’s not the money that will be in the jar at the end that’s of value – it will be the lessons your child takes away from the whole experience.
Ensure They are Financially Literate
Financial literacy is the ability to understand and utilize financial skills such as personal financial management, investing, and budgeting. Surprisingly, only a small percentage of people claim to be financially literate, despite this being a skill that is linked to the most successful people in the world. Just like saving, teach your kids about investing and budgeting early on in life and they’ll grasp the basics to take with them into adulthood.
Teach them the Value of Money
Our final point is perhaps the simplest one. In order to be sure that your children will grow up to respect money and not waste it, you need to teach them about its value. This could involve running them through what you use money for in regard to rent and bill payments, or it could be something as simple as making them pay for their own treats so they get used to seeing transactions and what they mean.