There’s no parent who isn’t worried about their child’s financial security. But, when it comes to ensuring a safe and healthy financial future for their kids, they often fail to give their children the future they deserve. In Edward Jones Survey, 83% of Americans said they couldn’t pay college fees.
Whether it is because of the losses from the COVID pandemic or high expenses, your children’s future will be ruined if you don’t think about it now. The question is, how can you ensure your kid’s financial safety, and what exactly can you do to provide them with a stable future?
Your child’s financial future involves planning for their education, higher education, healthcare, and of course, the wedding. In this post, we have shared a few easy and effective steps parents should take to secure their kid’s financial future.
Education can be a big stressor on parents, especially in today’s competitive business world. It’s important, more now than ever, to establish a schooling fund for your children. Saving for your child’s education will not only release the stress of paying their school fees, but it will free up a lot of space for your retirement savings. Do not leave everything for the last minute. You might not realize it now, but as the bills start piling up, children’s education will look like a financial burden.
A custodial account is, basically, a savings account in your child’s name. Your children can access this money once they turn 18 or 21 (depending on your state laws). It’s a perfect way to ensure the financial protection of your children without facing the burden of saving too much or too little. You know you have to deposit a specific sum in your children’s custodial account every month, so it’s easier to plan your expenses and budget accordingly.
Note that the money you have in this account will become taxable as soon as it reaches $950. Your child will get full control of the money once they become eligible. So, it’s important that they are prepared to use this money wisely for their education and investments.
The biggest mistake of parents is that they start saving late. They wait till their children complete their primary education. Let’s face reality—education is getting costlier with each passing year. Start planning 3-4 years before your child starts higher secondary school. Then, you can start saving with the goal of drawing the funds 4-7 years from today.
Your investment and savings plan is never enough when it comes to your child’s education. Considering the high tuition fees, it’s important that you sign up for term insurance to protect your child’s future. Insurance protects you and your family from unfortunate events. As mentioned before, it only takes one hospital bill for a middle-class family to lose their savings. Your savings and investments will work only when you have an insurance plan in place.
Nobody likes to think about death. But it is inevitable. It’s best to prepare the will for your children so you can avoid messy inheritance proceedings. If you haven’t prepared the will yet, now is the time to write a will and assign the guardian.
The last thing you want is your savings, assets, and properties getting into the wrong hands. Having a will ensures that your children receive the inheritance. In addition to that, you must assign a legal guardian for your children. In today’s unpredictable times, it is important to prepare a will in your early 40s and 50s. Preparing a will is not expensive at all. All you have to do is hire an inheritance attorney in your state and use their advice.
This is the biggest burden for your children. Providing for you when you are retired so that you can have a good life can take a toll on your child’s financial health. The least you can do is save for your retirement so that you have enough funds for the future. This will, at least, reduce the burden on your children. If your work involves a 401k plan, deposit a specific amount of your salary to your savings account every month. This way, the set amount will automatically be deducted from your paycheck and go into your retirement account. The sooner you begin saving for your retirement, the more time you will have to have enough funds.
Savings alone will not provide for your children’s financial future. You need to invest your money in real estate, stock market, commodities, and other investment areas to grow your income.
Your savings will not mean anything if your kids do not know how to spend money wisely. You are saving for their education, health, wedding, and future goals. You need to take some time to talk to your children about future goals, savings, and investments.
As parents, it is your responsibility to teach your students the importance of saving money and spending only when it’s necessary. Unhealthy spending, such as eating out on weekends or buying movie tickets, should be avoided as much as possible. We’ve seen parents who save a lot but are unable to provide their kids with a secure future because of the kids’ unhealthy spending habits. Your children with credit cards are never a good combination.
The biggest problem we are facing today is that schools do not offer financial education. The best thing you can do is help your kids with higher secondary education and encourage them to get a job so that they can secure their financial future and understand the importance of being independent.
These were the quick steps for planning your child’s financial future. If you need any advice related to insurance or financial assistance, feel free to contact George J. Roth (a popular insurance advisor) at +1 780-909-8524
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