Saving for your child’s future is one of the best investments that you can make. However, that’s sometimes easier said than done. Starting to save when they’re younger is tough, since it’s expensive to even have children, right?! But there will come a time when you’re able to give your child every financial advantage possible! Luckily for parents, you don’t have to start with thousands in order to invest. You just need to know how to make the most of the money you do have in your family budget to put towards investments.
Best Financial Strategies for Your Child’s Future
Obviously we’re NOT experts on finances, and we’re just sharing information with fellow parents. But we can’t ignore the fact that a lot of us have no idea where to start when we want to begin the ‘money saving journey’ for our kids. So, once you’re ready to take the plunge, take a closer look at these financial strategies to give them a head start as they grow older. And then find a financial advisor, or someone you trust in the investment world to really get that ball rolling!
One of the easiest and most effective ways to save for your child is to create an investment account. An investment account for kids can be used to build a nest egg for trade school, college, a car, or any other major life event that they go through. Many investment accounts have donation and gift options. It makes it easy for loved ones to help build the nest egg as your children grow older.
Many people are surprised to hear that not only is a Roth IRA good for retirement expenses, but can also be used to fund higher education costs. Early withdrawal from a Roth IRA typically come with penalties, however there’s a little loophole! Most investors can make penalty-free withdrawals as long as the money goes toward a child’s tuition for higher education. Your child will eventually have some money management opportunities as they get older. When your child gets their first job, they can open their own Roth IRA so they can continue to contribute their own funds.
529 College Savings Plan
Know for sure the money you’re saving will be used exclusively for higher education? Then a 529 plan could be a good option as well. Those plans are designed specifically to save money for college, and they generally have excellent interest rates and low fees. Parents should definitely research the specific regulations regarding 529 plans. It’s important to understand what the limitations are in regards to the types of expenses this account can pay.
For those who have a child with a disability, an ABLE account could be an ideal investment vehicle. The purpose of an ABLE account is to help parents pay for covered expenses without compromising:
- food assistance
- any other programs that they might be using
As a bonus, you also have the option of rolling money over from a 529 plan to an ABLE account if your child is diagnosed with a disability before the age of 26.
These are just a few of the investment options currently available to parents. Start researching each account to make sure you fully understand all of the benefits. By starting this process early, your child will have the financial backing they need to cover any of the expenses they’ll run into as they grow older.
About the Writer: Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most of her time hiking, biking, and gardening. For more information contact Brooke via Twitter @BrookeChaplan.