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Last updated on October 22nd, 2024 at 11:59 am
If you’re a parent of little ones, you know it’s sometimes hard to imagine your children growing up and becoming independent. But as much as we may want to hold on to our babies forever, the reality is they’ll eventually need to find their own way in the world.
We can’t, and shouldn’t, do everything for them. But what we can do is help set them up for success. It’s never too early—or too late—to think about your child’s financial future. And the earlier you start, the better positioned they’ll be for the opportunities ahead.
Whether it’s helping them cover the ever-rising cost of college (which averages $38,270 per student per year, including books, supplies, and living expenses), contributing to a down payment on a home, or helping them buy a reliable car, contributing to your child’s financial future now will make a huge difference later.
With that in mind, let’s discuss a few ways to invest in your child’s future success.
Open a Savings Account
Starting a savings account for your child is a smart and simple first step. If you begin setting aside even a small amount when they’re born—say $50 a month—you will have over $12,000 by the time they turn 21, and that’s not even counting interest!
One way to make your money work harder is by finding a high-interest savings account. These accounts can help your deposits grow faster, so it’s worth shopping around for the best rates.
As your child grows, they can even contribute to the account, helping them learn to save. It also provides a safety net for life’s unexpected challenges, which can be incredibly valuable as they start their working life.
A modest savings account isn’t the path to riches, but it can play a part in building economic security, and it’s a terrific way to help kids develop real-world readiness.
Invest in Property
If you want to take things up a notch in securing your child’s financial future, you might consider investing in real estate—specifically, commercial property. While this is a big investment, it can provide long-term financial security for your child.
You might wonder why you should look at commercial properties for sale versus residential. The reality is, as a teenager or even a young adult, your child may not know exactly what career they’ll pursue or where they’ll want to live. A residential property could tie them to one location, which may not be ideal. In contrast, commercial properties typically come with five-year leases, meaning a steady income for five years is virtually guaranteed. While part of the rent will go toward the mortgage, it can still generate a small income that can grow over time.
Eventually, once the mortgage is paid off, the property will provide a larger income stream for your child. This could even be a stepping stone for them to invest in more properties, potentially building a real estate portfolio of their own.
Another advantage of commercial properties is their flexibility. You don’t need to live near the property, because with the right tenants, they’ll handle most of the day-to-day issues. Plus, commercial real estate comes with tax benefits that aren’t available with residential properties, making it a smart option for those looking to support their child’s future goals.
Invest in a 529 College Savings Plan
If you’re specifically saving for college, a 529 plan could be a good bet. These tax-advantaged accounts are designed to help families set aside money for education expenses, and many states offer tax deductions or credits for contributions.
One of the biggest advantages of a 529 plan is that the earnings grow tax-free, and withdrawals used for qualified educational expenses—such as tuition, books, and room and board—are also tax-free. You can start a 529 plan when your child is young and contribute over time, letting the funds grow as they get closer to college age.
Many 529 plans allow relatives and friends to contribute too, making it a great option for birthdays or holidays when family members want to give a meaningful gift. And if your child decides not to attend college, you can transfer the plan to another beneficiary in the family without losing the tax benefits.
Invest in the Stock Market
Another option to consider builds on the idea of a traditional savings account—but with the potential for a higher return. While savings accounts are safe, the interest rates are typically low, meaning your money might not grow much beyond keeping up with inflation.
If you’re looking for a way to grow your investment more significantly, the stock market could be a better path. Before diving in, though, it’s wise to study the market and even make some hypothetical purchases to get a feel for how it works.
Keep in mind that the value of stocks can fluctuate. There will be ups and downs, and at times your investment could be worth less than what you put in. However, historically, stocks and shares tend to increase in value over the long term.
If you’re not an experienced investor, seeking professional advice can make all the difference. A financial advisor or investment professional can guide you through the complexities of the stock market, helping you develop a strategy that aligns with your financial goals and risk tolerance. They can provide insights into market trends and recommend the best stocks or funds for long-term growth. Working with a professional can give you peace of mind, knowing your investment decisions are well-informed.
As your child grows into their teenage years, you can also involve them in discussions about their stocks. These kinds of skills will be invaluable to them in the future.
Wrapping Up
In the end, every parent wants to give their child the best possible start in life, and investing in their financial future is one of the most impactful ways to do that. Whether it’s through saving, investing in real estate, college savings plans, or the stock market, each of these strategies offers opportunities to help your child build long-term security and financial independence.
By starting early and making thoughtful investments, you’re not only providing a financial cushion but also teaching them valuable lessons about money management and planning for the future. These are just a few ways you can be sure your child is better prepared to navigate the economic challenges of adulthood, giving them the freedom to pursue their dreams without unnecessary financial stress.
Also read:
6 Tips to be Successful in Your First Real Estate Investment
A Beginner’s Guide to Setting Up an Investment Portfolio (6 Important Tips)
How to Save for a Rainy Day: Try These 5 Smart Saving Strategies
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