There are several motives why parents may start thinking about their child’s future at a tender age. Some of the common ones include plans to have saved enough money for kid’s college fund and the new orientation of the young ones into money management skills. These techniques help in securing the child’s bright future.
On the other hand, several realities make it hard for you to quit. For example, the financial requirement for a college education is growing every day, the cost of living has been on the rise, and prices of almost everything else, including buying a house has risen.
How to Get Started on Saving
The goal of almost every parent is ensuring that they have saved enough money to support their child. The aim is helping their kids successfully transition to a life of independence. This being the case, what techniques can parents use to achieve this dream? Here, we have dedicated time to write an essay about some of the strategies. However, you can learn more about others not covered here from financial blogs on websites such as kscripts.com.
Develop a Saving Mindset
It is hard to achieve anything unless you have the right mindset. Overcoming such mental blocks requires you to cultivate a conscious endeavor of investing and saving for both yourself and the child’s future. A great secret to achieve this goal is coming up with a financial plan. It should include aspects such as the targeted amount to raise, timeline, and the minimum amount you should be saving either weekly or monthly. Ensure that they are logical in terms of being achievable and motivating.
Come-Up with a Budget
You cannot save without a prepared budget in place. In financial terms, it approximates revenues and expenses for a specific period. According to experts, savers should have a plan in advance for the management of their income and spending. It demonstrates you have vision into the future by managing your present. Budgets also make it possible for you to achieve targets you have set in your savings plan. For those of us teaching our kids critical financial lessons, make them appreciate the budget as a crucial tool for planning.
Once you have a plan and the budget in place, it is advisable to start implementing them soon enough. You do not want to fall into the procrastination trap. Financial advisers claim that to enjoy the fruits of compounding, make sure that your money is compounded for a longer time. Therefore, by starting early, you not only get to benefit from more returns but also gain the advantage of saving for longer without much pressure.
Saving Plan Tools
Having learned how to get your savings dream into action, next, we review the options available for the implementation stage. What are the vehicles that can help you set up your kid for financial success? How can you be ready for their college education?
529 Savings Plan
Also known as the Qualified Tuition Programs. They are state-funded piggy banks that involve having your money invested and the returns not being taxed. All you have to do is spend your contributions after tax into the 529 plan. This can later be withdrawn, including the tax-free gains for use in education-related expenses. It is currently available in about 50 states, but if not present in yours, there is the option of joining one in another state. Some of its benefits include if the money is spent on college-related expenses, it is tax-free, and it allows you to change beneficiaries without penalties.
Create a Savings Account
Several banks provide plans where you can open a joint parent-child savings account. They are useful in both teaching your kid how to save and achieving the set targets. On the other hand, a parent may prefer to open a custodial account. It is appropriate where you want to save money for your kid but ensures they cannot access it until they are adults. The parent gets to manage the account even though it is opened in their child’s name. They also provide the advantage that part of the initial investment is not taxed.
While this article offers some of the smart options available for you to save for the future, it does not mean that the list is exhaustive. There are still other viable options such as CD ladder, pre-paid college tuition plans, trust funds, and government bonds.