Whoever said that the best things in life were free never had children. Bringing kids into this world is a huge decision that involves many factors. It’s the biggest decision one can make in their lifetime.
Having children requires many well-thought-out plans to be able to provide the best for them. The biggest challenge parents face is the expense. Kids are expensive. You should start saving for your child the minute they are born. This plan sounds easy until you have a child and witness the pile of endless expenses that could amount to thousands of dollars per year; basic expenses such as food, housing, medical, and most importantly education.
The biggest challenge your kid will face in the future is paying their college tuition which on average can run up to $40,000 per year. This is why it’s crucial to start planning different ways of saving and investing money for your kid, to save them from huge debts that most millennials are now drowning in.
Here are some of the best investments for your kid’s future.
Investing for Your Kid’s Education
A recent study showed that more than 70% of Americans are saddled with student loan debt. If you want to save your kids from experiencing the same frustration, use different college savings options just as you do your retirement account. Some plans, like 529 plans, offer financial aid benefits. 529 plans are new to most people. To understand more about them, first know that they have been around since 1986. Since then, another type of plan was popularized — college savings plans. College Savings Plans depended on investing your money or after-tax contributions in several investment options one can choose from.
You can kill two birds with one stone and resort to savings accounts. You will be able to save money and invest at the same time. If you are trying to get your kid to get set up, savings accounts are a good option as they are a low-risk investment. However, since they offer a low return rate, they’re better for long-term savings goals such as paying for kid’s college tuition or wedding expenses. The interest earned by savings accounts is categorized as assessable income. If you are opening the account under your child’s name, you must understand that some special tax rules apply to under 18s.
Managed funds are a great investment option to save money for your children as it’s a great way of balancing your portfolio across a range of different asset classes. Since managed accounts have different levels of risks, you need to calculate the amount of money you want to invest and the level of risk for funds you want to choose and make sure that it’s suitable for the goal you have set for yourself. Managed funds depend on pooling your money with other people’s money to invest in different assets and shares. There are different shapes and sizes that managed funds come in.
- Listed funds which are called “Exchange Traded Funds”
- Listed Investment Companies
- Passive and Active Investment Funds.
In terms of difficulty, investing in managed funds is usually fairly easy with minimal restrictions about buying or selling any units in listed funds. However, several managed funds have larger minimum investment amounts. This isn’t necessarily a negative point, it’s rather more suitable for big projects that require larger amounts of money.
An investment bond’s concept is very similar to managed funds when it comes to the opportunity to diversify and the different risk options related. However, the only difference is tax. If you want to save money for long-term goals or marginal rates from 30% and higher, this investment option will be suitable for you as it’s tax effective. Insurance bonds are mainly designed for people who want to invest their money for more than 10 years. Depending on your withdrawal frequency, tax for your earnings vary. If you decide to refrain from making any withdrawals, your earnings will be tax free.
Ensuring that your kid is safe and happy with a secure future is the only thing every parent wants. Since we want a better life for our kids, it’s a necessity to provide our financial help to cover all their needs and prepare them for the future. This way you can guarantee that your kid will graduate from college free from any financial debt. Tuition increases regularly and if you are a new parent, your child’s tuition fees may be exceptionally high when applying for college.