Since from an early age, a piggy bank is given to kids as a gift that can help them understand the value of money. Teaching children how to save and why it is crucial to do so is very helpful in providing them with a solid and stable future.
“A penny saved is a penny earned”, they say, then if you are planning a more stable and fruitful future for your child, it is important to start saving by making a plan.
Furthermore, raising a kid can be very expensive and that’s why many parents have to make some adjustment to their finance when are starting a family. When children are little, maybe you spend to buy necessary objects such as dresses and nappies, but it is when kids grow that the expenses increase as well. Medical expenses, school and extracurricular activities, such as sport, music, school of languages and going out with friends are just some of the expenses that parents have to add to that list. Not to mention that the cost of the college can be a heavy load to add to your finance too. Then, when a child becomes an adult, more money is needed, maybe for a wedding or helping to buy a house.
It is for these reasons, that you may need to save regularly for your children, even a small amount and teach them a savings habit. Consider that effort as a lifelong project.
How to start then?
How to save money for your children’s future
Sometimes it is not just to save money, but also to choose the right form of investment. As a matter of fact, today there are several options to consider if one wants to give savings the opportunity to grow over time. However, it may be challenging to choose which one may the proper one according to the budget, and goals. For this purpose, it could be a game changer to rely on a financial advisor, whose experience and skills may be valuable in guiding you on your financial path. A financial counselor could help you find the products that best suit your needs by assessing your risk tolerance, your objectives and so on.
Among the most common products there are trust funds, accounts that give you possibility to give your child money as inheritance. However, you have to remember that you’ll pay taxes on this kind of funds.
On the other hand, you should also consider tax-free financial products. For example, many people are interested in how to buy premium bonds, since they are financial products that date to 1956 and is trusted by 21 million people. Indeed, premium bonds are very popular, as the prizes are free of income and capital gains taxes and they allow to invest a minimum amount of £25.00. But who premium bonds work? They are issued by the UK government’s National Savings and Investments Agency and they give you the chance to win a monthly cash prize, till 1 million pounds and your child can withdraw money at the age of 16 or take on ownership of the savings account.
Other options to consider are represented by children’s savings accounts co-owned with parents or by a Junior ISA, but in this case the withdrawal of the money is allowed only when your child has turned 18.
How to teach your child the importance of saving
Probably, even more important than setting up savings accounts or choosing the right financial products, is teaching your children good savings habits that they can carry on throughout their lives.
There is no set rule for when your child should start saving, but it may be a good idea to commence after high school graduation. Sometimes many parents tend to not talk about finance with children, instead discussing the importance of money and how you spend your earnings or try to save them could be a game changer.
For example, to instil successful saving habits, it could be useful to underline the importance of paying bills on time or spend just how much you can afford.
It should not be underestimated that, in many cases, savings could be a stress reliever: teaching that to your children means to prepare them to face life’s many financial obstacles in a more peaceful manner.
Thus, saving and investing for your children may be considered as a welcome gift to them. In the end, it is a matter of setting a good example: along with the cash you’ve saved, you’ll give your kids the gift of knowledge if you show them how to save and to put money aside systematically for your goals.