You don’t have to be wealthy to make sure that your children have enough money in the future. There are a number of ways to save money throughout their childhood so that they’ll be able to pay for college and other important expenses later on. With a bit of planning, you can put together a solid method of setting aside money and creating a financial safety net for your children.
1. College Savings Plan
Plans that allow you to save for your children’s college education are important in order to help cover the rising cost of tuition. You can contribute to these plans on a regular basis. You can also encourage relatives to make a contribution to it on special occasions, such as birthdays, instead of buying presents. Building up a college savings plan makes it possible for your children to get a higher education without having to take out student loans.
2. Estate Planning
Having a will done or setting up a trust is a good way to make sure that your children have financial support after your death. You can designate how much money each child will get and which possessions they will inherit. It’s best to work with an estate planning lawyer to ensure that the trust or will is set up correctly so that there are no legal disputes over it.
3. Roth IRA
If your children are old enough to work, you can set up Roth IRAs for them so that they can begin saving up for retirement. Roth IRAs for minors have limits on the amount that your children can contribute each year based on their income. Putting money in an IRA when they’re still young means that they’ll have a great head start on funding their retirement.
4. Savings Account
You can open a custodial savings account for your children to help them learn about being financially responsible. Although you will be in control of this account, the money in it is considered your children’s money. You can deposit a certain amount in this account on a regular basis or use it for the cash or checks they get as birthday money. You can also have your children deposit their allowance in the savings account.
5. Life Insurance
Having life insurance is essential when you’re a parent. In the event of your death, your children would have a financial cushion to keep them afloat. You can get a term life insurance policy that covers a set period of time or a whole life insurance policy that covers you for your entire life, although this is a more expensive option. Upon your death, the benefits from your life insurance plan would go to your children as long as you listed them as your beneficiaries.
No matter what plan you decide on, you should seek help from a financial professional to ensure that you reach your goals. Your financial adviser will keep you on track and make sure that your plan is successful.