Every parent has the dream of giving his or her child a better life than he or she had growing up. One valuable way to set your child up for a lifetime of success and less struggle is through investing for your kids now.
Raising a child is a difficult task and preparing him or her for a secure financial future is tough when all the lessons are theoretical. It is hard enough for an adult to imagine ten years down the line! Why not start the investment process for your kids as soon as possible and involve your child in the investing with you?
Investing as an Educational Tool
No matter the form of investment you choose for your child, the long-term effects net as a positive, even as you make it through ups and downs in the economy. This is especially true if you involve your child in the investment process. The biggest potential benefit to your child is as an educational tool.
Through a span of ten to fifteen years, your family is sure to experience financial ups and downs, stock market swings, and growth in your investment portfolio. When your child is next to you in the decision-making process, he or she understands that investing isn’t a magical way to build your money. Look at the statements, see where the money is, and work to explain basic concepts along the way. If money is tight, let your child understand why you are investing versus spending on luxury items. If the market is fluctuating, show the effect of a portfolio’s risk on investment. It teaches about risk management, following companies you believe in, and considering the effect of money when treated properly.
If you suffer a setback, this is also a valuable lesson in money, finance, and investing. A young person with a grasp on investing is set up for a successful financial future.
The Benefits of Investing for Your Child
Looking to invest for your child? Whether he or she is a baby now or is growing up quickly, investing sets your child up for a brighter future. Think about it this way – if you invest $4,000 on the day your child is born and let the money stay there and compound in interest, the money would grow to nearly a million dollars by the time your child is 65 years of age (assuming a 9% annual return). The impacts of an investment for your child includes:
- Teaching him or her about sacrifice now for a payoff later
- Providing a nest egg to start a life, whether it is with a spouse or a child
- Get more from your money the earlier you start as interest compounds over an extended period
- Making education more accessible because of a long-term investment portfolio
- Teaching the basic principles of finance and investment
- Encouraging a saving mentality with your child
What Does a Parent Experience from Investing in His or Her Child?
In a world of uncertainties, setting aside some money and letting it grow for your child’s future provides peace of mind. As a parent, you never know what will happen. The right way to prepare for the future, whether it is an expected or unexpected expense, is through investment. The pros a parent experiences when investing in his or her child include:
- Peace of mind knowing your child is taken care of in case you are not around
- Watch your money grow for a cause you are happy to fund
- Giving your kid an initial investment to start his or her own life
- Providing the basis for the better life, you dream of giving your child
- Preparing for emergencies, illness, and other unforeseen circumstances
- Allowing for the funding of exceptional opportunities for training or specialization in an area of talent or giftedness
What If the Money Isn’t Used as You Wish?
Parents often worry about the way a nest egg for a child will be spent in the long run. Will your child take the money and buy a nice new motorcycle once you are gone? There are a few ways to safeguard the money. Firstly, invest in an account specifically for educational funding.
Another tactic is to make the money accessible after your child reaches a certain age. At a certain point parents must trust the decision of a child and see the investment as money that is already spent.
If you are concerned about the long-term of your investment and how your child will use it, the best course of action is to speak with an estate attorney and financial planner. This safeguards the money for your child as well.
You don’t need a lot to kick off an investment fund for your child today. Get started now and you’ll be glad you did in ten years!