Making preparations for your child’s financial future is not just about giving them money to spend on their future endeavors. It’s also about preparing them to manage their own money when the time comes. Teaching your children to budget, save, and spend appropriately can equip them with the skills needed to make the most of the money that they earn.
College Funds
Education is generally a good investment in a better future for your child. However, many individuals are hesitant about taking college courses due to the high tuition costs.
Consider starting a college fund for your children to help them afford a few semesters without worrying about finances. Starting a college fund can also help your child learn how to save money that will go toward something practical.
While loans are always an option, it’s important to teach your children how to borrow money productively. Students often find themselves borrowing more money than they can reasonably pay back in a timely manner. Teach your children how to stay on top of loans to avoid being overwhelmed by debt.
Help Them Learn and Earn
An investment account for kids can help you earn some money for your child as well. An adult will have control over the account. Your child will need a parent or guardian on the account and there will be controls on the account limiting what they can do.
But make sure they actually do the work and an adult simply signs off on it. Do not do it all for them while they watch.
They will learn so much more if you make them do the reading and make the decision. Spoon feeding them answers will limit how much personal growth they get while accumulating money.
If they grow their bank balance but don’t grow their expertise and wisdom, the risk is their money will get blown soon after they turn eighteen.
Practice Financial Literacy
Educate yourself and your child. This should not be a case of “Do as I say, not as I do.”
There are many topics to cover to achieve financial literacy. College funds and investment accounts are just one piece of the puzzle and do not constitute a full education.
Children should also know how to budget, the difference between good debt and bad debt, cost-benefit analysis, how to comparison shop, and many other things. So don’t focus excessively much on investments per se.
