Ways to Secure Your Children Financially
If you want to ensure that your children can enjoy the benefits of financial security, there are many ways to build this foundation—starting from when they’re small to when they’re ready to move out on their own. To help you get the process of saving for your child’s future off to a good start, we’ve provided some suggestions you can use to begin building your offspring’s financial nest egg.
Help Your Children Develop a Savings Habit by Opening a Savings Account for Them
Make it in their name and encourage them to save for and make regular deposits to it. You can add some extra incentive if you promise to make a matching deposit each time they make a deposit of their own. With this kind of regular weekly deposit, a child’s account will grow to a considerable amount over time. For more ideas on how to teach money basics to younger children, we recommend reviewing our Smart Money Basics for Pre-Schoolers page.
Maintain Active Life Insurance Accounts
Life insurance, both for yourself and your children, can provide a valuable means of building your child’s financial security. Be sure to update your own life insurance policy to provide for your children’s goals and needs should something happen to you. The amount will be at your discretion, but your insurance agent will be able to help you determine the best amount for your needs. It’s also a good idea to start your children’s life insurance coverage as early as possible. Their rates will never be as low, and many policies will enable your children to increase their coverage as they grow up and hit milestones such as college, marriage, and having children of their own.
Consider Opening an IRA on Behalf of Your Child
While it might seem like an odd idea, it’s never too early to set up a retirement IRA for your child. If your children have begun earning a verifiable income of their own, they can begin making IRA contributions. You can also make a contribution to their IRA for them in their name, a common practice among many parents.
Go Ahead and Start Planning for College
Perhaps the most important step to take to ensure your children’s financial security is to set up a college fund as early as possible and begin saving for their educations. Savings options you can utilize include a Coverdell Education Savings Account, which allows you to save up $2,000 each year, and a Section 529 Plan, which (depending on where you live) allows you to set thousands of dollars aside to provide for your child’s education. It’s a good idea to sit down with a financial advisor and have them review your investment options as you determine the right education savings strategy to follow. In the meantime, feel free to explore our Education Section for more information on student savings plans and other educational resources.
