Investments are one of the best ways to increase your monthly income and save up money for retirement. Having a regular return on investments helps to secure your financial future and frees up more cash for luxuries in those later years, but it’s not all about you. What about your children?
They’re facing increased education and housing costs and it’s harder than ever for them to save. It’s important that you teach them the value of standing on their own two feet and being sensible with their money. But that doesn’t mean you shouldn’t try to help them out a little. People are increasingly relying on their parents for financial help, and the average age of people that still live with their parents into adulthood is only going up. If your children are relying on you, what’s going to happen when you’re gone? If there’s nothing there for them, they could find themselves struggling. However, if you invest money on their behalf and get them to help you manage those investments as they get older, they’ve got something to fall back on.
It’s a great thing to do when they’re first born because even if you only invest a small amount, by the time they get to college age or get married, there will be plenty of money for them there. It’s also a great way to teach them about money by getting them involved in the process and eventually, letting them manage their own investments.
So, if you’ve got a little one on the way or you think it’s time to start investing in the future of the kids you’ve already got, these are some of the best investments for your kids.
The most obvious way to save for your kids future is to put cash into a high interest savings account every month. It won’t give you that much of a return but it’s safe, most of the time. It’s not likely that your money is going to lose a huge amount of value, especially when it’s gaining interest. However, inflation is very high at the moment and if inflation outstrips your interest rate, you’re going to lose value in real terms. In most cases, those interest accounts will earn you a bit of a return, but not that much. You’ll have to start going for bigger investment opportunities if you really want to build up some money.
Investing in real estate is good for a couple of reasons. The first is that it’s generally a great investment. It’s very popular at the moment because landlords make a huge amount of money in rent and the value of the property is likely to increase dramatically in just a few years. That means your kids can use it as a steady stream of income when they get older, which can take the financial pressure off them when times are hard. The second reason that it’s a good idea is that they’ve always got a fall back option if they find themselves in real financial difficulty. If they’re falling short of their mortgage for whatever reason, they can sell their house and move into the investment home for a while. The mortgage will be mostly paid off by the time they’re adults so it’ll save them a lot of money.
You’ll probably have to get a home loan to buy the property so this is probably the most expensive investment on our list. However, if you’re renting the place out, that should be more than enough to cover the mortgage on the property. Investments for your kids are very long term so you’ve got an opportunity to make a big profit on a house by buying in an up and coming area. If you find a neighborhood that isn’t that popular at the minute and has cheap houses, it’s worth considering whether it will become more popular in ten years. If you take a gamble and get it right, you could get a house that’s worth a lot of money for a great price.
One of the biggest challenges you’re going to have is getting your kids interested in helping you out with their investments when they’re still young. One good way around this is to invest in kids companies that sell toys or clothes that they like. They’ll be far more interested in helping you out if they can relate to the products. The thing is, toy companies are actually great investments anyway. Think about how much people are spending on toys every Christmas and they’re pretty expensive, even though the manufacturing costs aren’t that high. When you’re trying to choose one, pick one that’s been public for a long time and proven that’s it has longevity because even though toy companies make a lot of money, they’re also very susceptible to trends and can easily fold if they don’t keep up.
If you don’t like the risk element of investing, government bonds are a good way to go. They are one of the safest investments out there and you’re pretty much guaranteed to at least get your initial investment back. The interest rates on them are pretty low and during a financial crisis, they’ll drop even lower as people shift all of their money into bonds. However, if you have them for an extended period, you will still build up a good amount of cash. You’ve got to decide whether your priority is the amount of risk involved, or the amount of money that you’ll get back.
529 College Account
Not that many people know about the 529 college savings account but it’s one of the best ways to save up for their tuition, but you can’t use it for anything else. You can put in your cash after tax and it’ll gain a good amount of interest in there. You don’t need to pay any more taxes on any of that money as long as you spend it on tuition. If you get to that point and your child decides not to go to college, you haven’t lost that money. You can still take it out and spend it on something else, but you are going to have to pay all of that tax if you aren’t spending it on college so the money is going to take a big hit.
If you’re using a 529 account, it’s worth looking into prepaid college tuition. Most states will allow you to pay tuition now and secure that price for the future, whenever your child goes to college. If you’ve got a healthy amount saved and it looks like college prices are going to rise dramatically, it’s a good idea to get in early.
Kids Savings Accounts
When they get a bit older and they start to get a little bit of money of their own, it’s worth trying to encourage them to start their own savings account. Getting them into the habit of putting money away from a young age means that they’ll enter adulthood with a chunk built up, but more importantly, they’ll have a good attitude toward saving money and they won’t be as likely to fall into financial trouble when they grow up. The kid’s savings accounts aren’t a long term option but they’re a good way to get the ball rolling. The Capital One 360 savings account is probably the best one out there at the moment but the deals are always changing so keep an eye out.
Investing money for your kids is the perfect way to secure their future and teach them financial responsibility at the same time.