Family financial planning – ways to invest in your kids’ future

Having a family is one of the most beautiful things a person can dream of, but establishing and maintaining one isn’t that simple, given today’s economy. The financial challenges of parenthood are increasing by the day, especially since parents must balance retirement and college saving plans.

In many cases, parents don’t know how to save accordingly for the future without straining their present, which ends up with a lot of stress within the family. On the other hand, other parents are trying out every alternative to gain more income, from investing in retail to betting on the Ethereum price prediction.

While there are so many options on the market, parents should have a plan for leveraging their skills and knowledge and saving money for their kids’ future. Here are some ways to do it successfully.

Happy family jumping with huge piggybank. Cartoon illustration

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A basic plan for a family’s financial goals

If you’re new to this, you might need guidance on what to consider in your financial plan. A basic option includes allocating your money into three categories that you can manage in time, such as the following:

  • 50% of income for basic needs;
  • 30% for wants, like travel;
  • 20% for investments and savings;

The family income should include a thorough explanation of income and expected income, as well as a method of tracking these costs in time to understand where you can make improvements. This plan works very well for individuals and families since there’s more income involved, along with expenses.

The importance of an emergency fund

Unfortunately, we never know what life has in store for us, so we should always be prepared for inconveniences, such as unforeseen health issues, to avoid stressing over our income. Building an emergency fund is not that complicated, as you must set up automatic deposits and choose between monthly pay and everyday pay.

You should consult the various paths you can take regarding interest and contributions because many options are more or less beneficial for your family in the long term. For example, a high-yield savings account only offers insignificant interest, but it might be the best thing to do if you have a tight budget.

The 529 education savings method

Many kids will be burdened by the high costs of going to college, and they’ll most likely remain in debt for some time until they’re free to use their money to their liking. But with a little bit of effort, you can help them into a debt-free life through the 529 plan.

The systems include two options. You can start a prepaid tuition plan that incorporates purchasing college credits that won’t devalue in time. On the other hand, you can opt for having an education savings account, which is a regular investment plan. The latter might be a better decision since it can help pay qualified education expenses.

Debt and budget management

Among some of the best ways to ensure you’re not in debt and can save enough money for your kids is to manage your budgets and ensure you’re not overspending on non-important things. For example, you could better plan your weekly and monthly spending on food by sticking to a budget and finding ways not to waste food.

According to the Public Interest Research Groups, about 35% of food waste from the total supply in the country consists of food thrown away or discarded. Food waste also results in significant financial losses for companies and families, sometimes due to poor education or unawareness of the food’s expiry date. Therefore, it would help considerably to stick to your budget by buying in bulk, cooking everything you’ve got around the house, and being more mindful of the food’s quality and the best date to consume.

Involve your kids in the saving process

If your kids are already at the age where they can start working, you could involve them in the process of saving money and being financially educated. For example, you could get them a regular piggy bank where they can put a part of their money monthly and save up for something more significant for them, such as a bicycle.

When they get older, kids can open a particular savings account at a bank with a custodian if they’re minors. This could help them contribute to a Roth IRA at some point. If you could both put something aside for that account, the benefits will be considerable in the future. Finally, if they decide what college to get into, help them apply for scholarships and grants, as this can ensure they’re not going into debt as young people.

Explore your options

Depending on your place, there might be various types of savings accounts or options to save money for the future. For instance, in the US, you can choose between the following:

  • A child savings account that anyone can open and contribute to, but taxes are significantly higher than other options;
  • Junior ISA is tax-free, and the kids can access it when they turn 18;
  • Junior SIPP can be opened only by parents or guardians, and it has a certain contribution limit;
  • Bare trusts work based on cash, stocks, and shares and can be accessed when the child is 18 years old;

If you’re unsure what to choose, it would be best to consider consulting an advisor who can give you a proper insight on the taxes and implications of opening such a savings account for a longer period. Some options might be more inefficient, but sometimes, it’s not easy to figure it out.

Are you ready to save up for the future?

Saving up for your kids’ future is one of the best things you can do for them if you think you can afford it for the long term and there are no other significant investments at the moment. An emergency plan, managing debt, and exploring various options are great ways to ensure you have options and the future is a little bit secured.