Raising children these days is a tough job both financially and morally. Parents consider many things to ensure that their child enjoys a comfortable life. Comfort does not come cheap, but you want nothing more than a stable life for your child. As a parent, you should always stay a step ahead, therefore planning for your child’s future needs early on is all you should focus on.
But what is future planning, and why is it important? It means proactively planning for all the vital phases of your child’s life. From shortlisting good colleges to arranging funds for admission and annual charges, it needs careful consideration of all aspects. This also implies a secured and unimpeded supply of funds if anything goes wrong. Your children feel more comfortable and organized when they know that you have got their back.
If you are trying to make life easier for your children, this post might help you a lot. Below are some important ways through which you can secure your child’s financial future.
1. Set up a trust fund for your children
While planning for the financial needs of your loved ones, the first option you have is to hire an attorney and set up a trust fund. This can be done even before the child is born, and the second-best time may be now. While your child grows, develop separate funds for primary schooling, higher education, or foreign research programs. These fundings can be in the form of money, property, or any asset.
Often, the biggest mistake parents make when setting up a trust fund is not deciding on a definite funding source. This results in abrupt fundings, and the trustee may finally call it off. This can be avoided by buying an asset or property and later setting up a trust fund. Another common slipup is not defining the trustee. For example, if you have more than one child, you can do two things; set up a single trust fund and specify the distribution percentage for each or set up multiple funds for each.
2. Design investment plans
Investments ensure that your child has a steady supply of returns over 15 to 20 years. For this, you may have to design investment plans with periodic withdrawals based on your child’s short-term or long-term needs. Long-term investments provide good security and returns. But what benefits do these investments offer if you cannot withdraw returns when your child needs them the most? Therefore, carefully consider your investment plan. This will indeed require a good deal of planning. Starting from mutually defining your child’s priorities, especially if they are adults. The next step is ultimately setting short-term and long-term goals. The short-term goals maybe all the expenditures of their primary education, extracurriculars, or activities within the next year or two. On the other hand, long-term plans may include higher education expenditures, marriage, etc.
3. Buy health or life insurance plans
Investing in different investment schemes is a vital step towards securing your child’s financial future. However, they may not be enough on their own without a health or life term insurance plan. A combination of different financial plans might guarantee your child’s financial freedom in the future more concretely.
What is the best way to choose insurance plans? Well, there is no definite rule, but considering all the terms and conditions and their effect on your child’s life is the simplest way to finalize an insurance plan. Premium wavier plans in life insurance also cover financial losses in unfortunate events. Discussion with a financial planner and laying out all your requirements help them shortlist life insurances based on your budget and needs. This will make the whole process a lot simpler and easier.
4. Design your will well in time
Though this may sound absurd to many, a will should be designed while you are middle-aged and can think straight. By the time you get older and acquire more wealth, assets, or property, you can ask your attorney to update your will. This will ensure a thoroughly planned distribution of your assets according to your wishes.
It is often seen that death-bed wills are designed in haste and often fail to accommodate the technicalities of distribution. Even worse, in the absence of a will, the distribution of assets involves the state and puts the future of children and spouses in jeopardy. When this happens, your child is likely to get very little, if any.
5. Sell items of your children that they may not need anymore
While we have discussed some potential funding and investment options, it is only fair to try creative ways to save some money for your child. Children grow out of their belongings very quickly. Some of these may be new as ever and can easily be sold. Fortunately, many online retailers allow you to do this. One of them may be the OffterUp platform which allows the sales of mildly used items to people in your area or neighborhood.
There are actually crucial times when the sales are high, especially in October and June. Winter gears sell very fast in October, and baby gears overall sell fast in June since there are more births around June and July.
As parents, it is always wise to start planning for your child’s future while you are financially stable and well. While planning for their financially sound future, you should educate your children to be thrifty and considerate while spending. Financial literacy on the part of children plays a vital role in making them more cautious in spending and being propensity towards saving.
Parents who involve their children in financial management once they can understand how life works develop a sense of responsibility in their children. This sense of responsibility is also a part of their future financial planning.