Having a child is definitely something to celebrate. It is a sweet addition to the family and a celebration of life. Having a child, however, also comes with a lot of responsibilities and financial planning.
Health insurance, milk and diapers, pediatrician’s visits, years of school and college tuition – these are just a few common things to think about to ensure your child grows healthily and comfortably. Don’t let this list overwhelm you though; we are going to share with you 4 things you can do today to prepare investment plans for your child’s future.
1. Early planning, early start
Never let the elation of holding your newborn baby in your arms make you forget the importance of planning for the future. Investment plans for their education and health should be started as soon as possible. Even during pregnancy, it is important to think not only about the complications of childbirth and the joys of the child’s milestones during your journey in parenthood but also the following years. Let’s illustrate this with an example.
Parents A and B have their babies in the same year. They’re both planning to invest for their child’s education with an annual return of 8% p.a. Parents A start right away, contributing $300 a month until their kid turns 10, then they stop adding more money. Parents B choose to wait till their kid is 10 years-old before contributing $600 a month – twice as much! – until their kid is 18. Guess who managed to earn better returns? See the table below.
|Parents A||Parents B|
Parents A contributed less money than Parents B. But they started earlier, so their money has had more time to grow. As shown in the table, they were able to gain a lot more than Parents B. This is the power of compound interest – by investing your returns over a long period of time, the end result will convince you to start early. The sooner you start, the better.
2. Gain passive income
We work to live and not live to work. When welcoming a new addition to your family, we dream of the milestones we’d personally be able to witness firsthand and not working extra hours to make sure we can meet the bills. You’d want to spend more time with your little ones instead of spending more time at work. You need a way to work less yet earn more and one way is by building a passive income stream.
Passive income comes in many forms, such as a part-time job or starting your own small business. But if you want more time for yourself and your family, it’s recommended to look to investments as a form of passive income. Before you venture into the investment world, check your financial health first so you know where you stand and can find out the best investments to meet your needs.
3. Choose the right child investment plan
Make sure to buy health insurance for your child. You wouldn’t want to invest a huge amount of money for their education only to have to withdraw it in case of health emergencies. Putting money aside for your child’s health and education will allow you to provide protection for your child while also growing money for their future.
Banks and insurance companies offer various child investment plans where you pay premiums monthly or annually. Each plan also offers different benefits, so take your time to study them and choose one that fits your financial and family situation best.
You can also opt for low-risk investments like bonds. Or high-risk investments like stocks which have proven to generate one of the highest growths in the financial market. These two products are great for the long term, and they can be highly beneficial to your child’s education fund. Minterest Digital Investment platform offers fixed notes and premium property investments which offer lower risks and attractive returns – up to 18% p.a.
No matter what investment products you choose for yourself and your financial goals, consider diversifying your portfolio. Diversification is still considered a great strategy in mitigating the risks of investing, which is why it is important to also invest in other products.
4. Find a trustworthy advisor
Does all of this financial talk give you a headache? We get it. It is a lot to take in. If you don’t have enough time to study investment products in-depth but you need someone to manage your resources, you can always talk to a financial advisor to help you achieve your financial goals.
Now, you are more prepared to protect your child’s education, health, and future. Keep learning about child investment plans and don’t forget to enjoy the magical journey of parenthood.