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Investment Advice: Saving for Your Child’s Future

Baby boomers, generation x, millennials, and centennials inhabit different realities, despite living alongside each other. Globalisation and technology have created a world in flux that simultaneously brings opportunity and unpredictability. The job market is less stable than it was 20, 10 or even 5 years ago, and the path to accumulating financial wealth isn’t as straightforward as it might have been for the baby boomers.

 

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Baby boomers, generation x, millennials, and centennials inhabit different realities, despite living alongside each other. Globalisation and technology have created a world in flux that simultaneously brings opportunity and unpredictability. The job market is less stable than it was 20, 10 or even 5 years ago, and the path to accumulating financial wealth isn’t as straightforward as it might have been for the baby boomers.

As a parent, you want to provide the best emotional and financial support for your child. Saving up for their future from a young age is one of the smartest things you can do to help your child start their adult lives on the right footing. You’ll be able to afford them opportunities for development well into their adult lives by providing capital for tertiary education, set up a home or further their investments. Here’s some basic  to help plan their bright futures:

 

 

The Big Picture

 

Take a moment to reflect on the bigger picture. Besides daily living expenses, there are four main pillars to consider when building a sound financial future for your child. They are sound education, talent development, rites of passage celebrations and recreational activities.

Work out a ballpark figure of how much your child’s education is going to cost, including extra-curricular activities. At this stage, you don’t know what your child’s talents are. Perhaps they’d like to play the piano or take up soccer. This, on top of school fees, textbooks and new uniforms, can be unexpectedly pricey and needs to be factored into your savings.

 

When it comes to sound investment advice, we recommend including rites of passage and important family holidays into your savings budget. Like education, these are significant expenses that can leave huge gaps in your investment portfolio without proper planning.

 

Ask the Right Questions

 

Before delving into detailed investment advice on tangible assets and bonds, you need to decide on an appropriate savings option for you and your family. First, have you considered what you want to invest in? Second, what savings plan do you want to step? And third, who will have ownership of the account? These decisions will impact the type of savings accounts you’d like to have and set the tone for your child’s future, so it’s important to take your time to weigh up the pros and cons.

 

Choose a Suitable Savings Option

 

Once you’ve answered the above questions, you’ll discover there are many different investment options. The Money Advice Service recommends setting up an account with your local bank, which your child can manage on their own when they’re older. This type of account doesn’t just secure your child’s financial future; it also offers a wonderful way to increase their financial literacy because they can start managing their money from a young age.

Another option is NS&I children's bonds. With this type of investment, your child owns the bonds, buy only a parent or guardian can buy them, and holds them until they turn 16. These bonds are sold in batches known as issues (each run for five years). Each issue has a fixed interest rate and only accumulates interest at the end of the year. After a five-year period, you can roll over the existing issue into a new five-year issue until your child’s 16th birthday.

If you have enough capital, the best investment advice is to purchase real assets with intrinsic value. Real estate is an excellent long-term investment that generates capital while under your ownership. Furthermore, if you are buying-to-let, your tenants help pay off the mortgage. The property will become an investment nest egg for your child and, as a long-term investment is less risky than stocks or bonds.

Searching for sound investment advice can feel flummoxing when you’re pre-occupied with looking after your newborn. You have to factor in new expenses, readjust your budget and start thinking about life insurance.

You can make the process easier by downloading our ebook: New Parents’ Guide to Finance to help with sound financial planning. And, if you’re dreaming of a quick family getaway and want to invest in a profitable holiday home, then take a look at our sunny Spanish villas in Calpe.

 

 

 

Image credit: usnews.com

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