It’s no secret that when you have a child, your world changes. You want your child to grow up happy and healthy, and you want to provide them with the best possible future. However, this can be difficult when you don’t know where your finances stand or what the next few years will bring. In this article, we’ll be covering how parents can plan for their child’s future.
Get Your Finances Under Control
Your child’s future doesn’t have to seem like it’s going to be built on luck. While it’ll take some work, the right amount of planning can help you make sure they save money long term and have everything they need when the time comes. This starts by properly managing your own finances. If you have any lingering debt, you must pay it off, so it doesn’t impact your future. Furthermore, you need to build up an emergency fund. This is to ensure you can swiftly deal with any problematic situation without having to dip into your personal savings. This is also a great way to introduce your children to the importance of saving money.
Don’t Forget About College
College is where your child is ultimately going to find their place in the world. However, it’s also one of the biggest investments they’ll ever make. As someone who’s already graduated college, you know firsthand how difficult it can be to pay back student debt. Fortunately, you can spare your child from the stress and worry by compiling the funds ahead of time. Opening a 529 college savings account is one of the best ways to go about this. 529 plans are tax-advantaged savings accounts that allow you to invest money for educational expenses. You can withdraw up to $10,000 per year from these accounts without paying taxes on the money as long as it’s used for education purposes.
Another way you can help your child go to college is to become a cosigner. A cosigner is someone who helps another person get a loan by agreeing to take on the debt payments. If the primary borrower doesn’t follow through with their payment, the responsibility will fall to the cosigner. This requires a great deal of trust, which is why a student loan with cosigner is typically something that occurs between a parent and child. Becoming a cosigner allows your child to have an easier time being approved while also locking down lower interest rates.
Plan as Soon as Possible
It’s never too early to start planning for your child’s future. If you have a little money saved, consider starting an investment account for them. You can even open an individual retirement account at a bank and then transfer the funds into an online account when they get older. IRAs do come with benefits, like tax-deferred growth.
Start Saving Early
Start saving early. It’s a common misconception that you should wait until your child is born to start planning for college. While this may seem logical, it actually makes more sense to begin your preparations earlier. Why? The sooner you start saving and investing, the more time compound interest has to work its magic on your investments.