Categories: General Tips
As a parent, of course you want to position your child for success in every way possible. Whether it’s a great education, nutritious meals or a sound financial future, these priorities are top of mind for most parents. There are several ways to start investing for your child before they get a paycheck from their first job; we’re walking you through some of those options today.
Set up a 529 Plan
If your child is planning to attend college, then it’s a good idea to set up a 529 plan to save for those costs. There are two different types of 529 plans: a college savings plan and a prepaid tuition plan. The college savings plan is the more flexible option; this lets you set money aside for higher education costs and use it at many schools, even a private high school if you choose to send your kids to one. A prepaid tuition plan locks in the current tuition rate at public schools in your state, which can be a nice benefit. The downside is that if your child goes to school out of state or attends a private college, you’ll have to pay the difference.
Consider a Roth IRA
Why not start saving for retirement now? It’s never too early. If your child has some income from work, then they can have an IRA. The same $5,500/year contribution limit applies; an upside to this type of investment is that your child can make withdrawals from it for qualified education expenses or a down payment on a first home. One thing to be cautious of is that some universities may look at a child’s retirement savings on the financial aid application and count IRA withdrawals as resources they can use towards the cost of college, so keep that in mind.
Try a CD or Share Certificate Ladder
Have you heard of a CD ladder? It’s an interesting savings option that’s worth considering. With this approach, you purchase multiple Certificates of Deposit (CDs) or Share Certificates with different interest rates and maturity dates. This option is especially appealing if you’re a risk-averse kind of person, as CDs aren’t as impacted by market fluctuations that influence mutual funds and many other investments.
Talk to a Professional
A trusted advisor can guide you how best to invest for your child. Make an appointment to speak with a professional about what options are best for your family.
Start Them Off with an Account
If your child gets an allowance, is already making money from a first job or just gets some regular “walking around” money from Grandma, it’s a good idea to sign them up for a checking account so they can access that money and learn about financial budgeting.
Sign up for an online checking account – a new way to bank!