All parents strive to give their children a good start in life. This includes making sure that the child gets love, food and motivation to become the best version of themselves. It is also important to try to give your children a good financial start to their lives. To do this you should start saving money for your child as early as possible. The earlier you start saving the more money your children will have when they move out and start their lives on their own. Interest on interest means that every dollar you save when your child is small will be worth several times more when they are 18. Ideally, you should start saving for your child as soon as they are born.
Try to do a larger one-time deposit to your child’s savings account during their first year. I know that this can be hard to do since it is expensive to have a baby but the benefits of doing so are huge if you are able to do so. Ask grandparents to provide funds to this account instead of other presents they might want to give the child. A very young child will not appreciate the gifts but the money can make a large difference for the child once they grow older. The gifts can wait until the child is a few years older and can appreciate them.
Avoid regular bank accounts
When you save money for your children you should strive to optimize the return and minimize the risk. You should avoid options that give a very low return as well as high-risk alternatives. Your goal is the money should grow to make sure that your child gets a good start in life when they leave home.
Many parents choose to place their children’s money in an interest-bearing account. To do so feels like a save option since you know that the money will be there when the child needs them. It is true that savings accounts are a save option but it also true that they are a terrible option for your children’s savings. A savings account is a good option if you think you are going to need the money within the next two years but they are a terrible option for your child’s money. Your child’s savings is money that should remain invested for the next 20 years. The long investment period allows you to invest the money in the stock market and earn a lot higher returns at virtually no risk. Money that has been left on the stock market for 20 years have historically always done better than money in a savings account. The long investment period allows the value to rebound even if there is a stock market crash or two during the investment period.
Investing in high-quality blue-chip stock allows you to create a low-risk investment portfolio hat will earn your children a good return. The average return on the NYSE during the last century has been a little more than 10% a year.
This means that every dollar you invest in a low-risk stock when your child is born is likely to be worth more than 5 dollars when the child is 18.
The very low-interest rate that you will get in a savings account means that your child’s money will only be worth marginally more after 18 years.
Investing the money in the stock market is not risk-free but it has historically always been a wastly better alternative than leaving the money in a savings account.
Avoid high-risk investments
Avoid investing your child’s money in high-risk financial instruments. You should avoid all types of high-risk stock and growth companies and focus your investing in so-called blue-chip stocks. Investing successfully in high-risk stock such as penny stocks take a lot of effort and there is a very high risk of failure. Check out penny stocks list. The investment you choose for your child should require very little oversight and have a very low risk of failure. Ideally, you should choose stocks that you can buy when the child is born and then keep until your child is grown. Your goal should be to invest in companies that have been around for a long time and that will be around for decades to come.
You should never invest i your children money in any high-risk financial instruments such as forex, CFD:s, or binary options. All these instruments are high-risk instruments that are more suitable for day trading than long-term investing. You should never speculate using your child’s money. It is meant to be kept safe to improve their lives. Not for you to
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