Having children means more than adjusting what you spend your money on each day. While a new parent may need to buy extra groceries and clothing, the real change should be in how you save.
Many people want to invest in their child’s future and don’t know where to start. These five tips for our US based readers will help you make the right decisions now so that you don’t have to pay for your mistakes later.
The famous I-529 is hard to beat when it comes to helping parents reach their savings goals for their children. It provides high contribution limits, along with aid treatment in the form of tax advantages. The 529 is a plan designed to help families with various levels of income meet the costs of university. Nearly all fifty states now offer the 529, so ask your financial advisor about getting started. The key is to begin early when your child is just born. This allows for enough time for your investments to grow to their maximum potential by age 18. However, it is never too late to reap the benefits of tax deductions and other savings tools.
The Roth IRA
Tucking away some earnings into a Roth account is a fail safe way to grow your money tax-free, regardless of the child’s age. Not only does an IRA help you save for your child’s education, it can also help teach them very valuable financial lessons. Instead of spending their money earned as part of their summer job, they can invest the funds and watch them grow. In just 10 years 1,000$ can be turned into 5,000$.
Preventing disease and maintaining good overall health pays off in ways that many do not realize. According to one study performed by the Department for Health and Human Services, dental health problems alone account for the loss of over 50 million hours of schooling. Be sure to purchase a health care plan that includes dental insurance. Find the best dental insurance plan that fits you and your family.
It may seem too easy, but never underestimate the power of a standard savings account. Experiment with a uniform transfer to minors account (UTMA) to earn the highest possible returns on your deposits. Savings accounts are great for the most risk averse among us. And most banks provide special plans for families. Talk to your advisor before opening a savings account to make sure that you get the best possible rate.
Tuition prices are rising, putting stress on families who believe that they will not be able to afford university in the near future. More and more states across the country are now offering what is called a prepaid tuition plan. The idea is to provide parents with a way of paying for their child’s tuition at the present day rate, before the inevitable rise. These plans apply for any school, private or public, and are one of the smartest investments decisions that a parent can make.