Now that you are done with shopping for the first phase of baby paraphernalia, it’s time to think about the part of your baby’s welfare that is not bought or sold in stores, that is that part that will protect your baby`s future.
It’s true that New parents have plenty of things to think about: baby’s cries, midnight feedings, sleep schedules, diaper change and loads of other baby care things .But experts agree that starting to plan for the baby’s financial future from day one, makes the most sense and will assure the baby’s first steps will be secure and in the right direction.
It starts as early as your baby shower (even earlier) – friends and relatives in lieu of gifts often write generous checks in your Baby’s name. It may seem early, but now is the time to put those checks into use and start planning for your Baby’s future.
Here a few ways to protect your baby’s financial future:
1. Start saving now:
When a child is born, it may seem like there’s plenty of time to start an investment program. As every parent knows, it costs a lot of money to bring-up a child to adulthood. Not just the usual expenses of food, clothing and shelter, but also the greater bills of college that loom on the horizon. So when is the best time to start investing on a child’s behalf? The answer is right from the beginning.
Whether you have a little or a lot, almost everyone can begin saving for their baby. There are many ways to save for the future of your baby, regardless of whether you have a little or a lot to save, with the right strategies you can make your child’s financial outlook a lot brighter. Below are two types of methods you can use
a. Mutual Funds
A mutual fund (according to Wikipedia ) is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.
If parents put $5,000 into a bank savings account at 4 percent interest when Baby is 1 year old, baby will have $9,800 when he turns 17,but If put into a mutual fund, however, at 10 percent interest, baby will have $27,000, what do you think of that?
b. The Trust Fund
Another option is a trust fund. Trust funds (according to wisegeek.com) are arrangements that allow individuals to create sustained benefits for another individual or entity. It is advisable for Parents or grandparents to set up a trust stipulated conditions. For example, baby at age 25, can have half of the value of the trust, and the remaining half at age 35. In this way you can save the child from lavishing it, at a go.
Parents should estimate college costs of their child’s dream school and what their annual funding would be, this knowledge will help you to spread out the cost of college out over a long period of savings and will reduce the financial stress associated with education planning.
It is important for parents to start this process early so that you will have more time to build up the investment returns for your child’s account.
2. Get a life insurance: the insurance is not for your child but for you. Experts advise parents to buy term life insurances to protect the rest of the family in the case of death, because that type of insurance provides a benefit for the child upon the death of the parents without any cash accumulation.
3. Write a will: being without a will is always a risky proposition and can result in an unfortunate circumstance especially for families with young children who might be left unprotected if their parents pass away. If you do not want the courts to determine who gets custody of your child or children as the case may be, it will be good to name at least one guardian who would be able to raise your children if you and your spouse die before they are of age (at least 18years old).