When is the perfect time to teach your kids about investment? What kind of assets should you make on behalf of your kids, and how can you teach them about it? It is never too early to think about your kids’ future. Often, parents are wary about providing for their kids when they grow older, and their needs expand. Then, of course, there’s always the constant fear that you’re not going to be around forever, and you may leave them on their own sooner than you expect. Parents want to make sure their kids are taken care of even if they’re not beside them anymore.
Investing in your kids’ future is one of the noblest things you can do. While opening a savings account is a good idea, you have to think outside the box to grow your kids’ money in the future. Since they’re still young, this is the perfect time to make investments they can reap when they grow older. Imagine buying a blue-chip company stock right now at just $100 per unit. How much will that cost in the next decade or more? That money can even go to your kids’ college fund.
Shares and Stocks
The stock market may be volatile, but if you invest in the right companies for the long-term, you can watch your money grow and multiply. You can open an investment account for your kids and buy shares of stocks when you can. When there’s a promising initial public offering, consider investing in it because chances are that you can get them for a much lower price than average.
If you invest your $1,000 in the stock market right now, it has the potential to grow to $5,000 or even more, depending on the performance of the company. Investing in stocks regularly will boost your kids’ investment portfolio. This is one of the most popular ways to give your kids a financial head start.
Buying gold, silver, and other precious metals is always a good investment choice. The value of these metals will only grow in years to come. Though there are good and bad days with gold, it is generally a valuable asset. You can also start buying custom jewelry for your kids. As you well know, the value of jewelry increases, too, as years passed. A collection of jewelry will be a worthy investment to make in the name of your kids. They have the option to keep them as heirlooms or sell them for a profit in the future.
A 529 plan is designed for educational plans. You can grow your kids’ money there through investments and regular monthly contributions. The best thing about this plan is that when you withdraw from it for educational purposes, it is not subject to federal income tax (capital gains from investment). However, if the withdrawal is for non-educational purposes, you’ll have to pay a 10% federal tax penalty. You’ll want to stay clear of withdrawing money from this fund.
Similar to stocks and shares, mutual funds refer to money you put into a group of companies based on a principal account holder’s decision. You can choose a company that will handle your kids’ mutual funds investment. Here, you won’t have to worry about reading the market and selling/buying shares when the market becomes too volatile. Mutual funds are highly liquid and have recorded good returns for short- and long-term investments.
Your life insurance can save your kids’ future when you suddenly pass away, or something unexpected happens like unemployment. Most life insurance policies have investment options, too, so your money will grow while you’re paying for it monthly. You can also use it for your kids’ education. By contributing to the fund regularly, you build up financial protection for your kids once they’re in college.
Teaching Your Kids About Investing
Kids as young as four years old can be introduced to the value of investments and savings. If they want to buy a new toy, ask them to save up for it. They can do menial tasks in the house, and you can pay them a dollar for it. Just don’t forget to explain that they don’t always have to get paid to contribute to the household work.
Start early in investing in your kids’ future, as well as in their financial knowledge. While you can start investing for them, they will also take care of these investments in the future. Aside from the investment portfolio you will leave to them, your greatest gift is to provide them with the knowledge to take care of their finances in the future.