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8 Tips To Safeguard Your Child’s Financial Security

8 Tips To Safeguard Your Child’s Financial Security

Securing your child’s financial future is one of the most important things you can do as a parent. 83% of Americans can’t afford to pay for college while millennials currently earn 20% less than Boomers did. The rate of home ownership is also lower for millennials while student loan debts are much higher compared to their parents.

Reasons for the current state of affairs include globalization and slow salary growth. Financial planning ensures that your child will have funds set aside for college and be well taken care of in case of a catastrophe. Here are a few tips to help you plan for your child’s future.

1. Open A Coverdell Education Savings Account

An ESA (Education Saving Account) will enable you to deposit up to $2,000 annually towards your child’s college tuition. The plan allows the funds to grow tax-deferred. ESA’s aren’t just for college expenses; they can also be applied towards elementary and secondary school costs.

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If you plan to invest more than $2,000 every year you may want to consider a 529 plan. It’s similar to an ESA plan except without the annual limit.

2. Consider A 529 College Plan

There are two types of 529 plans; pre-paid plans and savings plans. A pre-paid account allows parents to buy tuition credits for future use. The disadvantage of a pre-paid plan is that funds can only be applied towards tuition and not room and board.

A 529 savings plan consists of mutual funds investments which grow over time. Most plans consist of numerous investment options. Experts generally suggest investing more aggressively in stocks while the child is young and tapering off to a more conservative portfolio as your child gets older.

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Financial experts suggest funding the account to the maximum amount as soon as your child is born in order to maximize future growth. Automating 529 contributions at set intervals will ensure that the account will grow at a steady rate.

3. Draft An Updated Will

USA Today reports that 64% of American’s don’t have a will. Creating a will is imperative when it comes to protecting your child’s financial future. You will also need to designate a guardian to take care of your children and name a property guardian to manage your estate. Drafting a will doesn’t have to be expensive; Quicken’s Willmaker is affordable and easy to use.

4. Update Beneficiary Information

Make sure to update beneficiary designation is up-to-date on your life insurance policy, bank and retirement accounts. According to Loren Barr, a probate attorney at Barr & Young Attorneys in San Francisco, CA, the information on the beneficiary designation form will override your will. It’s important to update this information after major live events such as the birth of a child or divorce. Experts also suggest naming a contingent beneficiary in case the primary beneficiary predeceases you.

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5. Open A Custodial Account

A custodial account is one of the easiest accounts to open. It’s basically a savings account in your child’s name. The account will be accessible once your child turns 18 or 21 depending on their locality. The disadvantage is that the funds are taxable after the first $950. Your child will also have complete control once they become of age, which can either be a good or bad thing depending on their spending habits.

6. Get Life Insurance

Statistics show that only 62% of Americans have life insurance while 85% need it. 70% of households with minor children will have difficulties paying the bills if a primary wage earner were to pass away. The most common reasons for delaying life insurance is perceived cost. The average policy cost for a 35-year-old female non-smoker is just $61 per month. Inquire about life insurance in order to protect you family; it may be a lot cheaper than you think.

7. Save For Retirement

According to U.S News, the average Social Security benefit is just $1,180. Let’s face it; for most of us, that’s not going to be enough to live on. Saving for your own retirement can help your child’s future because they won’t have to provide for you financially in old age. If your work offers a 401k plan, start off by having a set amount of your paycheck deposited directly into your account. The earlier you start the more time you’ll have for your money to grow.

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8. Talk To Your Kids About Money

Financial literacy isn’t always stressed adequately in school. Encourage your teen children to get a job and save for what they want instead of handing them over money. Talk to your kids about the basics such as how to manage credit cards, a bank account and how to budget. Knowledge is one of the best gifts you can give to your child when it comes to money management.

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Jacqueline Cao

Entrepreneur

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Last Updated on January 21, 2020

How to Develop a Millionaire Mindset in 6 Simple Steps

How to Develop a Millionaire Mindset in 6 Simple Steps

We all like to dream about being financially wealthy. For most people though, it remains a dream and nothing more. Why is that?

It’s because most people don’t set their mind to achieving that goal. They might not be happy in their current situation but they’re comfortable – and comfort is one of the biggest enemies of growth.

How do you go about developing that millionaire mindset? By following these simple steps:

1. Focus On What You Want – And Take It!

So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”.

Millionaires play to win, not to avoid defeat.

This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

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2. Become Goal-Orientated

It’s almost impossible to achieve anything if you don’t set firm goals. Only lottery winners become millionaires overnight. By setting yourself attainable goals, you will get there eventually. Don’t try to get rich quickly — get rich slowly.

Let’s take the idea of making your first million dollars and expand on what kind of goals you might set to get there. Let’s also say you’re starting at a break-even position – you’re making enough to get by with a few luxuries, but nothing more.

Your goal for the first year can be having $10,000 in the bank within a year. It won’t be easy but it is doable. Next, you need to figure out the steps you need to take to achieve that goal.

Always look at ways to make growth before cutbacks. With that in mind, you might want to see if you can negotiate a pay rise with your boss, or if there’s another job out there that will pay better. You might be comfortable in your old job but remember, comfort stunts growth.

You may also have other skills outside of your workplace that you can monetize to boost your bank balance. Maybe you can design websites for people, at a fee of course, or make alterations to clothes.

If this is still not enough to make the money you need to save $10,000 in a year, then it’s time to look at cutbacks. Do you have a bunch of old junk that someone else might love? Sell it! Do you really need to spend $10 on your lunch everyday when you could make your own for a fraction of the cost?

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If you are to become a millionaire, you need to start accumulating money.

Here’re some tips to help you: How to Become Goal Oriented and Achieve More in Life

3. Don’t Spend Your Money – Invest It

The reason you need to accumulate money is for step three. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with becoming a millionaire. You’ll want to quit your regular job at some point.

Stop working for your money and make your money work for you.

Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

There’s not just the stock market — there’s also property, and your own education.

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4. Never Stop Learning

The best thing you can invest in is yourself.

Once most people leave the education system, they think their learning days are over. Well theirs might be, but yours shouldn’t be. Successful people continually learn and adapt.

Billionaire Warren Buffet estimates that he read at least 100 books on investing before he turned twenty. Most people never read another book after they’ve left school. Who would you rather be?

Learn everything you can about how economics works, how the stocks markets work, how they trend.

Learn new skills. If you have an interest in it, learn everything you can about it. You’d be surprised at how often, seemingly useless skills, can become extremely useful in the right situation.

Start developing the habit of learning continuously: How to Create a Habit of Continuous Learning for a Better You

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5. Think Big

While I advise to start off with small goals, you absolutely should have a big goal in mind. If you have a business idea, then that is your ultimate goal – to start that business and make a success of it. If you want to invest your way to millions of dollars and do little work other than research, then that is your big goal.

There is no shame in not achieving a big goal. If you run a business and aim to make $1 million profit in a year and “only” make $200,000, then you’re still significantly ahead of most people.

Aim for the stars, if you fail you’ll still be over the moon.

6. Enjoy the Attention

To be successful, you have to be willing to promote yourself and enjoy the attention to a certain extent. Now the attention doesn’t need to be on yourself, it could be on your brand, but attention definitely attracts money.

Never be embarrassed to get your name out there. That means finding a spotlight and being brave enough to step right up underneath it.

If you run a business, try contacting the local papers. You’d be surprised at how amenable they often are to running a story about you and your business, and it’s all free publicity.

Above all, remember: You control your own destiny. Push hard enough for anything and you’ll get it.

More About Thinking Smart

Featured photo credit: Austin Distel via unsplash.com

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