Preparing their child for a successful future is one of the most important goals for most parents. And one of the best ways to do this is to help them develop and execute a solid financial plan at all stages of their lives. How can you do this even when your child is still small? Here are a few things any parent can do.
1. Craft Your Own Financial Plan. Leading by example is one of the best ways to teach kids good habits. So if you haven't already begun working with a financial planner, now is the time to do so. Not only does a parental financial plan help keep your child's home stable and secure, but it also helps them normalize good financial decision-making and goal-setting.
2. Start Saving for College. It's never too early to begin putting money aside for college. This helps kids qualify for better careers and avoid graduating with debt. By acting early, young parents may benefit as much as their children. This is because as the parent ages, they can focus more on their own retirement, knowing that their teen's college education has been planned for already.
3. Contribute to Your Child's IRA. Once a minor starts working, they become eligible to open and contribute to a traditional or Roth IRA. Some parents choose to contribute up to the maximum allowed from their own funds so the child can keep what they earn and still build savings. IRAs not only start a retirement fund, but they can also serve as emergency funds, provide home down payments, or help pay for college.
4. Teach Age-Appropriate Budgeting. Whether a child earns a little or a lot, they can learn how to wisely make plans for their own money. Very small kids often benefit from the simple jar method — dividing money into three categories for saving, spending, and donating. As they grow, help kids learn to use a bank account, a written budget, and both long- and short-term goals.
5. Discuss End-of-Life Planning. All parents should have their own estate plans in place to protect their kids. But have you discussed any of this with young adult children? Without going into unnecessary detail, talk about what general assets they may inherit and how to plan what they want to do with them. Take them to meet your financial planner. Let them know of any special arrangements, such as a trust, that may affect them.
Where to Start
The best place to start financial planning for any member of your family — including yourself — is by meeting with a financial planner in your area. As you make clear your goals as an individual, as a couple, and as a parent, your planner will help you reach them no matter what your situation. Call today to make an appointment.
To learn more, contact a resource like Greer Financial Group.