When you become a parent, you go from being the number 1 priority in life to suddenly having someone else being the priority, overnight.
And, that priority is the most important role you’ll ever take on.
It doesn’t take long before the pitter patter of tiny feet turns into a fully-fledged human being and you find yourself wanting them to be smarter, kinder, more successful, and higher achieving than yourself.
Like many parents, you might be wondering how you can help your children along the way. Especially in a time where the cost of living is growing and a house costs over 9 times the average wage.
In this week’s blog we outline a few ideas and things to be mindful of when saving for your children’s future.
1. Have a plan
Like all financial planning, saving, or investing, having a plan is a great start.
First, map out what you’re saving for. Is it to pay for your child’s university? To help with living expenses once they leave home? A first home deposit?
Once you’ve defined what you’re saving for then calculate how much you’ll need to squirrel away to achieve that goal. Don’t forget to take inflation into account. You could be 18 years away from cashing in that investment so costs will change over that amount of time.
To help, here’s [https://www.timeshighereducation.com/student/advice/cost-studying-university-new-zealand] a great breakdown of what university fees and living expenses you’d expect to pay today.
Finally, decide what approach you’re going to take to save the money.
2. Decide how you’re going to save
How you save will depend a lot on the plan you’ve put together as outlined above. If you’re short on time and have less than 5 years to save, you’re not going to have time to play the stock market or ride out the highs and lows of a managed fund. That means a high interest earning savings account or term deposit might be your best bet.
If time is on your side then we do recommend that you look into a diverse approach to investing using managed funds managed by professional managers as you will have time to ride out any ups and downs to likely secure yourself a tidy return for the long term.
You can find out more about managed funds here. [https://www.nzadvicegroup.co.n...
3. Start Early
No matter what route you go down when it comes to saving for your children’s future, the earlier you start, the more effective you will be.
Compound interest makes a huge difference and starting early is key to accumulating interest, returns and dividends and then building on those earnings.
Remember too that you don’t have to save enough to cover your child’s whole time at university or buy them a house outright.
But every dollar you do save is a dollar that they won’t have to borrow.
4. Manage your own cashflow
One key to starting your child off well in life is ensuring that you have your own finances in order. A big part of this is understanding how money flows in and out of your own accounts. It’s about ensuring that you control your money rather than the other way around.
Having a budget, setting up automatic payments, clearly defined accounts and spending limits are all ideas that can help with this.
If you are constantly going into overdraft, taking on debt or don’t understand your own cashflow, it’s going to make it a lot harder to put money aside and start your children off on the right footing with their own finances.
5. Arm your child with financial know-how
‘Give a man a fish, you feed him for a day. Teach a man to fish, you feed him for a lifetime.’
With any gifting or financial contribution that you provide to your children, it’s important to set them up with a strong foundation in financial literacy.
They won’t always be able to expect a pot of money from you so helping them at a young age should go hand in hand with teaching your children about their own earning and saving.
Equip them with financial literacy so that they can start off in a strong financial position and stay that way.
Planning, investing, saving and buying property are all huge life decisions and we highly recommend the advice of an expert to ensure you have the best plan and approach in place.
Interested in getting help with a plan to save for your children’s future? Just fire us an email on email@example.com and we’ll be in touch.