Along with the joy a new baby brings, there is also a great responsibility when it comes to planning for their future. The earlier you start preparing, the better. Read on for ways you can support your baby’s financial future by planning now.
Steps for Planning for Baby’s Future
Establish a Financial Plan
Financial planning is one of the most important things parents can do to secure their child’s future. Keep in mind, it is not about hitting an arbitrary sum of money in an account. It’s about laying the groundwork for them to make informed decisions, giving them the tools they need to manage whatever comes their way and giving them a head start when it comes to life independently from you.
Open a 529 College Savings Plan for Each Child
529 College Savings Plans are a great way to start saving toward education beyond high school, but they can be used for any educational expense you may incur.
- Kansas residents look to Learning Quest to start saving.
- Missouri residents look to MOST, Missouri’s 529 Savings Plan.
Both of these plans offer convenient, flexible and tax-advantaged ways to save for a college education. The earnings grow tax-deferred and withdrawals are tax-free for qualified education expenses. The earlier you start, the better, as the magic of compound interest can work in your favor over time.
Life Insurance and Estate Planning
Ensure your child’s future is protected in case of unexpected events by obtaining life insurance and drafting a will and/or trust that designates guardianship and financial care. This article gives a great overview of the importance of planning for their future and the legal steps you can take to protect them should a tragedy occur.
Teach Smart Financial Habits
Financial literacy is a life skill that should be taught early and often. Start with the basics when they are young like explaining how money works, the importance of saving and the difference between needs and wants.
Building smart and deliberate money habits from a young age can prepare your child for financial independence down the road.
Lead by Example. Show responsible financial behavior, such as budgeting and saving. Involve them in creating a budget for things like groceries or monthly family activities. Let them be involved so they understand the value of a dollar.
Introduce Basic Money Concepts: As your child grows, teach them about saving, spending, and making thoughtful financial decisions.
Consider a Custodial Investment Account: Setting up a brokerage account in your child’s name can help them build wealth over time while teaching the basic principles of investing.
By taking these steps you can create a solid foundation that will help your child grow into a happy, confident and successful individual. Planning ahead ensures that you are giving them the best possible start in life!
