Welcoming a new child is a joyous occasion, but did you know that the average child costs their parents $500,000 in their lifetime? Saving for your child’s financial future is important because it can help set a secure foundation for your child early.
Many parents start saving too late for their child’s educational future. It dawns on most parents around middle school that college is around the corner, this is when many parents scramble to begin saving for their child to go to college. They also start to really understand how expensive college is. Creating a savings plan for your child when they are an infant allows you to save a little at a time and better prepare for their financial future.
Get your child started without debt
It is estimated over 70% of Americans will be paying toward student loans in their lifetime. Starting a savings account for your child will help offset some of the costs of choosing to get a secondary education. Saving for your child’s future isn’t all about college though, this fund can be used to purchase their first home, take a travel year between high school and college, or start a business. Maybe your child will choose to not use it and continue to add to it for a later goal of their own. Starting your child’s adult life with a monetary cushion can help increase their chances of having long term wealth.
Your money will make more money
Saving for your child early also means their accounts have the chance to earn interest over time. Investments like CDs, Savings Bonds, stocks, and most traditional savings accounts usually see better returns the longer you have them. Things such as compounding interest and dividends are usually more when they have been able to sit for an extended amount of time. Investments like CD’s and bonds usually account for things like inflation, meaning that the money you’ve saved for your child is able to grow without the worry that inflation will decrease the value of your money.
You have more time to reach the savings goal
Whether you’ve decided to save for college or your child’s future endeavors, saving early gives you more time to reach your savings goal. This means that you don’t have to save super aggressively to get there, for example, if you plan to save $25,000 for your child it is easier to save $1,500 a year for 18 years, than $5,000 a year for 5. Also when you give yourself more time to save you are able to adjust if you have a period of time where you are unable to meet the savings goal for the year.
Creating a savings plan for your baby doesn’t have to be difficult, we could help you find a mix that works best for you. If you’re ready to sit down with a member of our team, give us a call at (800) 835-3400 or stop by a branch. We are here to help you on your financial journey.