When you’ve just had a baby, savings are probably fairly close to the top of the list of things you don’t even want to think about, let alone take action on. Just having a baby is financially exhausting. Plenty of people probably warned you about the impact that having a baby would have on your body, but not enough people receive fair warning of just how expensive a new baby can be. Some people put the cost of raising a child as high as $21,000 within their first year. We think that sounds expensive – but we couldn’t swear to it being wrong.
There are excellent reasons for you to force yourself to look into financial products for your newborn, though. Ultimately, all parents want a better quality of life for their child than they’ve enjoyed themselves – and f you get started early enough, you can make that a reality. Making the proper financial provisions for a new baby might not be as expensive as you think; especially if you act as early as possible. For that reason, we’re going to ask you to sit down, fight against the urge to reject the idea of trying to put money aside out of your head for a moment, and look at this brief guide to five financial provisions you should consider making for the youngest member of your family.
- A Junior Savings Or Investment Account
We list both options here because some people are nervous about the idea of investments. That’s largely because investments are misunderstood. It’s true to say that they can be compared to gambling, but not the same sort of gambling you’d encounter if you were playing mobile slots games. The money you put into the games on a mobile slots website will either turn into a larger prize, or be lost. Winners at slots casino get jackpots, and losers get nothing. Not all investments function in the same way. Some may never grow at all – and that’s the gamble, but many of them will guarantee that they at least won’t lose money. If you’d rather your child’s account experienced a guaranteed level of growth – even if it was a low level – opt for a savings account with a fixed interest rate instead. Don’t give them access to it until they’ve turned 18.
- A Pension
Talking about a pension for someone who’s just been born might sound a little crazy. The only thing they have in common with pensioners is that they’re wrinkly, and some of them are bald! In an ideal world, we wouldn’t have to talk about pensions for children. Our world is sadly far from ideal – we’re currently heading for a pensions crisis that may rob the next generation (and the one that comes after it) of many of the retirement benefits the current generation is looking forward to. The best way to ensure your child stands a chance of receiving a reasonable pension when they’re older is starting one while they’re still young. To put the benefits in financial terms, if you were able to pay $3,600 per year into a pension fund until your child was 18, and then it was left until they were 60, upon reaching 60 that pot would be worth $1m. This assumes that the pot would grow at 5% per year, which is reasonable for a pension fund.
- Life Insurance (for you)
We’d all like to assume that we’ll be here to see our children grow up. It’s a sad reality that some of us won’t be. Even if you’re from a family with no history of medical issues, you could be knocked down crossing the street tomorrow, and that would be it. None of us can ever say that we’re totally safe from an accident, and that’s what insurance is for. If you’re comparatively young, fit, and healthy, you could obtain hundreds of thousands of dollars worth of life insurance for $10 per month or less. It wouldn’t replace you if you weren’t around anymore – and your child would, of course, miss you terribly – but you could at least enjoy the peace of mind that comes with knowing they’ll be financially looked after even if you’re not there to see it.
- A Regular Bank Account (as soon as they’re old enough)
Do you wish you’d known more about the value of saving money when you were younger? So do we. Make sure your child won’t also answer that question in the affirmative when they’re your age. As soon as they’re old enough to have a bank account, open one up for them. Instead of giving them pocket money in cash, transfer it into their bank account. They’ll soon get used to the idea of seeing how money builds up, and how putting a little away each week or month contributes to a much larger pot. Let them spend a little when they want or need to, but always have a conversation about what they’re spending the money on. Also make sure they work out how much they’ll have left once they’ve spent their money, and how long it will take them to build their savings back up again. This is the only way to teach the value of money.
- A Piggy Bank
You probably weren’t expecting to see this here – but it’s just as important as all the others! Money shouldn’t just be something that children see on a screen. We might be heading towards a cashless economy, but we’re not there yet, and we don’t expect to be there within the next ten years either. That means cash will still be around when your child is growing up, and they should develop a positive relationship with us. Who among us didn’t love raiding their piggy bank when we were younger to see how much we had for candy and toys? If money is held in banks all the time, it’s boring, and it becomes a chore. If it’s a chore, it’s less likely that your child will have a positive relationship with it. If approached with the right mindset, managing money can be fun – and it all starts with a classic piggy bank that a child can squirrel loose change away in. You can worry about the insurance, the pensions, and the savings accounts. That’s the serious stuff. Let your child have fun with the less serious side when they’re young!
