There is hardly any class or individual who is not facing hardships due to the increase in the rate of inflation across the world. Amidst all this, most of the parents are under stress especially due to the education expenses of their children.
What is going on in the heart and mind is whether they will be able to educate their children better to make them conscious and positive citizens. Do they have enough financial resources to get their children admitted in a good institute for education and training?
Now it will not be wrong to say here that worry about the future of our children is something that all parents share.
The first concern is usually about maintaining good health or being happy with your choices in life.
But as they watch them grow up, one concern that often arises revolves around their financial well-being.
A survey conducted by Standard Life in the UK revealed that seven out of 10 parents are worried about their children’s financial future.
This concern usually has two aspects, one is how to save for their future, the other is whether they understand the importance of saving.
Studies have shown that children who get into the habit of saving from an early age can manage their finances better in the future.
But here it is also important to understand that saving is not that easy, as Dan Ariely, an economist and author at Duke University in the United States, says: ‘One of the drawbacks of money is that you are never sure about it. It’s hard to say how long it’s going to last, so it’s very difficult for us to think what it really means in the long run.’
“What’s really important is to give them (children) some control and make some of their own decisions about money so that maybe can make some mistakes.’
Economist Stephanie Fitzgerald says, “Oh, I wish I’d saved some money or I’d spent it on something that would last me a long time.”
1. Long Term Savings Accounts
Since our children do not need money immediately and long-term savings products always offer higher benefits, it is better to compare the accounts offered by banks and the interest rates on each.
“Kids have simple accounts and it’s a great way to teach kids about money coming in and going out,” says Stephanie.
Banks often have two types of accounts, with quick access current accounts you can withdraw or deposit money at any time but have lower interest rates than fixed or long-term savings accounts.
To understand which bank is offering good savings accounts for children, there are some ‘comparison sites’ where you can compare different schemes.
In many banks, you can also choose to have accounts that only the children in whose name the bank account is registered can access, but this also has the added benefit of allowing the children to access the account. I can use the accumulated amount when they turn 18.
According to Stephanie Fitzgerald, ‘this limits the chances of someone going out unnecessarily or covering something that isn’t needed.’
But above all, you have to prepare them for the moment and communicate with them what you expect them to do, when, where, and when you see them using the money. . Such as when entering university, in case of any future emergency, or perhaps when purchasing your first car.
Another positive point is that when you save for them, it’s important to talk to them about how to set aside money for unexpected events to make them feel that their future is secure. If there is anything they have to focus on, it is their education.
2. Gradually, saving to accumulate money is never easy
Saving for a child today is a great gift for their future. Not only can they start their adult lives with some money, but including children in the process helps them learn important lessons about money.
But if you can’t save for them for some time due to family situation, things may get difficult but still you can do something with effort.
The important thing is not to take out a loan or use a credit card for anything like that.
It is very natural for parents to want to ensure that their children have the best future. But the reality is that we are facing a cost-of-living crisis due to inflation and people’s ability to save is clearly under considerable strain at the moment.
Financial planner Christy Stone has similar thoughts.
“I would really encourage people to make sure they don’t go into debt or default on their loans in hopes of saving for their children’s future,” says Fitzgerald.
“Your children will not suffer and the important thing is to make sure that the family is financially secure at this time.” Hopefully, as things improve, they will be able to save more in the future.”
3. Don’t overlook the magic of compound interest
Some describe it as ‘compound interest’, some describe it as the eighth wonder of the world, and some describe it as a snowball that piles on you without you noticing.
It all starts with a savings account that has an interest rate. Suppose you put $100 or its equivalent into an account that offers you a 5 percent interest rate.
Now while reading and understanding this matter you have to focus a little, take a good and deep look at the data.
Now let’s proceed with the matter.
With this account, at the end of the first year, you will have $105.
100 dollars you took out of your pocket.
And the bank gave you $5 as a reward for being a good customer and not touching that deposit in a year.
The key concept is that the magic of compound interest happens until, or until, everything looks good until you transfer the money. Neither the initial one, nor the one the bank gives you.
“You can make free money just by putting equity in the account,” says Fitzgerald.
Now we are moving towards the second year.
You now have $105 in your child’s account, but your finances won’t allow you to deposit more into it this year, but what will happen? What will happen is that your money will continue to grow despite this.
But here the mind was confused that how could he?
Chances are, you won’t make $5 this year. But still you will have more money by the end of this year. With the same interest rate of 5 percent, the bank is now going to pay you more.
The 5% you earn now is not about the $100 you initially invested. Interest is now applied to your account total for the second year, ie $105.
Interest for the second year is 5.25 US dollars instead of 5.
Now, sir, your child starts the third year with $110.25 and ends his third fiscal year with $115.76.
Now in the same way for the fourth year with 121.55 zalar.
A fifth year with $127.63.
And when he turns 18, thanks to that compound interest, he will have $240.66.
Now imagine that instead of $100 initially, you invest $1,000, when your child turns 18, he will have $2,406.62.
Save a little at a time and let the math do the rest. Now, what’s important here is that the money the bank is putting into your child’s account each year is a reward for the amount of money you’ve spent on that account over the years. No money was withdrawn.
And if you want to teach your child about finance, give them a piggy bank i.e. cereal, money helper.
Experts say this is a good idea for very young children, who need to learn that money is not a toy and should be kept in a safe place.
A piggy bank helps them understand the value of different coins and bills, and that larger coins are not necessarily more valuable.
This is also a good opportunity to start giving your child pocket money and it doesn’t matter. It may be a small coin but with its help the child gets a big and important life lesson.
Also, because we manage to save for them ourselves, it is important that our child develops an understanding and understanding of how money works.
A skill or lesson that will stay with them for the rest of their lives.