Many single parents are likely to feel anxious about any uncertainty their child may face in the future. This feeling is natural because so many external forces are beyond your control, and leaving your children to fend for themselves can get overwhelming. So it’s best to prepare for worst-case scenarios and secure your child’s future, at least financially.
Deciding to give your child a good financial grounding is excellent, and it’s never too early to start planning. But before you start making smart investments, you must teach your children a few critical financial lessons to keep the hard-earned money from getting wasted. Some of them include:
- The importance of saving money
- How taxation works and why we pay taxes
- Financial scams
- The negative impact of interest on debt, especially credit cards
Once you have these lessons under your belt, it’s time to implement a few innovative strategies to safeguard your child’s future. Besides ensuring enough funds are set aside for college, financial planning will also take care of your child in case of a catastrophe.
Here are a few ways to ensure your child’s future remains secure.
- Prepare for the worst
People devote more time planning a vacation, buying a car, or even picking a dinner spot than deciding who inherits their assets once they’re gone. Contrary to popular belief, estate planning isn’t just for the rich. Even if you’re a parent of a middle-class family, you must plan for when something happens to you. Regardless of their net worth, some people have a knack for the stock market or real estate, both assets you want to ensure end up in the right hands. But without an estate plan, the court often decides who gets your assets in a long and brutal process.
While nobody wants to think of dying early, it’s not something you can control. You must ensure your children are taken care of in a manner you approve. Even if you think your assets aren’t worth anything, designate heirs for them as soon as possible. You never know how their value may change.
- Start investing as early as possible
Most experts and financial planners will advise you to build a realistic roadmap and start investing early. Beginning to invest early allows you to take more risks and provides plenty of opportunities to earn better returns after making a wrong decision. For example, consider a situation where you start investing when your child’s born and suffer a massive loss when they’re around five years old. You’ll have plenty of time left to reinvest in something else until your child has to go to college or get married. This way, you’ll be much closer to achieving your financial goals.
- Pay your debts
For the success of any financial plan, debt management is a crucial component. Having debt is not necessarily bad, just as long as you can return the loan on time. As a single parent, you may fall under pressure to borrow loans and meet essential financial obligations from time to time. But building a good credit score can keep you from amassing a debt burden that may negatively impact your child’s future. If you start a family when you’re already neck-deep in debt, it can get incredibly challenging to pull yourself out of it. All the investments in the world will be worth nothing if you leave your children with a pile of debt and loans to pay off. But the sooner you pay down these debts, the closer you get to achieving your family’s financial freedom.
- Instill a savings habit
A critical skill every parent must teach their child is that of money management. They must instill the practice of delayed gratification in the form of savings while children are still young. By setting up a bank account in your child’s name, you can do this. Initially, you’ll have control of this account and can kickstart it yourself by adding a lump sum amount to it when you can. When they’re a little older, encourage your children to save money themselves, allowing them to learn the importance of saving money.
Children should be encouraged to take an active interest in investing and saving money to help them make financially confident decisions in the future.
- Get adequately insured
After your child’s birth, the risk associated with the loss of your life rises steeply. And so the requirement for covering your life insurance goes up manifold. Instead of sticking to the same plan as before, take the time to re-evaluate life cover requirements after your child is born. Besides increasing monthly expenditure after childbirth, you must also consider the cost of meeting your child’s future goals like college or wedding. Once you’ve worked out the new coverage requirement, look for the appropriate insurance plan that helps you bridge the gap.
- Establish a school fund
Although it may seem like it, it’s never too early to start building a college fund for your child. School fees skyrocket with each passing year and can become a severe stressor if not planned for in advance. Giving your child the best chance at success means securing their future academically by getting them into the best schools you can afford. Even if you start by investing a small amount, a nominal annual growth will keep the burden from falling on your shoulders as soon as your child starts schooling.
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- Save for retirement
When you retire, your children will probably be in a tumultuous stage of life, living paycheck to paycheck and trying to build a life for themselves. You don’t want to top that up by adding your financial burden and becoming entirely dependent on them. Saving for your retirement can help secure your children’s future because it will prevent them from providing for you financially in old age. With every paycheck you receive, deposit 10-20% of that income to a separate account that you save only for your retirement period. The earlier you start making these deposits, the more time you’ll have to grow a substantial nest for yourself.
Single parents are responsible for providing their children with the best experiences and opportunities. With no support at hand, it can be challenging to shoulder all the financial obligations and your child’s well-being. However, having a financial roadmap, addressing issues at the right time, and making suitable investments can safeguard your children’s future. You can rest easy knowing that your children will remain financially secure even after you’re no longer with them.