(Newswire.net — June 24, 2020) — As a parent, your child has to be your priority – and that is true no matter what age they are. Whether it’s their health or their financial wellbeing that you’re looking out for, a parent’s first instinct is to help their kid wherever they can. But with finances in particular, what options does a parent have when it comes to saving up? This article will explain the choices.
Cash in the bank
Parents who are saving for their children’s future often get nervous when thinking of investments, and fear that what they set aside could be wiped out in an instant. And so, on the face of it, the safest and most straightforward way to save up for the future is to simply let cash pile up in a checking account at the bank.
But the reality is that this is a potentially unsafe option, and does not necessarily lead to the sort of safety net that you might imagine. That is because of inflation, which can chip away at your hard-earned savings over time and leave your children with money of less value than when it was deposited. Checking accounts rarely offer a level of interest that beats inflation – and as a result you could end up running a constant loss.
Self-directed investments
With interest rates so low, and the return on investment of a cash account so paltry, many parents turn to more aggressive and fast-growing investment options. The do it yourself approach to this problem is to open a self-directed investment account, which means that you simply find a brokerage platform and then choose your investments based on research. It can be cheap, but it’s vital to ensure that you don’t get scammed – so make sure you’re on the lookout for hallmarks of fraud, such as promises of returns that seem too good to be true.
Managed funds
If you’re interested in beating inflation but are not willing to manage your savings by investing them directly, another option is to opt for a managed fund. If you go for this option, then you will be adding cash to a larger pool and then letting professionals choose the overall direction of the fund’s movement. The downside here is that you will have to pay for the privilege, and fees can be expensive. It’s, therefore, best to shop around and ensure that you’re choosing a provider with a competitive fee.
Whether you are saving to send your child to college or you are building up a nest egg which one day might give them a down payment on a house, there are all sorts of reasons why you might want to save cash for your child’s future. And by choosing the right option for your risk appetite, you’ll be able to ensure that you save in a way that will provide the growth or stability you need without your prudent savings plan becoming a source of anxiety.