Expert Tips on Saving Up for Your Child’s Future
Monday, February 6, 2017, 6:00 AM | Leave Comment
Your children are your whole world. Of course you want the absolute best for their future, but how do you get there?
There’s no learner’s manual for life planning or financial stability. Luckily, there are plenty of other resources that can help you learn more about how to plan for your child’s future.
Read below to learn some tips and tricks from financial expert and author, Dave Ramsey, for how you can pay down debts, save up for the future, and get your little one off to a good start in life.
Photo courtesy of Pixabay by akufh1110
Ramsey has written many well-known and well-respected books on financial planning for people of all ages.
Ramsey’s website offers 7 Baby Steps parents, families and even those without children can take towards financial freedom, debt relief and stability.
Ramsey suggests a formula for paying down debts and saving up for the future.
His tips include:
Save up a “nest egg” of $1,000 in the bank. A “nest egg” is a sum of money specifically set aside and saved for the future, for an unexpected emergency requiring funds, or for the metaphorical “rainy day.” This is not spending money; it is important to set this money aside and not touch it once you’ve saved it up.
Pay off all debt except for your house. This might sound daunting, especially in current economic times when debts are high.
However, Ramsey assures that it can be done – and the quickest way to succeed is by getting out the trusty pen and paper and making a list of all debts, in order from least to greatest.
Start paying off the lowest debts first. Why? It may seem counterproductive, but Ramsey says you’ll feel accomplished each time you pay off (or nearly pay off) a debt. This will encourage you to keep chipping away at the numbers, until you pay off more and more of your debts.
With your debts paid off, you’ll have more money available each month to go towards your current and future children. You can even start using this money to save up for their college funds.
Expert tip: If two debts have similar amounts, but different interest rates, focus on paying off the debt with the higher interest rate first.
Invest 15% of your household income into your retirement. Ramsey suggests looking into all the various options available for retirement savings, including 401K, Roth IRA and Traditional IRA.
When you complete these steps in Ramsey’s recommended order, you can simply use the money you were previously spending on debts and bills to save up for your (and your children’s) future.
Expert tip: “Spread [your] money across four types of mutual funds,” Ramsey says, “growth, aggressive growth, growth and income, and international. Even a couple hundred dollars a month invested now can make you a multi-millionaire.”
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Save up for college
A college education is important, but college tuition, housing costs, and other college expenses are continuing to rise. That doesn’t show any signs of changing anytime soon.
To help guarantee the best possible future for your children, you should start saving up to help them afford college.
Ramsey suggests investing in a 529 college savings fund or a ESA (Education Savings Account).
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Give money to your children
After you’ve paid down your debts, invested in college plans for your children, and built up your own wealth, you’ll be in a great place to start giving back to your children – and your children’s children.
As part of this step, Ramsey suggests being “generous” with your money and even setting up an inheritance and a deed to real estate for your children.
Ramsey recommends taking your financial freedom in ordered “baby steps” to make it less overwhelming and more achievable. Read the full list of tips (and more detailed information about how to save money and pay down debts) here.
These tips will help you build a solid foundation so your child can hopefully have a financially stable and successful future. While there are lots of life events that are beyond your control, these are some steps you can take to plan for potential scenarios and also help your child get ahead in life.
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