Safeguard Your Newborn’s Future
Life turns over a new leaf when you become a parent. All your other priorities take the back seat as the little bundle of joy makes his way into your life. You know things are not going to be the same anymore.
Parenthood teaches people a lot of things, and financial responsibility remains at the top of the list. For obvious reasons, you need to plan your finance more responsibly than before because now you have to ensure the baby receives everything it needs.
It’s always beneficial to plan ahead of time. When it involves your little one, it’s best to start as early as possible. It’s never too early for making an investment for your child. And since there are so many things to look after, an early start can save you from hustling later.
If you have had a baby for the first time, it may take some time for you to adjust to the new lifestyle, but the sooner you can fit in, the better for you and the kid because you have a bunch of things to plan.
Investment in Child’s Education
It is needless to mention how crucial education is for a child. It not only gives the child opportunity to a better life but also allows him or her to contribute to the society in several ways. However, with the steadily rising expenses, it is getting more and more difficult for the parents to afford the education a child deserves.
A two-year course used to cost 1,000-6000 USD annually 10 years ago. Now the same course costs somewhere between 5,000-30,000 USD a year. One can only imagine what it will cost 20 years from now. That’s why you need to plan the education expenses of your child from now.
Currently, there are three popular plans in the market that increase your saving benefits and earn you enough money to pay for child’s education and other expenses.
- The 529 plan:
If your plan is to save for your child’s college education, then the 529 plan is the best option you get. It offers you the highest number of tax breaks, and there are also fewest limits on contributions. In addition, the money grows tax-deferred. And it can be withdrawn without any additional tax. However, you have to pay the penalty if you use the money for a purpose other than higher studies.
- Coverdell Educational Savings Account:
Coverdell ESA, previously known as Education IRA is an investment option that offers tax shelter to parents as well as the children for capital gains. This plan comes with stricter contribution limits, but the rest of the plan is quite similar to a 529 plan. The best element of this plan is that it can be used tax-free for K-12 expenses, including private schools.
- UGMA/UTMA Account:
The UGMA/UTMA accounts offer flexibility to the investors as the parents can use the funds for other purposes rather than just their child’s education. The contribution can be made up to 11K USD per year. Any adult can use the child’s social security number to open an account on behalf of the particular child. The custodian (parents or local guardian) has limited control over the assets. Once the child becomes legally an adult, he or she gets all the assets transferred in his or her name.
Clearly, the purpose of each of the plans varies depending on the needs of the investor. If it’s for child’s K-12 education, Coverdell ESA is ideal. For the child’s college studies, a 529 plan is appropriate. And a UGMA/UTMA account is ideal if the needs are more complicated.
Investment in Child’s Health
Early childhood is considered the most critical phase of human development. This is the time when the baby experiences rapid physical and mental growth. Since the foundation of an individual’s health and well-being is laid in this period, it is crucial to secure the child’s health from all the threats.
There are several health insurance programs for the child that emphasize on the well-being of the child. However, you need to look for several things before choosing a health insurance plan for your newborn.
- Evaluate the coverage options:
Since most of the children healthcare plans come as a part of the parent’s healthcare program, it is important to know whether the policy covers only you and one dependent (spouse or child) or the whole family.
- Check the total cost of the plan instead of just the monthly premium:
Don’t forget to check the deductibles, copays and all the additional medical fees that you are likely to receive. While it may be more cost-effective to avail a lower deductible plan with higher monthly premium, it is always better to check with all the available options.
- Learn about the paperwork to add the newborn to your plan:
Parents usually have 30 days after the birth (or adoption) of the child to enroll in an employer plan, and 60 days to enroll with a marketplace insurer, even if it’s not open enrollment season. Ask your insurance company for the enrollment or application forms in advance.
There are options like Medicaid and Children’s Health Insurance Program that federal government funds. So you may need to learn about those programs as well to see if you qualify for any of those.
As you may realize, negative impact on your child’s development can be irreversible at times. So it is always better to secure his or her well-being by investing in proper healthcare plans to safeguard the present as well as the future of your child.
Other Investment Options for Your Child
Well, your job as a parent does not end after securing your child’s health and future education. You need to make sure he or she receives all the essential things while growing up. Raising a kid does not come cheap, and if you want her to have a bright future, you need to ensure there’s sufficient fund to fulfill the necessities.
Securing your child’s future education and well-being won’t be enough if you cannot offer her a better life. You may need to move to a bigger apartment when you have a child. That’s also an investment for child’s future. So, how exactly can you manage those expenses?
Invest in recurring deposits or long-term fixed deposits:
Long-term deposits are a great way to build a fund for your child’s future requirements. Since they come with fixed rate interest, you can plan the desired amount for the child even before the birth.
Open a savings bank account:
If you don’t understand the market trends or have no experience in any kind of financial investments, you can simply open a saving account for your child and keep saving some amount from your own income. You can also save the cash gifts that the child receives in the same account.
Invest in couch-potato portfolio:
A couch-potato portfolio is an indexing investment strategy which attempts to mimic the performance of the broad market index. It’s a passive strategy that requires the investor to monitor the investment only one a year.
Well, there are hundreds of options that may allow you to save or multiply your funds for your kid’s future. You need to identify which option fits your requirements and has the potential to benefit your child as well as your family in the longer run.
It is always better to get proper advice from an expert who has knowledge about the financial landscape and can help you make better financial decisions. It is an arduous journey, but watching your newborn grow into an admirable person is simply unparalleled.