How to Set Your Child up Financially for the Future 

There is an old English proverb that aptly summarises a parent’s responsibility towards their child, “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.” The same theory applies to financial literacy, which encompasses the art of earning, spending responsibly, saving wisely and investing optimally. As a parent, it is your duty to impart these skills to your child, setting them up financially for the future.

Invest in Your Child’s Future

One of the most significant ways to accomplish financial security for your child is to take steps to invest in your child’s future. While this may seem an overwhelming concept, it essentially entails making decisions today that will have positive financial implications for your child in the future. This could involve opening a savings account in their name, investing in property, setting up trust funds, purchasing premium bonds, or making intelligent stock market investments. It is crucial to begin these processes as early as possible. The sooner you start, the more your investment will compound over time, yielding a substantial corpus for your child’s future ambitions.

Open a Junior ISA

One of the simplest ways of saving money for your child’s future in the UK is through a Junior Individual Saving Account (ISA). These savings accounts are tax-advantaged, meaning the interest earned on the money saved is not subjected to tax. You can save up to £9,000 in a tax year in a Junior ISA, an investment that your child can access when they turn 18. By starting this when your child is young, you could build a substantial pot for them over the years.

Smart Spending on Education and Skills

Safeguarding your child’s future is not just about financial investments but also investing in their knowledge and skills. Providing quality education is a fundamental aspect of this. It’s also worth considering other areas where you can make long-term investments in your child’s development. This could be music lessons, language courses, coding or STEM workshops or other forms of skill development that interest your child. Not only can these add to their overall growth, but they can also open doors to scholarships or grants in the future.

Making a Family Holiday a Learning Experience

A family holiday is often an overlooked opportunity to teach your child about money. Planning the vacation with your child can involve conversations about budgeting, comparing prices, making value-based decisions, and understanding the importance of saving for leisure activities. Showing the cost of experiences and discussing why you might choose one activity over the other due to a financial decision can be an insightful experience for them.

Teach Practically About Money

Last but not least, teaching your child about everyday matters of finance can be incredibly valuable. Explain concepts like budgeting, frugality, responsible spending, and debt. Allow them to manage a small amount of money to give them practical exposure to handling finances. For older children, you could involve them in family financial matters so they understand bills, mortgages, and insurance aspects.

Conclusion

Setting your child up financially for the future may seem a daunting task, but it is an achievable objective with the right planning and execution. By saving wisely, investing strategically, spending smartly on education and skills, and imparting practical money lessons, you will not just make your child financially independent but also raise them to be financially wise. It’s your job as a parent to sow the seeds now and then watch them grow into a future of financial stability and success for your child.