Wouldn’t you like to see your children realize all their dreams? Wouldn’t it be great to send your kids to college without worrying about debt or going broke yourself? Now, you can do this if you start early and use a little bit of planning and foresight.
There are goal-oriented investments you can make without snapping your budget, and these will save you taxes too. Here are some tips.
You mainly need to provide for kids’ education, health, and lifestyle. Of these, education is usually the most expensive.
Health is less so and is being aggressively pushed by the government. Lifestyle will cost you as much, or as little as you teach your kids. In addition, your kids will need to be taught the value of money, savings, and investment.
Though expensive, education can be financed without debt. Tax-advantaged 529 plans are the most popular ones in the US. Most states offer 529s with tax deductions for in-state investors. The Congress has also permanently removed taxes on the monies drawn, if used for educational purposes. You can invest $24,000 per year, or $1,20,000 in a 5-year bracket, without taxes. Your money will be professionally managed. Custodial accounts for minor children (UGMAs/ UTMAs) allow you to save $24,000 without taxes, but this has two main problems – you cannot give it to your second kid if the first gets a scholarship, and it is considered the child’s asset, which can affect institutional aid prospects.
If you live outside the US, try investing in schemes that will mature at crucial landmarks like the child’s 21st birthday when they are looking to pursue expensive higher education. Insurance schemes or even some smart investing in mutual funds can help you build a corpus. Avoid dabbling in riskier ventures like stocks since you cannot afford to lose the money set aside for a college fund.
Health insurance is important to help your child through distressing illnesses, and permits you to put away some money for the child’s future. So make sure you always have your health cover.
Lifestyle and finance educationgo hand in hand. You can teach your kids to enjoy life and develop a healthy respect for money along the way. You can teach them to save and make investments for them.
How have you planned for your kids’ future? If you have any investment tips for our other readers, share them with us, right here. What are the best investment options available in your country of residence?
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