by | Feb 24, 2022 | Personal Finance | 0 comments

Starting a family is one of those key times in life to re-evaluate your saving and spending habits.  As any parent will tell you, raising kids can be costly!  A little planning can go a long way.  So where do you start? 

Many parents think of college savings right away.  If that’s where you’re headed, here are a few ideas to consider first.

A common question is: but what if your child doesn’t end up going to college, and/or you would like to provide them with money for something other than education?  (Think a wedding, or a down payment for a house.) 

Some parents open a UGMA / UTMA account to establish an investment account on behalf of the child.  This type of account is opened and controlled by a parent until the child reaches the age of majority (18 or 21, depending on your state).  One of the positives to this type of account is that it allows you to invest for the child without the limitations on how the money is spent (unlike a college savings account, which limits you to qualified educational expenses).  But this same flexibility could also be one of the negatives: when the account technically becomes the child’s, there is really nothing a parent can do to limit how the child spends it.  Parents should consider this double-edged sword before going with a UGMA / UTMA.

Another type of investment vehicle to seriously consider is a Roth IRA.  As many savers know, Roth’s grow tax-free, which can be a powerful vehicle to have in your financial toolkit.  And yes, a child can have a Roth IRA!  Phil explains this in his article here.

Finally, even if you don’t have the resources right now to begin investing for your child, you can still teach them good financial habits.  I often get the question about how to teach your kids about money.  Read more about this, with 3 ideas on what to do, here.

Sure, raising kids can be costly, but it’s also a wonderful opportunity to help make the world a better place.  In the words of Pierre Teilhard de Chardin: “The future belongs to those who give the next generation reason for hope.”