Money is a tool that has mystified, fooled, delighted, angered, and been enjoyed by many for centuries. It has been used for a lot of good in the world and also a lot of evil. Money is part of life for the youngest among citizens and a necessity for elders. Continue reading to understand the importance of getting children involved in investments and the five types of investments to get for your children.
An investment is a system of putting money away in a bank or fund with the hopes of getting more money in return after a specified time. Like savings, investments are a way of generating income. Many people believe they need millions to begin investing, which couldn’t be further from the truth. Different types of investments can be started with as little as $25.
Talking to children about saving and investments helps them develop healthy relationships with money. They learn the benefits of hard work and the necessity of saving and that they don’t have to fear money. Although they may not understand all the terminology involved in investing, parents should also talk to kids about ways they choose to invest for them. In addition to the traditional piggy bank, some of those ways are:
The cost of college today can be astronomical. Therefore, many states give adults the option to put money aside for their children’s future college expenses. The plans are either a Coverdell Savings Plan or 529 Plan and allow parents a high contribution amount of up to $150,000 per year for children between grades K through 12 in most states, whether they attend private or public schools. These plans are low maintenance and have a basic setup and forget until college approaches. Other benefits of college savings plans are:
- Money can be withdrawn at any time.
- Religious school children also qualify.
- Most of the withdrawals are tax-free.
Stocks are one of the most popular investment options for children. It is a method of purchasing shares of a company. The amount of shares that a person owns in a company is proportional to how much they invest. What makes it cool for kids is that they learn how to read stocks and understand the changing culture and what is worthy of an investment.
If your minor child has already started earning money and you don’t want it simply sitting around or stuck under a mattress, a custodial IRA account makes sense as a sound investment. A custodial IRA account is a tax-free account for your child in the name of his custodian, namely the parent. If money is withdrawn from the custodian IRA before your child is of age, that money must be used for the benefit of your child.
In addition to being a great investment tool, custodial IRAs have many benefits, including:
- Teach children good financial habits.
- Compounding interests gives children a great start to purchasing a home or vehicle.
- There are no age restrictions.
- The younger they start, the more they’ll have at the end.
A mutual fund is a managed investment pool that lumps money from many investors to purchase stock. Brokers and accountants track how much each person invested, and the returns are based on those percentages.
Getting children involved in what stock to purchase is an excellent way for parents to teach the importance of keeping up with trends in the economy and business. There are child-related goals, terms, and options available when investing for children.
Mutual funds make for great gifts from grandparents to younger children who already have enough in the toys department.
The idea of commercial property as an investment seems like an unrealistically significant and unconventional investment for children. However, a Delaware statutory trust allows multiple investors to become interest holders or an ownership trust. The benefits of owning property are numerous, including:
There is a low risk of failure.
Greater income potential.
There are tax savings.
As you have read, teaching kids healthy habits with money can begin as early as you’d like, through savings and investments. Five types of investments to get for your kids are above and a great start to their future.