Individuals with children should be concerned about their kid’s financial future. Parents living check-to-check oftentimes struggle to put aside funds in a savings account dedicated to their kids. The creation of generational wealth may also be the hardest to tackle on a low to mid-level income. However, there are ways parents can use the money they have to secure their child’s financial outlook.

Cheryl Lock, of USA Today, pinpointed several ways that parents can begin saving money for their children. From having discussions with kids about how money works to opening a college savings account, there are a wide range of opportunities to stack the cash. Here’s how:

1. Set up a college savings account
One of the most important things you can do is to consider how (and if) you’ll help them obtain a college education. An analysis of Labor Department statistics by the Economic Policy Institute found that in 2016, Americans with four-year college degrees made almost twice the average hourly wage compared to those without a degree. So a college degree is still important. However, you should never save for your child’s college at the expense of saving for your retirement. Instead, consider whether, and how much, you can responsibly save for both. (You can read this to help you get an idea about how much is enough when it comes to college savings.)

2. Have a life insurance policy
Don’t think of a life insurance policy in terms of what would happen to your kid if you die. Consider it a way to ensure your child is taken care of in the future, no matter what happens to you. Talk to a certified financial planner if you aren’t sure where to start, or which option is best for you. (Or you can read this article that outlines seven essential documents to fill out.)

3. Put a guardian in your will
Putting together a solid will so your child will be taken care of if something happens to you should be a top priority when estate planning. Picking the best guardian for your child is equally important. You can name two types of guardians — one to physically look after your child and one to look after their assets. Think seriously before simply naming your mom or best friend as your child’s guardian.

4. Open a savings account for your child
When it comes to helping kids become financially savvy, teaching them how to save — and why savings are important — is crucial. Your kid doesn’t have to be walking yet for you to open a savings account in their name. Ask your bank about a custodial savings account. Once your child is old enough for an allowance, you can discuss why everyone should have savings and how much to put away. Many experts say saving 20% of your income is a good way to build up a safety net.

5. Give them an allowance
Experts differ on whether giving kids an allowance helps them become financially savvy, how much to give and for what purpose (just to help them save, or in conjunction with chores, etc.). Research from T. Rowe Price, an investment management company, showed that children who receive an allowance are more likely to think they have a good understanding of basic financial topics than those who don’t get one. The important thing is to not give your kid an allowance and let him do with it what he will — you need to talk about money with your kid, as well. Discuss the importance of earning money and how to make it last.

 

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