Managing the household budget is a tough job and at times it is made much more harder by the fact that some parents are thinking about what financial gifts they can leave behind for their children. Are they supposed to be saving some society-accepted amount to leave behind for their children? Are they being bad parents if they do not leave anything behind monetarily for their children when they pass away?
There is just so much you can do with extra funds in your budget and are you missing out on an inheritance amount for your kids? You know all too well the stories you have heard about kids being left with nothing when their parents passed away and they had to transfer from one relative to another because no one would take them.
But at the back of your mind, is leaving behind an inheritance part of your duties as parents? Is it really one of the things that you need to accomplish before you die? You might be asking yourself because when your own parents died, they did not leave you and your siblings much. There were no millions in the bank. Just a few stocks and maybe the house but that was it.
These could be thoughts running through your head at a time that your children are all growing up. It is even possible that you are afraid to be empty nesters. Psychologytoday.com explains that this stage is filled with different emotions such as sadness and grief especially as the parents kiss and hug their children for the last time in the driveway as they set off to college.
What will you financially leave behind for your kids
Before you start to sweat about the need to leave tons of money for your kids as inheritance when you pass away. Money doesn’t always have to be spoon fed because your children might never learn how to value money. With that in mind, here are some of the things that can look at and leave behind for your kids to help them make it in life.
- Saving as much as you can for retirement. This might sound a little confusing because you are thinking of what to leave behind your children and not what you can do to secure your future but believe it or not, you are also doing your children good. As much as the retirement factors that you need to keep in mind, you are also securing your future finances which means that your children will not have to worry about you and your finances. They can give you some cash on special occasions but it is something that you do not need.
- Encouraging them to do the same with theirs. One of the things that you can do also for your children is to encourage them to do the same. They need to ensure that they have their retirement fund in tact to give them peace of mind and to not depend on their own children for money. Show them how you value saving for retirement when they are still small and show them how it is helping you financially at the time that you and your spouse needs it. This can help them understand the benefits of a retirement fund better.
- Creating an environment where you can talk money. You might look at financial gifts as dollar amounts that you need to leave behind for your children but that is not always the case. One of the things you can do to help them financially is that is as long as they are still living with you or even when they just come over for visits, cultivate open communication especially when it comes to money matters. They can ask you anything and this gives you a unique opportunity to guide and coach them on how they should use money.
- Stop adjusting your retirement portfolio. This has a lot to do with how you manage your retirement fund because as you know by now, having a solid amount for your retirement helps you and your children financially. One of the things that you can do to make sure that you are on track with your retirement fund is to stop tweaking your portfolio allotment every now and then. Of course you need to taper off the risk as you get older but let your portfolio run its course especially if you already have a great one. This saves you from unwarranted stress and keeps your funds on track.
- Saving for your children’s college fund. WSJ.com recently congratulated 2015 graduates as they have an average of $35,000 per student loan borrower. This is not a recognition that they should not be too happy about and you can have a hand in preventing your children in being part of that statistic. One way of effectively doing that is to put together a college fund that they can use to pay for their higher education’s cost of attendance. You are essentially giving them a good start in life and freeing them from prohibitive cost of student loan debt.
How to save for a college fund
Saving for your children’s college fund is trickier than it sounds but this should be one of the financial priorities of married couples. Here are a few things you need to consider as you go ahead and plan for your children’s future need for college.
- Pay yourself first. You have read in the article that your retirement funds serves more that your future needs but secures your children’s finances as well. But to have a proactive fund, you need to understand what compound interest is and how to make the most out of it. Investopedia.com simply explains that this is simply earning interest in interest. Imagine what your credit card lenders do when you miss a payment where they capitalise the interest amount and charge interest again on it the next month. But the difference is that you are the one making use of this financial tool to help you build up your fund.
- Know your options. Your retirement fund or your home’s equity are not meant to send your children to college and that is where a college fund comes in to the picture. SEC.gov explains that a 529 plan or sometimes referred to as “qualified tuition plans” for your children’s college need is a great tool because it is a tax-advantaged savings plan parents can use for their children’s college dreams. It is better to separate the fund that you intend to use for your children’s higher education rather than combining it with your savings.
- Start early even with little amounts. But you need to remember that consistency will be your biggest ally. Starting early and being consistent with the amount that you are saving for a college fund will help you save enough for their need. You can increase the amount that you are putting aside as you increase your income to shorten the time you need to reach you goal.
- Talk to your kids about the fund. If you cultivated an open line of communication with your children especially when it comes to money. You let them know about the college fund that you are saving up for them. You can even encourage them to get summer jobs or help them set up a business on the side to help them put more funds into their fund. The idea is to let them contribute some amount to help them have a sense of responsibility and ownership with the fund.
Financial gifts for your children will certainly help them get started in but this does not always mean that you dole out money for their use. There are ways to help the financially without surrendering to their every whim.
