Kids whose parents set up a saving plan to help pay for their education have a higher tendency to graduate from university than kids without this incentive. You can argue that poor parents cannot afford such a saving plan and that the rich kids would go to university anyway simply because that’s what is expected of them in the wealthy environment, they come from.
That may well be. But I would still argue, that you should consider setting up an educational saving together with your child or children.. Not with a focus on the amount but on the word “together”.
Most parents don’t talk about the financial situation of the family with their children. They may feel ashamed of the amount of income; they may not want to reveal the size of their personal credit card loans. They feel the children should be free from worries how precarious their financial situation actually is. Or they have other reasons, like being afraid that talking with the kids about money would suddenly turn into a fight with their spouse.
But talking about their money and how to grow that is a different story. So start there.
The easiest way is to simply open a savings account with a joint signature so that both you and your child have to sign to withdraw the funds. Then set up a piggy bank box in a shared area of your home. When you give you child pocket money, agree on part of it to go into the piggy bank. By the end of each month, you go to the bank together and empty the piggy bank and watch the numbers grow on the bank account.
Do not pay your child for doing household chores. Some things should be done around the house because they need to be done and that’s what being part of a family means. Find other things to pay your kids for, or give them an allowance for the sake of giving them an allowance, not in return for cleaning their room or helping with the dishes.
Do not let the driving force be the dream of an iPad or smart clothes. The saving is for education and can be spent on educational expenses only. Accept that the child sees it as your responsibility to pay for school fees, but would be OK if you take a loan in the mutual fund if you pay it back in monthly installments with handsome interest. Very educational.
As the child gets older and the funds grow up too, you can talk about investing them in a managed fund or buy safe shares, like shares in well established banks. It doesn’t get much safer.
When should you start? Well, I once heard this great advice: Hold up a $1 bill and a $100 bill. If your kid knows which one he wants, it’s time.
And keep in mind, when it comes to investing in your child, while the amount of money is of course important – the time you spend with them managing that money might be the smartest part of your investment.