A child's future is something that cannot be taken lightly by parents or guardians. And with the skyrocketing costs of education and other commodities, it only makes sense to begin keeping aside a certain amount of money for your child's education and for his secure future. For this, you can open an investment account for him or her. There are different ways to go about this, and the simplest method has been explained in this WealthHow article. Another benefit of this is that it also helps you to save a certain amount of tax that you pay. The rules and regulations vary for each plan and institution. So make sure you learn about them properly before making a long term investment for your child and planning his future.
What You Can Do
What You Can Do
- As you may have already guessed and probably already done, the first thing you need to do is decide on the kind of investment that you want to make for you child, and if you have more than one child, then also about how much each child should get.
- Once you've decided this, it's time for some heavy duty research. You'll need to do your homework well, regarding where you want to invest your money for your child.
- There is no dearth of financial institutions offering you a variety of schemes and plans which will not only ensure a bright and financially secure future for your child, but also help you with your taxes. Yes, that's right, investing in the name of a child does give you certain tax benefits, but again, only up to a certain amount, which if breached can make the child liable for payment.
- So, visit your own financial institution and ask them what they think is the best investment option for your child. Go through their scheme documents and scrutinize them.
- Next, ask your friends and relatives about where they're investing if they are and ask them how they like it. After you have purposefully studied all there is to be studied, you can make your decision about where you'd like to invest.
- Once you've made this decision, you can approach the concerned institution and ask them to guide you in going about it.
- One of the best investment plans for children is the state run 529 plan. This plan helps you to invest in your child's name, from any state, in any state and is valid even if your child studies in a totally different state.
- Another great idea for investing in your child's name is an ESA or an Educational Savings Account. Again, this not only helps your child, but also your tax. You can consult your financial adviser about whether any of your current investments have the facilities of holding an ESA.
- You can also consider opening a custodial account, in which you will have two options: a Uniform Gifts to Minors Act (UGMA) and a Uniform Transfers to Minors Act (UTMA), both of which allow for a custodian to open up an investment account in the name of a minor, with deposits in the form of cash and stocks respectively.
- Another option that can be considered is setting up a trust fund for the child, until he reaches majority and then he can use the money as he pleases.