Figuring out exactly how much you can save for your child’s future is daunting. You probably know diversifying your investments is safer, but you also want to get a return on the money you put down. As your kids grow and change, some of your savings strategies will grow and adapt. Here are five types of investments to consider.
College Savings Plan
A 529 college savings plan is a flexible savings account that lets you take advantage of tax benefits. You can think of a 529 plan as an IRA for your child’s education. The earnings you make from interest on the account are tax-free. There aredifferent kindsof 529 plans. For example, if you choose to do a self-directed 529 savings plan, you can choose the state you want to invest in even if your child doesn’t go to school in that state.
There’s a good chance the company you work for has some sort of 401(k) plan set up where they match some amount you invest. This is pretty much free money, and in many cases, it’s a good plan. However, sometimes your tax bracket or other financial circumstances create a situation where maintaining an IRA would be more beneficial.
You can set up some IRAs in a way that allows you to taketax-free moneyout of the account if it’s being used specifically to pay for your child’s college education. For some people, this could be one of the best ways to invest in your child’s economic and educational future.
A recent article in the U.S. News and World Report highlighted a debate about whetherbuying a homeis a good or bad investment. It will eventually be necessary todetermine the valueof your home and calculate how much your assets are worth. This is a good place to start understanding accessible types of investments you can put money into.
Another kind of real estate is called a real estate investment trust, or REIT. You put money into the trust, which invests your money in real estate properties and pays out dividends to shareholders like you. Investing in real estate can feel risky, especially after the real estate bubble burst in 2008. REITs keep your money safe because they’re aggressively managed.
There are ways you can ensure that your money stays safe with an REIT.Forbessuggests looking at funds from operations for a particular trust over the past couple of quarters. This can help you figure out safe and profitable investments.
Mutual funds allow you toeasily diversifyyour savings, which can prevent major losses if the economy weakens. There are different levels of risk you can incur based on the type of fund you invest in, and the rate of return varies as well. Mutual funds are typically safer than other investments like hedge funds and are regulated by the US Stock and Exchange Commission.
Savings accounts through your bank are probably one of the first types of investment you’ve used, but the interest rate isn’t very high. Look for a couple of important things in a savings account. Find an account that doesn’t includeextra fees. Don’t submit to withdrawal limits and invest in a strong bank. Some savings accounts let you invest your money in the currency of your choice. Consider setting up one of these with your kids to teach them principles about money. The financial lessons you teach them when they’re young will impact how they view money for the rest of their lives.
Regardless of your current savings status, there are always things that you can do tostart making progressnow. It’s never too late to start investing just a little bit. Remember, you’re planning for the financial security of your family, and every little bit adds up. When it comes to money, do what you can with what you’ve got now.
Thids is not intended to be considered any recommnedations or invenst advice.