Parents want to give their children the best chance at happiness, but that involves making a significant amount of money. Investing is an excellent way to supplement your savings. These are the most important things parents need to know about investing before diversifying their spending for their child’s future.
Give Your Investments Time
Even if you put thousands of dollars in something like a high-yield savings account, accruing gains takes time. Investing in the stock market works the same way. You’ll need to watch the market to sell at the right moments and reinvest in profitable stocks to help your portfolio grow. It may take years to reach your savings goals, so don’t expect riches overnight.
Understand the Risks
You might think that purchasing stock in a successful company like Apple or Google eliminates the potential for failure, but that isn’t true. There are always risks to buying stock or opening accounts that rely on the stock market for growth.
Talk with a broker or portfolio manager to dive into the meaning of stock-related risks, such as:
- Economic risk
- Market value risk
- Inflationary risk
They’ll know which trends are currently affecting the market and advise purchases based on what they think will be most profitable. An expert will also watch your account closely, minimizing the risk of financial loss while you’re busy raising your kids.
Work Investments Into Your Budget
It’s exciting to open a new account, so you may want to throw everything you have into it. It’s better to make small deposits that work with your current budget. You can also rearrange your monthly savings to include minor stock investments, depending on your investment plan. You’ll know you’re making the right financial decisions if your investments don’t compromise your emergency savings or ability to pay your bills.
Consider Education Lotteries
Multi-million dollar lottery tickets are rare, but you can make faster profits from your investments by putting your money in education lotteries. They have a higher chance of winning because they work differently. Instead of hoping for a less than one in a million chance to win a traditional lottery, purchasing something like a Print’n’Play ticket will give you a one in 240,000 chance to bring home the jackpot.
Your money will also go toward something worthwhile. Every educational lottery purchase funds public schools in your state, so your children will benefit by receiving a higher-value education due to additional funding.
Compare Investment Types
No one should throw their money into an investment account or the stock market without understanding their options. Read about the six types of investments to figure out which is best for you, like:
- Bonds
- Stocks
- Index Funds
- Mutual funds
- Exchange-traded funds (ETFs)
- Option contracts
Learning what makes each investment different will point you in the right direction. You may decide to purchase a bond because it’s less risky due to government backing. You might also lean more toward an index fund because they cost less. Investigate every option within your purchasing power and talk with an expert before making any money moves.
Plan to Diversify
Everyone’s heard the old saying — don’t put all of your eggs in one basket. It’s true in many cases, but especially when you’re investing. Throwing your savings into a stock purchase for one company could make your money go up in flames if that company dissolves a month later.
When you find a few types of investments that seem suitable for your financial situation, put your money in two or three of them. You’ll increase the odds of making a quick turnaround and long-term gains.
Create an End Goal
Anyone can invest, but parents should have goals for each purchase or account. Your kids will need money for school and their eventual college enrollment. They’ll also require support in their adult life to purchase a car or house, which will be much easier if they gain access to a significant investment account.
Sit down with your partner or yourself while reflecting on what you want to do with your investments. Assigning goals will help you feel like your investments are more successful. You’ll know you’re getting closer to giving your kids college educations, weddings or future homes as you watch your investments grow.
Add Investments to Your Will
If tragedy strikes, your children will need instructions in your will to handle your remaining investments. Assign them to each child as you see fit and outline what the money should go toward. A lawyer will finalize the paperwork so everyone gets taken care of in the event of your passing.
Learn More About Investing
These are just a few things parents need to know about investing before changing how they save money. Exploring your options, talking with an expert and diversifying your funds are the first steps to becoming a savvy investor who multiplies their family income.
