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Smart Money Moves for Kids: Building Wealth Early



As parents, we want the best for our children, and that includes setting them up for financial success. Teaching kids about money from an early age is crucial, and making smart financial moves can pave the way for their future wealth.


We hold the key to a future where the children in our lives are not just dreamers, but also achievers. It's our responsibility to open the doors to financial wisdom and provide them with the tools to build wealth from an early age. The journey to equipping our kids with smart money moves is an inspiring one, and it starts with us.


In this blog post, we will look at four key strategies to build wealth for your kids: setting up fund, creating wills, understanding life insurance, and teaching financial literacy.


**Setting Up a Financial Foundation for Your Child**


When considering creating what used to be known as a trust fund for your child, junior ISA, or a simple bank account for your child, it's important to weigh your options.

  • Funds have long been a popular choice for setting aside funds that your child can access when they reach a certain age. The benefit of a Junior ISAs is that it offers a tax-efficient way to save for your child's future. They have annual contribution limits of £9,000, but the interest or growth is tax-free. The funds become accessible only to the child once they turn 18, ensuring that the money is used by them for their future. The drawback? The funds are locked away until they reach adulthood, which means they can't be used for immediate needs or educational expenses before then. Another complexity is you would have to make a decision about where to invest the money (for example into an ETF).

  • A straightforward bank account is another possibility. It is easy to set up and offers immediate access to funds when needed, which can be perfect for short-term saving goals or emergencies. However, the downside is the lack of tax benefits and the temptation to use the money before it can accumulate significant interest.


**Securing Your Child’s Legacy Through a Will**


Establishing a will is an essential step in securing your child's financial future. It's not a topic we relish thinking about, but it's critical. A will ensures your assets are distributed according to your wishes. Octopus Legacy is an option that allows you to pass on assets potentially tax-efficiently, but like all choices, it comes with its pros and cons.


The advantage is that it may reduce the inheritance tax burden on your estate, potentially leaving more for your child. However, these options may lack the flexibility of direct inheritances and can be complex to set up.


Other Will Options

  • DIY wills: Templates available online but may lack legal expertise.

  • Solicitor-drafted wills: Customized and legally sound but costlier.


**The Assurance of Life Insurance**


Life insurance, with companies such as Polly, provides a financial safety net for your children. It ensures that if anything happens to you, your child's financial needs will be taken care of. The policies can vary significantly in coverage and cost, so it’s vital to understand the terms and choose the one that suits your family’s needs best.


While, life insurance may represent an additional monthly expense, the financial security it offers can be priceless. It pays out a lump sum if the parent passes away and therefore provides peace of mind ensuring the child’s future needs are met.


Alternatives:

  • Term life insurance: Affordable and covers a specific period.

  • Whole life insurance: Combines protection and investment.

Illustration: If you pay £50/month for 20 years, your child could receive £100,000 in case of your demise.


**Educating Your Children About Money**


Deciding when to teach your children about money is just as crucial as how you teach them. Whether it’s through traditional piggy banks, opening a youth savings account, or using educational apps and games, it's important to introduce financial concepts early on. Each method has its advantages; piggy banks can make saving tangible for young children, while savings accounts can introduce them to banking. Apps and games make learning fun and interactive. Regardless of the method, the key is consistency and making financial learning a part of everyday life.The path to empowering our children with smart money moves is not always straightforward, but it is achievable. We have the power to lay the groundwork for their financial success, starting now. Let's take it step by step, together.


Smart money moves for kids involve a combination of legal planning, insurance, and financial education. By implementing these strategies, you’ll empower your children to build wealth and make informed financial decisions throughout their lives.

Remember, it’s never too early to start! 🌟💰



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