In one of my previous articles, I mentioned the need for parents to help their children make the right financial decisions. It is the responsibility of every parent to train their children on the importance of proper financial management. Several banks have clubs for children through which they can learn about finances.
In this article, I’ll see how the best parents can diversify their children’s savings for long-term use.
Parents, in addition to training their children on the basics of saving, can also boost this kitty by completing their children’s savings.
There are several ways that parents can use to achieve this:
- Develop a matching fund
Children are known to receive all kinds of cash gifts from family and friends. As a parent, one can deposit all of these monetary gifts into the child’s savings account or spend them immediately to buy any items for them. Instead of opting for the second option, it is wiser for parents to open a matching fund for their children.
This means that for every shilling a child saves, the parent recharges it with the equivalent. The amount will then be deposited into the child’s account.
Children can also earn their starting allowances by doing some housework. Parents can reward their children by giving them an allowance for any successful homework.
These savings can ultimately be deposited in any bank. There are several banks that allow guardians or parents to open a bank account for children, so parents help the child to collect the minimum account opening fee using this matching fund.
- Open a mutual fund
A mutual fund is a diversified investment portfolio in stocks or bonds. Its maturity period varies from 5 to 20 years. This is a recommended savings plan especially for long-term financial goals. Parents can use this method to contribute to their children’s college tuition.
A parent can open an account for their child with any mutual fund provider. For example, in Kenya (located in East Africa), we have Old Mutual as one of the main service providers. However, it is necessary to establish the minimum amount required to open an account with these providers. The parents will then be given a contract to sign as evidence.
The following are some of the requirements to open a mutual fund account in Kenya:
- The child’s birth certificate
- Copy of the identity card of the parents
- Starting balance of 1,000 Kenyan shillings (depending on fund type)
- Registration form duly completed
- Bank account details, especially if one is going to make these payments through a standing order.
With all these options available, it is paramount that every parent realizes that it is their responsibility to support their children financially. Even the Bible speaks of a wise man who is the one who supports their children and grandchildren. It is important for parents to develop strategies that help them achieve this goal by diversifying their children’s long-term investments.
