As a parent, securing your child's future is always a top priority. However, with back-to-school season approaching and its associated costs, family finances are more pressing than ever.
A new report reveals that over one in four parents take on debt to cover these expenses. So, how can you manage family finances to give your child a strong start in life?
“There's nothing more stressful than taking out loans to fund your child's start in life and being burdened with high interest rates,” Nick Charalambous, Financial Advisor and Managing Director of Alpha Wealth, says.
While saving the monthly €140 children's allowance in a bank account is common practice, here Nick explores six more strategic options to help you better manage family finances and give your child the best financial start possible.
Explore Alternative Savings Options: Instead of traditional low-interest bank accounts, consider savings plans from insurance companies with higher potential returns through diversified investments. With current inflation at 2.5%, seeking better returns is crucial to ensure better returns on your money.
Harness the Power of Compound Interest: Starting a savings plan early allows your money to grow exponentially. Compound interest is earned on both the initial amount and the accumulated interest. For example, saving €140 a month from birth can grow significantly over 18 years, with a 4% annual growth yielding €44,807.67 compared to €36,692.14 at a 2% growth rate.
Secure Funds for Education Early: Early savings prepare you for future financial demands and relieve the burden of education costs. A dedicated savings plan supports your child's ambitions and causes you less financial stress by avoiding high-interest loans.
Utilise Tax-Free Contributions: Take advantage of the Small Gift Exemption, allowing parents and grandparents to gift up to €3,000 annually tax-free. This is a popular way to fund future college fees or house deposits.
Plan for Medium to Long-Term Goals: Savings plans are ideal for goals over five years, benefiting from compound interest. Understand plan terms to ensure 100% allocation of your money and avoid fees. Flexibility allows fund access without penalties, but remember it's a medium—to long-term investment.
Consult a Financial Advisor for Tailored Investments: Speak to an impartial financial advisor about equity-based investments suited to your risk appetite. Investment options on a risk scale from one to five allow you to adjust over the years for growth within your risk profile.
Book a financial review with Alpha Wealth at www.alphawealth.ie for trusted financial advice on tax savings, pensions, investments, and more.
Slán go fóill.