Saving for your Children’s Future

One of the most wonderful yet intimidating experiences, having a baby can add meaning and purpose to your life in many unexpected ways and irrespective of how many books you read or parenting classes you take, raising a child can be full of surprises. But a growing family also means a growing list of expenses. As you are cradling your brand-new baby, picturing the various milestones it will reach in the near future, a quick look around you will see you surrounded by pushchairs, car seats, swings, bouncy chairs, play mats, bottles, tiny clothes and an assortment of other accoutrements.   
 
As you child grows and approaches young adulthood, the items needed may decrease but they are replaced with life experiences that carry a pretty hefty price tag. From higher education to weddings and helping your child purchase its first property, saving for their future is one of the most important aspects of financial planning for every parent. It may seem daunting to plan so far in advance but like any other goal, this one too needs meticulous planning. 
 
Read along to find out how you can give your children a running start into financial adulthood.

Determine how much you need to save  

Long-term financial planning for your children can be a complex process. Initially you will require a variety of baby gear, clothing and some educational toys to see them right through toddlerhood. But as your children grow older, other things come into play. They will eventually become independent grown-ups with their own career, hobbies and bills to pay.  
 
Although there are no hard and fast rules as to how much you should set aside for your child, where you put this money will largely depend on its purpose, your goals and risk tolerance. However, every cent counts and by saving early your money will have the time to grow into a substantial sum. Here are some typical expenses you might want to foot the bill.   
 
 
Help pay for their education 
Unlike abroad where students need to pay their preferred university tuition fees to study and obtain some form of qualification, attending the local university is free of charge. However, your children may aspire to enroll at an educational institution abroad. If you take into consideration the tuition fees and living expenses, you will quickly realise that education can become quite an expense. By planning ahead and being able to pay for this important milestone, you could be giving them an advantage over their peers that will allow them to succeed earlier in life. 
 
Help pay for their wedding 
Perhaps one of the best ways to ensure that you child steps into adulthood on a strong financial footing is by offering help to pay for their wedding. Weddings can often cost a fortune and many couples find it difficult to have the celebration of their dreams without running deep into debt. Offering a helping hand does not mean going overboard if you cannot afford to do so. Paying for just a part of their nuptials is a generous enough gift that will help them cover part of their budget.  
 
Help purchase their first home 
As the price of real estate is constantly rising, young people ready to embark on living on their own are finding it increasingly difficult to purchase their first property and get a firm foothold in the residential real estate market. This becomes even more of an impossible feat for new graduates just about to begin their first job or a young couple who wants to start a family. A highly practical way for parents to help provide for their children with long-term security is to assist them with the deposit on their first home.

Planning for your child’s future   

Establish your budget 
Selecting the financial vehicle for your child’s future is important, however, you must first outline you budget so that you can truly maximise your contributions to the asset. Ideally you should write down your monthly expenses so that you can truly gauge where your money goes and should you identify any unnecessary expenses, you could perhaps eliminate them from your budget. It may seem that relinquishing your morning coffee on the go will not make much of a difference to your finances, but a long-term habit can truly add up over the year. And when these minor expenses are coupled with others like for instance, your multiple streaming service subscriptions, you will have more money to save for your child.   
 
Decrease your debt 
Although having home and car loans or credit cards is a normal occurrence, starting a family when you are drowning in debt is not ideal. This is why you should make paying down the larger part of your debt a priority and ideally you should strive to do so before you even have kids since this will truly help you create the appropriate financial foundation for their future.  

Determine the extent of your cash flow 
The most fundamental aspect of saving for your children is to have a good understanding of your own cash flow. If you have a clear picture of what money you have coming in and what goes out, you can make better and more informed decisions. In this manner, you can determine whether you should cut down on a particular expense, increase your savings or allocate money for a specific purpose.  
 
Be as consistent as possible 
Keeping track of both your money and your savings is crucial and this can only be done with the help of consistent and systematic monitoring. By keeping a close eye on your spending, month by month, you can establish how close you are to achieving your financial goals.  
 
Insure wisely 
Although we tend to insure our house and cars, insuring our ability to work and earn a living is often overlooked, however, insurance can help you protect your loved ones from the financial uncertainty that comes with an unexpected death. Whether it is a whole of life plan or a family protection policy, your children will be protected should tragedy strike. Alternatively, you may opt to go for a life insurance for new parents. Would you like to find out more about insurance policies? Have a look at why insurance can help you safeguard you most important asset – your family. 
 
Sell stuff your child no longer needs 
Has your little bundle of joy grown into a boisterous preschooler? If that is the case, then you probably have no use for that baby crib or stroller. Part of the reason why kids carry expenses is that they tend to easily outgrow many of the products and items you purchase for them, which means that the majority tend to have a relatively short shelf life. A good way of earning some extra money which you could eventually save up for the future is to simply sell things you no longer need.

When should you start saving? 

An often-overlooked detail, timing is key here and leaving investing for your child’s future till much later is perhaps one of the biggest mistakes you can make. In reality you have a limited amount of time at your disposal to save for things like their first car or property. With this in mind, if you are an aspiring parent, perhaps you could start saving for your future children before you even have them. Having kids brings a score of added expenses right from the outset so the earlier you start saving, the better.  
 
There is also one more thing to keep in mind. If at any point you decide to take a career break to look after your children, your usual monthly income will take a dip, which makes it difficult to keep up with other costs let alone paying your usual contributions towards your child. 

Set yourself up for success with a savings plan 

Making regular deposits and seeing your money grow can help motivate you to save. If you have decided that the time is right to start putting money aside for your child, you may be wondering what is the optimal method to do so.  
 
Opening a savings account may be the first option that comes to mind and although it can serve as a good starting point, the interest paid from these accounts is relatively low, which means that there is a risk that the money pooled will not hold its real value against inflation. Another option is to select a fixed-term account, whereby you can earn a fixed interest on your savings over a set time frame, typically ranging from anywhere between 1 and more years. Contrary to a normal savings account where you can add and withdraw money as you please, with a fixed term one you must deposit a lump sum which you cannot top it up at a later stage. Although rates vary from bank to bank, interest rates with this type of account are higher to those of a savings account.   
 
The methods outlined above are certainly an effective means of saving. Yet, why not help your money grow further by producing a compound interest multiplier effect? Offering clients the most flexible savings on the market and a reliable and tax-efficient way of compounding interest over time, Calamatta Cuschieri can help you give your child a bright future thanks to a CC Funds savings plan.  
 
A great potential for stable capital growth, interest is reinvested automatically gross of any tax, while you can start saving from as little as 40 euros each month. Contributions are made into diversified funds with a very limited exposure to any single investment and since these regular contributions are invested over time, any downside risk is reduced, while the performance of your savings is optimized. Available in three varied strategies, the dynamic strategy has a better potential for long-term growth since historically blue-chip equities perform well, whereas the conservative strategy takes a slow and steady approach by investing mainly in bonds, however, it still provides a steady income. On the other hand, the balanced approach tends to offer an equilibrium between these two. 
 
With no restrictions, you can select how much you would like to save each month and change this amount whenever you please, while you can pause and resume the plan or even stop it altogether without incurring any fees or restrictions. At the same time, you can top-up your savings with one off deposits. Clients can access and monitor their savings plan online via CC Trader, our award-winning platform, while periodic reports on the savings’ performance are sent directly to customers via email.  
 
If you would like to set some financial goals, our goal planner can drive you closer to your financial objectives irrespective of whether you have a target amount or a specific date by when to save, whereas our monthly investment plan calculator can help you grow your savings by calculating the final amount you would have reached when depositing funds regularly. In contrast, use our budget planner to calculate the monthly contributions needed to create a realistic budget.  
 
Looking for some tried and tested methods to save effectively? Or perhaps you would like to go through some of these tips and tricks on budgeting? Saving becomes easier if you have a goal in mind. Here is how you should go about setting one.

Teach your children the basics of finances  

Saving and investing for your child’s future will not make that much of a difference if said child cannot appreciate the sacrifices made or cannot understand the value of money. If your children grow up financially responsible, then they are more likely to continue with these habits right through their adult years. As a result, teaching your children about financial literacy is something you should consider doing from an early age. For instance, teaching them how money works is a good enough start, while you can boost this lesson further by letting them have their own piggy bank and show them the power of saving. Let them learn what happens when you run out of money and how they can become financially responsible, while remember that your saving efforts can also serve as a great learning opportunity.  
 
 
 
It is only natural that as parents you want the very best for your children and strive to build a solid foundation for them so that they can grasp every opportunity in life. The costs of raising children will only continue to increase as time goes by, but by saving regularly and diligently you will be able to give them an edge in life that will help them succeed.   
 
One of Malta’s largest independent financial services group and a founding member of the Malta Stock Exchange, Calamatta Cuschieri pioneered the local financial services industry in 1972. Since then, the Group has constantly pushed forward, moving from strength to strength, gaining an excellent reputation along the way for consistently offering a bespoke and transparent service to clients at highly competitive prices. Today, CC has established itself as a 360-degree financial planner for investments, pensions and life insurance. 
 
Visit one of our local branches situated in Mosta, Fgura, Sliema, Qormi, and Birkirkara for a free financial health check and to benefit from a savings plan with no restrictions. Get in touch with one of our advisors today.