In one of my previous articles, I did mention the need for parents to help their children in making the right financial decisions. It is the responsibility of each 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 will look at how best parents can diversify their child’s saving for long term use.
Parents can in addition to training their children on the basics of savings also boost this kitty by topping up on their child’s savings.
There are several ways parents can use to achieve this:
- Develop a matching fund
Children are known to receive all kinds of cash gifts from relatives and friends. As a parent, one can put these entire monetary gifts into the child’s savings account or spend it immediately to buy them any item. Instead of going for the second option, it is more prudent for parent to open a matching fund for their children.
This means that for every shilling a child saves, the parent tops up with the equivalent. The amount is then to be deposited into the child’s account.
Children can also earn their initial allowances by doing some household chores. Parents can reward their children by giving them an allowance for any chore successfully undertaken.
These savings can ultimately be deposited in any bank. There are several banks that provide for guardians or parents to open a bank account for children.Parents thus help the child raise the minimum account opening fee using this matching fund.
- Open a mutual fund
A mutual fund is an investment portfolio diversified into stocks, or bonds. Their maturity period is varied from 5 years to 20 years. This is a recommendable savings plan especially for long term financial goals. Parents could use this approach to contribute towards their child’s college fee.
A parent can open an account for his/her child with any mutual fund provider. For example,in Kenya(located in East Africa), we have Old mutual as one of the leading service providers. However one needs to establish the minimum amount required to open an account with these providers. The parent will then be given a contract to sign as proof.
The following are some of the requirements for opening a mutual fund account in Kenya:
- The child’s birth certificate
- Copy of parents identity card
- Opening balance of Kenya Shillings 1000(dependent on the type of fund)
- Duly filled in registration form
- Bank account details especially if one will be making these payments through a standing order.
With all these available options, it is thus paramount for each parent to realize that it is their responsibility to provide for their children financially.Even the bible speaks of a wise man being one who provides for his children and grandchildren.It is therefore of great importance for parents to develop strategies to help them achieve this goal by diversifying their child’s long term investments.