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Long term investment options for kids

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Children are not only expensive to have but the older they get the more expenses they create. Many parents worry about how to save for their children's future. Higher education prices continue to soar, and it's impossible to buy a house without a loan. Preparing for your child's future doesn't have to be stressful task. Your child going away to college or buying a home of their own may seem far enough in the future that you wouldn't need to worry about it just yet. But the best time to begin a long term investment is when your children are young. There are many options available for long term investments for kids. Between bank accounts, trust funds, bonds, or even investing in the stock market. Here are some options to consider.

Bank Account
The first step that most parents take towards saving or investing for their children is to open a savings account on their child's behalf and start making cash deposits. Most financial institutions have created a special type of savings for children. They often have a higher interest and offer incentives such as membership of a kid's savings club. These membership clubs reward children for saving money, with piggy banks, toys, and badges. It is never too early to open up an account for your child. Even while they are infants its better to have the option already open for when you have extra money to deposit.

Trust Funds
Another option could be a trust fund. Trust funds for children were introduced in 2005. These trust funds have made a big difference in helping parents to save for their children. New parents are given a minimum of $250 to invest in a long term savings and investment account their child's behalf, plus a further $250 when the child turns seven. The proceeds are held in trust for them until their 18th birthday. On top of those amounts parents can also invest up to $1200 each year. Along with parents, any family member or friend can deposit money into this trust fund.
There are three types of accounts:

  • Savings account. Savings accounts are the safest method as you won't lose money with this investment, but the returns on the investment are not very high.
  • Shares account. Shares accounts invest your child's money by purchasing stock market shares. Investing in shares can be risky but mostly on short term. Long term investments will rise and fall but you have a better outcome of it rising.
  • Stakeholder account. Stakeholder account is a medium risk option, which invests in shares until the child turns 13 and then the money is transferred to lower risk investments and assets.
Not only choosing which account you want to invest for your child, you also need to choose a financial institution that suits you and your child's best interest. You will want to watch out for fees charged and any requirements relating to how much you deposit and how frequently.

Savings bonds
Savings bonds are an excellent strategy to help secure your child's future. One great thing about savings bonds is that they continue to grow over a period of time. You purchase the savings bond for a certain amount and the interest will continue to grow over the years, so when the appointed time comes to cash in the savings bond you will have earned money with-out a risky investment.

Teaching your kids about their own savings, trust funds, or bonds will also help them realize what having that money will benefit them for in the future. It could be their way to pay for a college education or perhaps a car of their own when they are able to drive. Having a long term investment plan for your kids is the best way to prepare them for their future.

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