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As a woman of color and someone who grew up without much financial security, I can tell you proactively planning for your children’s financial future matters a lot. It could be the difference between having to work as soon as you are legally able to versus being able to be a “kid.” It may be the difference between freely choosing the university that is an excellent fit for you personally and academically or choosing the cheapest one.
Or it could simply be the ability to actively choose where you want to live once you leave home.
As a financial advisor, I’ve spent lots of time helping my clients decide how to invest for their children. I’m also a mother who has decided to invest for my three girls. I know it can be a difficult decision to navigate, and I want to share some tips with you as you decide how you can begin with confidence.
I’ve found that a desire to provide better for our children is almost universal in my work as a financial advisor. I have yet to find a parent who didn’t want to give a better financial start in life for their child than they had.
I find most parents don’t know how to start or how exactly to decide between the myriad options out there. I want to walk you through the options and give you the tools to determine which might be right for your family — after all, finances are not a one-size-fits-all game.
1. A High Yield Savings Account
I generally recommend everyone have a high yield savings account. These are low-risk ways to make money on your money than other conventional types of savings accounts because the APYs on these are higher. For example, many high yield savings accounts right now are offering .50% APY, or an expected rate of interest earned over a year.
I typically advise against selecting savings accounts at regular brick and mortar banks for several reasons. Firstly, they currently earn a very low-interest rate which does not allow your hard-earned money to grow. Secondly, there is no inherent tax benefit – short or long term. These types of savings accounts usually have .01% APY, which is exponentially smaller than a high yield savings account.
If you do utilize a traditional savings account, I recommend opening that high-yield savings account instead of a …….