Children are expensive. On average a parent will spend over €11,000 to raise a child to the age of 18 in Ireland. All the nappies, clothes, food and education really add up .It’s a good idea to start saving for your child’s future as soon as possible.
Figuring out how to save money properly is difficult. How do you start? Where do you put the money? How much should you be saving?
We spoke with Cliodhna Hughes, a member of the Financial Planners of Ireland Board to bring you some tips on how to start saving money for your children’s future.
You have 18 years! you do not have to save lodge your child’s entire pension fund in one go. Have a look at your finances and see what money you can spare. If it’s five euro a month or 50 euro, it doesn’t matter. Don’t feel pressured to save a certain amount every week if it’s outside of your budget. Anything you can spare is good enough. As your circumstances change you can always alter your saving habits.
“One thing a colleague of mine said to me when I was delighted because my creche fees were coming down she said ‘You are used to paying those create fees now what should do is take the difference and put that straight into savings.’.”
Where to Put Your Money
Unfortunately stuffing some extra change under your mattress is not the best way to create a savings account.
Cliodhna says that are multiple ways to create a savings account for your child but the easiest and most effective way is a deposit account. These accounts are in all of your local banks and credit unions. They are very easy to set up and straight forward to use.
However, the best way to save and come out with even more is to invest in stock. I know it’s scary but by investing you could potentially come with twice much many as you deposited.
Make It Automatic
You might think the best way to start saving money is to put your surplus cash at the end of the month into the bank. But there will always be that one extra expense that you didn’t plan for that brings your bank balance back to zero.
Cliodhna says the best way to combat this habit is to just make an automatic deposit at the start of every month.
“One of the rules in financial planning, in general, is to make it automatic.”
“If you put in at the start of the month and set up that direct debit, it happens automatically and then the money isn’t in the account to be spent.”
Take The Risk
According to Cliodhna the biggest mistake people make when starting their savings plan is not taking risks. She doesn’t mean taking a trip to Vegas and hoping to double your money in a game of Black Jack.
Putting your cash into a regular deposit account where it will sit stagnant for whatever length of time you leave it there is not the most effective way to save money.
“Make your money work for you.”
Investing your money stock market is the best way to save for a young child. Since the money will be invested for a few years, it has time to ride out the market’s highs and lows.
Typically the shares produce a better return than cash. Since the money is for their children a lot of parents are scared to place their money in stocks rather than a straightforward savings account but you have to remember you have 18 years. You have the time to take the risk.
Remember – no risk no reward.
The best thing to do when starting your saving journey is to seek the advice of a professional. Money is a daunting thing to deal with it and you want to make sure you are making the right decisions for you.
Try reaching out to a financial advisor or even have a chat with your local bank to figure out a plan that suits you.
The Financial Planners Board of Ireland is a not-for-profit organisation, run entirely by a volunteer Board of Directors. The organisation has a big directory of advisors to help you with your savings plan.