5 Smart Ways on How to Build Savings for your Child’s Future

Ideally, being a banker, I always exercise prudence with my client’s money or with mine. This makes sense because my mom was an Ilocano. I consider saving money as one of my priorities.

When I became a mother, however, everything has totally changed. My comfort zone shifted to a more challenging perspective than I thought it could be. Sometimes, no matter how you cut your budget, decided not to buy the latest gadget, or go shop in the mall, you realize that these are not enough. In reality, you have to save money for your child’s education and future. This way is a guarantee that you are making the right investment decisions.




To start with, here are five (5) basic tips that will surely help you to secure your child’s future.

1. The earlier you start saving up, the better

You can even start saving money even before your child is born. Like wine, the value of money appreciates when you left it untouched. Money from your savings accounts, mutual funds, insurance policies, or other investment instruments yield potential earnings that will increase the value of your money.

2. Set a separate account/s for your child

Make sure you and your child have a separate account to avoid spending it for another purpose. Deposit any cash gifts you received to save it for her/his future.

3. Determine the purpose of your funds

Have a clear purpose why you save money for your child’s future. Start asking yourself: Do you save money for his/her education or also for emergency purposes? Are you planning to throw a big party? Do you want to give your child enough inheritance? Or, do you want to go shopping for your baby?

Remind yourself always the reasons why you want to save funds for your child. You might consider these following:

(a) How much is to be allocated for a particular purpose?

It is important to have a target amount for each purpose you are planning. This will serve as a guide for you to manage your expenses and how much money should you invest in his/her account for a particular purpose.




(b) When will you need the funds?

Is it for short-term or long-term purposes? Do you want a cash available anytime or leave it untouched for months or even years? Knowing your purpose will help you determine where to put your money whether in savings accounts, time deposits or mutual funds, etc. Always remember that keeping your money on such investment companies will increase your funds.

(c) How much risk will you afford to take?

As a matter of fact, investing in such companies that offer higher potential returns implies a greater risk. For example, investing in the stock market will yield more earnings compared to other investment options such as savings accounts or government bonds but the return on stocks are not guaranteed. Invest only what you can afford to lose.

You have to match the purpose of your funds to the risk you are willing to take. You are not going to spend the money allocated for your child’s education, instead, you choose to give up your fund for recreational purposes and keep it in investment companies to maximize potential earnings associated with the time value of money.

However, sometimes you can allow yourself to make riskier investment choices if your purpose is for long-term. Like funds for your child’s college education, you can take advantage of such companies who offer higher potential returns such as educational plans or mutual funds. For short-term purposes, on the other hand, like your baby’s first birthday, it is recommended to put your money in short-term time deposits rather than in the stock market.

Have at least two set of funds for your child – one for short-term and one for long-term purposes. This will help you a lot in terms of saving money for the future.

4. Commit to a regular amount of savings and adjust your expenses

Most people, basically, apply the rule: INCOME – EXPENSES = SAVINGS.
However, the most effective formula should be INCOME – SAVINGS = EXPENSES.

The stereotype in terms of proper money spending should be changed. Savings is not a priority when you use the first formula. It gives you an idea that you can spend anything you want as long as you have money to pay for it.

People who treat savings as a bonus and not a requirement can be easily tempted by sales and discounts. These people are often called as “expense-first mindset”. A danger awaits for these kinds of people because they might incur possible expenses higher than their actual income.




Be serious when you plan to build funds for your baby’s future, use the second formula. This way, you can adjust your expenses accordingly after deduction of your savings.

Have a “savings-first mindset”. This will help you think twice before saying yes to discounts and promos!

5. Educate yourself about your options

Converse with your trusted personal banker to know about the different investment options you may consider. Learn and read about the investment products to choose from. Attend investment seminars to give you information. Always remember that the more you are knowledgeable, the more you are equipped in managing your funds.

Do not be discouraged if you are unfamiliar with the formulas and terms of investments. Actually, this is very easy to understand even for those people who have poor financial backgrounds. All you have to do is study the right investment you are going to take. Always remember that the future of your child rests in your hand.

Being a parent always gives you the fear on how to give your child a better future. However, you should not let this negative control you. Instead, set your goals, apply the “savings-first mindset” and study the different investment options. With proper knowledge, you are starting to prepare and make your child’s future more comfortable and secure.



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