Empower your kids financially with this guide to get them started on investments for their future.

Parents are constantly dedicating their time and resources towards fostering a safe and nurturing environment for their children in Singapore, spending up to 20% of their monthly household income on their children. This includes planning for their financial future, which involves investing effectively by shifting from traditional savings accounts to other diversified investment options to secure their child’s financial well-being.

If you’re wondering how to invest for your children, this article shares how to set financial goals for them and how investments help reach those goals effectively.

Related: A Basic Guide to Investing: Why it is important

Financial Goals for Your Child

Every parent has unique aspirations for their child’s upbringing. There are common financial objectives to consider for giving your child a strong and uninterrupted financial foundation, such as:

Education Funds 

Having an education fund planned for your child plays a key role in covering expenses from preschool to higher education, easing the financial load for both you and your child. You can consider exploring top endowment funds in Singapore to save for your children’s education.

Emergency Funds 

Safeguard your child’s well-being by establishing a safety net for unexpected financial challenges like medical emergencies or loss of your or your spouse’s income, as an unplanned circumstance can negatively impact your cash flow. The emergency funds you saved can alleviate financial strains should they occur.

Long-Term Financial Security

As a parent, your aim is to ensure your child’s stability into adulthood and, if possible, help them address challenges like home ownership, entrepreneurship, and starting a family. It’s a rewarding journey you can embark on for their financial security, filled with opportunities to guide and support your child as they navigate life’s milestones and create their own path to success.

Related: 5 Singaporean Blue-Chip Stocks to Watch in 2024

How To Make the Right Investments for Your Child

When it comes to securing your child’s future, kick off by defining your financial goals clearly. Think about the precise amount you want to achieve and set a realistic investment timeline to hit those targets. These key elements – your financial aims, target amount, and investment duration – work together to shape your investment choices and match them with your dreams.

Balancing Risk for Short and Long-Term Goals

As a rule of thumb, if you’re aiming for significant funds in a short time, high-risk investments might be the way to go. If you have longer horizons beyond a decade, you can mix high and low-risk products to craft an investment portfolio that suits your goals.

Your Winning Investments Strategy: Balancing Risk and Reward

Once you’ve mapped out your financial goals and investment timeline, the next move is to craft a well-rounded investment game plan. Explore the diverse investment options out there, weighing up safe, low-risk investments for steady returns against more adventurous choices with higher potential returns but increased risk. If you’re unsure, financial calculators or advice from a financial expert can help you figure out how much you need to invest to hit your financial milestones.

Align Your Child’s Financial Goals with the Right Investments

In this scenario, let’s consider an example where your daughter just turned five, and you intend to reach these goals for her:

Achieving a Financial Goal for Overseas Education Funding

To achieve a significant financial goal of S$200,000 for an overseas education fund, relying solely on traditional savings accounts may not be an efficient approach. Opt for investments in higher-yielding investment products that help your money grow without requiring a large initial capital outlay. For instance, consider investing S$10,000 in Syfe’s Core Equity100 and adding a recurring S$900 each month. This strategy could potentially yield around S$216,000 over 10 years.

Conservative Investments for Long-Term Financial Goals

Alternatively, if you have a conservative risk tolerance, exploring reliable endowment funds in Singapore, such as Gro Junior Saver (NTUC Income), Tokio Marine Kidstart, Aviva MyEduPlan, and Manulife Educate could be prudent in meeting your long-term financial objectives. These plans not only offer stability but also include valuable medical and life insurance coverage that other investment options may not provide.

High-Yield Savings Accounts for Optimal Returns

For establishing a yearly emergency fund target of S$500, you might consider utilising fixed deposits or selecting a savings accounts in Singapore with multiple benefits. These low-risk investments require minimal oversight. Institutions like Hong Leong Finance offer attractive fixed deposit rates, potentially reaching up to 3.8% annually. By depositing S$13,500, you could swiftly achieve your financial objective within a year.

Related: 5 Factors To Consider When Choosing An Online Stock Broker In Singapore

What Investments Are Available For You?

Navigate investments with meticulous planning. Consider factors such as risk tolerance, investment horizon, and the importance of diversification across different asset classes. These considerations can help optimise the growth of your funds over time, providing a solid financial foundation for your children’s future endeavours.

These four options offer varying levels of risk and potential returns that can align with your investment preferences and goals.

Endowment Insurance Plans

This life insurance option brings together a special mix of protection and savings. By merging insurance with a savings or investment component, parents, as policyholders, can enjoy financial safety and the chance for their funds to grow. In Singapore, certain endowment funds have caught the attention of parents, offering the potential for better returns than standard savings accounts.

Robo-advisors

Robo-advisors, the tech-savvy investment assistants, leverage algorithms to craft and handle a diverse portfolio tailored to your financial aspirations. Their user-friendly design caters to novices and seasoned investors alike. Opt for a robo-advisor for an almost hands-off approach to investing.

Check out the best robo-advisors in Singapore

Online Brokerages

The top online brokerages in Singapore offer efficient trading platforms for various investment products globally. You can diversify your portfolio easily with stocks, bonds, ETFs, and mutual funds through an online broker.

Check out the best online brokerages in Singapore

Savings Accounts

A savings account is a type of deposit account offered by financial institutions. It allows you to store your money securely while earning a modest interest. Interest rates for the best savings accounts in Singapore can vary from 0.05% to 3.88%. These accounts are ideal for short-term savings, offering a safe place for emergency funds and regular expenses.

Check out the best savings accounts in Singapore

Kickstarting your child’s financial future requires understanding the significance of early planning. Explore our Investing Resource Page for detailed information on various investment options, including Online Brokerages and Endowment Plans.

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