Welcome to The Money Coach, a Times of Malta column where readers can ask questions about life's money issues. Send your questions about personal finances, inheritance, gifting or other personal finance topics to moneycoach@timesofmalta.com.
Dear Luca,
My partner and I have been blessed with a newborn child, and we're now thinking seriously about our child's financial future.
We have set aside a small lump sum and are contemplating how best to use this. Should we open a dedicated bank account for this money? If so, could you shed some light on the key factors we should consider in choosing the right account?
Over the longer term, we are keen to understand the ideal approach to saving for our child's future. Specifically, we are uncertain about how much we should aim to save each month. This decision feels particularly weighty, and we want to ensure we are making the best possible choices to secure our child's financial wellbeing.
Your guidance on these matters would be valuable to us, and we thank you in advance for your time and expertise.
Warm regards,
A Concerned Parent
Luca responds:
Luca responds,
As a father of two young children myself, ages four and two, I completely understand the desire to provide the best possible life for our little ones. It's a journey I'm familiar with, and I'm glad to share some insights that might help you go through this important aspect of parenting.
Regarding your short-term query about the lump sum, normally when thinking about child savings it’s for at least five years or more. Having said that, there are always flexible options that allow you to withdraw money whenever you want, and current interest rates are good compared to what they were just a few years ago.
There are also many options when it comes to longer-term saving accounts. You'll find plenty of local financial companies advertising such accounts. You can also choose to save in an investment account. While I cannot offer you direct investment advice, I suggest looking for an account not just with a good interest rate, but also with low fees and a measure of flexibility in terms of access to funds.
Also, keep in mind that you can always invest yourself for your child, rather than being tied to one managed savings account. If you opt to go down that route, I suggest you speak to a qualified financial advisor to present you with all the possible options. These past few years such options have increased and I am sure you can find something which can be sustainable over the long run.
When it comes to saving monthly, this can be done from as low as €50 per month in many cases.
How much you choose to save depends greatly on your personal financial situation and goals for your child. A general rule of thumb is to save what you can comfortably afford without straining your family's day-to-day finances. Remember, it's not just about the amount but the habit of saving consistently that counts. For my family, we decided to save a percentage of our income, and adjusted that as our salaries changed, to ensure our contributions remained sustainable and meaningful.
Now, let's talk about practicality and emotions. As a parent, it's natural to want to give your child everything. However, it's important to balance this desire with the reality of your financial situation. My wife and I often discuss our financial decisions, focusing not just on our children's immediate needs but also on long-term goals like education and life experiences.
Here are a few questions that have guided our discussions:
- How do we envision our child's future, and what financial support will they need?
- What are the most important values we want to teach our child about money?
- How can we balance saving for our child with our other financial responsibilities?
- Are there any specific financial products or investments that could benefit our child in the long run? We ask this frequently, as every so often new investment products come out for consideration.
- How can we ensure our financial planning includes flexibility for unforeseen circumstances?
Remember, financial planning for your child is not just about numbers; it's about setting a foundation for their future and teaching them valuable life lessons along the way.
While saving for your child's future is important, don't forget to enjoy the present moments with them. Regular check-ins on your financial plan will ensure you stay on track without missing out on the joys of parenthood.
Luca is the founder of the Money Coaching Hub. Email him your financial questions at moneycoach@timesofmalta.com
Disclaimer: This column is intended to provide general information on various topics related to personal finance. The information provided is for educational purposes only and should not be construed as personalised financial advice for your specific situation. Financial decisions are highly individual and can vary greatly based on your unique circumstances, goals, and risk tolerance. The author of this column is not authorised to provide financial advice. Before making any financial decisions, it is recommended to seek professional financial advice from an authorised financial advisor.