Investments are an important part of any family’s financial health. They help give you the security of knowing you have something to fall back on. And they can teach you and your children how the financial world works. Even if you’re a low-income family, you can still find investment options that work for you and your children.
Savings Accounts
This is one of the most popular investment options. Anyone in the family can open a savings account, even newborn children.
Savings accounts have many different interest rates. For children, the interest rate may be fairly low, perhaps 0-2%. But if you’re only teaching your children the importance of opening an account and saving money, then the low percentage shouldn’t matter.
Savings accounts with higher interest rates usually come with fees. But they can be waived if you maintain the minimum balance.
Investment Retirement Accounts
These types of accounts are also known as IRAs. The money in an IRA can grow without being taxed. Sometimes the taxes are deferred; other times the account is completely tax-free.
There are several different types of IRAs, but the two most popular choices are Traditional and Roth. A Roth IRA is a retirement planning account that is tax-free as long as some conditions are met. A Traditional IRA doesn’t need a minimum yearly income amount to contribute. However, the money will be taxed once it is withdrawn from the account.
Both Traditional and Roth IRAs can be opened for minors. Although they cannot legally sign binding contracts, at certain financial institutions parents are allowed to sign for them in their stead. It might be helpful to seek professional advice on this issue, and authorities like Mr. Brian Prince can help you with any investment or banking questions you may have.
How to Find Family-Friendly Banks
Just like you would shop around for the best rates on anything you would plan to purchase, you need to shop around for banks. Try not to go with a bank that offers complicated financial investments to their customers. A bank that only does a few things, such as loans or mortgages, can focus better on customer service and your needs.
Look for a bank that doesn’t have too many add-ons with your account, like extra insurance fees. A bank that has reasonable or no fees should be your first choice. Remember that you’re investing. You don’t want to pay more in fees than you would get back in annual interest. You’ll actually be losing money instead of making it.
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