I’m blessed with two beautiful daughters and I absolutely want the best for them. I want them to live a well-rounded life and never have to worry about money. I’m certain you want the same for your children. Who doesn’t?
While we were growing up, our parents thought getting an education was the way out. They believed they were giving us the best by making sure we went to school, graduated with good grades, and get fancy jobs. That was a good idea until economic recessions hit and getting a job became an issue all around the globe. In the world we live in today, a bus driver earns more than some university graduates. I remember how my dad used to threaten me with how I would become a pepper seller “if I don’t face my book”. News flash Dad, pepper sellers are not doing bad at all.
Anyway, the point is how do we make sure our children are empowered and shielded from the financial struggles most of us had to fight? How do we secure their financial future?
First of all, it is super important to teach children money management than it is to save or invest for them. Giving a young adult – who has no idea how to handle it – money is like giving a toddler a lighter and a keg of petrol. We all know about very rich individuals who passed on and their wealth and assets passed on with them, despite the fact that they had children who could carry on the legacy. It is, thus, highly important that we expose our children to money management from an early age. Read my previous articles on teaching children about money and how to go about it.
If you plan to invest for your kids, you have to look out for investment options that are safe and give reasonable returns. Also, because the investment is for children, long term investment options are more suitable. The caveat is if you’re opting for long term investment options, you need to monitor the investment to make sure you get the best out of them. If you don’t have the time to monitor the investment, hire an investment consultant.
Here are some investment instruments I advise parents and guardians to consider:
Money Market Mutual Fund
This is a pool of funds that invest in money market instruments, hence, it is almost risk-free. It yields interest every quarter and the interest is compounded over time. The only disadvantage to this financial asset is that money can be withdrawn after the first 30 days of opening the account (this is mainly because money market instruments are short-term financial assets). If parents can be disciplined enough to not withdraw money from this account over a long period of time, the return on the investment will be quite impressive.
N20,000 invested monthly for 10 years at an average annual return of 10%, gives N4.1 million. Sweet, right? The return on this is way better than what you’ll get from an insurance savings policy.
This is also known as Shares. They have been known to give the best returns over time. The only challenge is that investing in Shares is a bit technical. You have to be able to identify the right companies to invest in, and also know the right entry and exit price. Once again, consult an investment expert if you do not understand how to invest in shares.
Real estate involves investment in houses and other landed properties. There are different ways of investing in real estate. You can buy a piece of property, wait for it to appreciate, and then sell it off. You can buy a property, let or lease it out, and then put the proceeds in a risk-free investment option. Or you could buy a property and hand it over to your child at a certain age.
Your decision on how to invest in real estate depends on your investment time-frame, i.e., how long you’re looking to invest and a number of other factors. It is best to stick with viable and easily disposable properties. Identify places that show promising returns in terms of infrastructural developments that will come to such places in the nearest future, and position yourself to take advantage of it. It is important that you’re strategic with investments in real estate as real estate properties can be illiquid, i.e., difficult to sell/convert to cash. Given the real estate terrain in Nigeria, it is also of utmost importance that you do your due diligence before putting down money on any property.
Please note that insurance is not an investment, it is a protection against loss. But it is necessary to have proper insurance cover as a parent.
The two types of insurance covers I recommend are health insurance and life insurance policies. These insurance policies will protect your investments when emergencies occur. A health insurance policy will save you the cost of hospital bills and a life insurance policy – which a lot of people are not comfortable with – will cater to your loved ones when life comes calling. Let’s face it, death is a life event that no one can avoid and no one knows when it will happen. So why not prepare for it?
Life insurance policies, depending on your age and the insurance company, can be as cheap as N2,500 for a
N1 million cover. Getting a life insurance policy and a health insurance policy, and then investing in financial assets, in my opinion, is better than putting your money in an insurance savings plan, as these plans have unattractive returns.
In other climes, there are a number of investment options created specifically for children but the Nigerian financial market is still in its developing phase and aside from kiddies savings account of commercial banks, there really isn’t much to hold on to.