How to make an investment for children
is something that every responsible parent will face. First, the
financial goals and needs should be addressed so that a plan may be
identified and followed. Valuable Investments require using the process
of earning money, saving it and then investing that money. One of the
most important things to learn about money is how to live below your
means and to say "no." Saying "no" to extravagant things that you don't
need will set an example for your children that they can use for the
rest of their lives.
Determine your financial goals. Most often, there are long term investment goals for children set by their parents. First, learn to not waste any resources and do not purchase things that you cannot make adequate use out of. The money you don't spend will be the money that can be saved and invested. Decide to choose an investment strategy that can glean a 10 percent annual return on valuable investments. Some of these may garner a 15 percent annual return if they are chosen and handled well.
Devise a diversification and asset allocation plan including around 10 percent cash, 65 percent stocks and 25 percent fixed income. Start with a certificate of deposit (CD) with fixed-income investments.
Saving is Investing
One overlooked factor of investing is saving. Because the interest rates are low, people often don't determine their worth properly. While there may not be the best return, saving serves as a safety net of sorts when done well. Compound interest is one of the most valuable tools for investment. Small amounts of money can also have an amazing amount of potential. Teach your children about putting a percentage of their allowance or income into the CD so that they are comfortable with it and regularly have saving as an active part of their lives. This is the most valuable thing you can teach them financially.
Keep records that are easy to find and maintain. As soon as is practical, show them the documents and encourage them to participate in the financial gains that can be expected.