Following our article on the expense categories to prepare before having a child, the next question is "how do we build the money in time without wearing ourselves out?" This article is about building a long-term fund for your children — using time as the ally, rather than effort alone.
Separate the goals by timing — don't treat them as one lump
Money for children is not a single goal but several falling due at different times: next year's school fees, secondary school in ten years, university in eighteen. Separating the goals lets you choose the right tool. Money needed soon belongs somewhere stable and liquid; money not needed for a long time can bear more volatility in exchange for the chance to grow.
Let time do the work for you
The most distant goal, such as university funding, is where compounding has its opportunity. Starting to save from the child's birth at a manageable monthly amount usually reaches the target far more comfortably than starting when they enter secondary school and having to accumulate a large sum in a hurry. The simple principle: set up an automatic monthly transfer into the child's account, separate from the household money, and let consistency accumulate the result.
Mix the tools according to their jobs
No single tool answers every goal. The usual approach is to mix: deposits or low-risk funds for near-term goals, long-term mutual funds for distant ones, and insurance in the role it does best — an endowment with survival benefits timed to the start of university, giving certainty under the policy conditions. That suits anyone who wants an amount that must definitely be there, in exchange for a return that is as specified. The proportion of each tool depends on the risk the family can bear.
Protect the plan with cover on the earner
What makes a children's plan fail-safe is not the return but the continuity of the money going in, which depends on the parents' income. Life cover on the earner at a sum spanning the long-term cost of raising a child, together with a rider such as waiver of premium on disability, is the mechanism that keeps the plan running even if something unforeseen happens to the person who built it. That is the difference between a plan that will "probably be fine" and a plan with something behind it.
Review annually, and teach your children along the way
Education costs change, and so does a child's path. Set a date once a year to review whether the amount saved still matches the target. And when your children are old enough, involve them in this money so they understand how the household plans for them. Children who see their parents planning usually grow into adults who plan for themselves — an inheritance no less valuable than the money.
In short
A good children's fund separates goals by timing, starts early, mixes tools according to their jobs, and has the parents' cover behind it. If you would like to work out your own family's real numbers, let's sit down and think it through together.