You can set up a trust fund for your kids to give them some security for the time when they come of age. It may seem like a long way off, but if you have set up a trust fund for your child when they are young, it will mean that money is there ready for them to help transition to university, move out of home, get married, buy a house, or take a gap year… or any of the other things that young people often do.
You can set up a trust fund with conditions that the child cannot access the money until they reach a certain age, usually 18 or 21. A reasonable investment rate in a trust fund will allow you to double the saved money every 8 years. Therefore, in theory, it would be feasible to double the saved money three times if the account is set up at birth and released when the recipient is 21 years of age.
Family members can be invited to make contributions as they wish, and many grandparents choose to help their grandchildren in this way by making small regular contributions, or annual gifts according to birth/Christmas times, or whenever they have some spare cash.
Encourage extended family to choose this option over buying your child yet more baby clothes and kids’ toys.
Chances are your household is already overrun with such items, and the money would be put to far better use being saved (and grown) in a trust account for the grandchild.
Of course, if you plan to let your child receive a money from their trust fund when they come of age, you need to spend the meantime educating them about how to manage money. Not just that money, but money in general. Look at Paris Hilton for an example of what not to do! Kids who watch their parents spend money like water will be more likely to just blow their trust fund money when they get it. Kids who watch their parents manage money well, making regular savings contributions, staying out of debt, and making wise and frugal purchases, will grow up emulating those good money-management skills.
Of course, if it’s a managed fund, you can make any stipulations you wish about what the recipient must do before they receive the money. For example, you may wish them to be able to hold down a job for 12 months or more before the money is released to them, making better sure that they are capable of working consistently to make their own earnings. Other milestones you might stipulate before they can access the money is that they must have made a certain amount of money, or perhaps put a down payment on a house.
Finally, some parents choose not to tell their child about the trust fund set up for them. This sidesteps the issue of a sense of entitlement and “when I get my money I will do such-and-such” mentality. Keeping this information from your children does not negate the need to teach your kids about money, and it still allows you to present them with that money if and when they show the ability to manage money well – it will come as a bonus to them instead of something they were counting on to get by.