Investing in your child's future through the power of compound interest is a smart financial decision that can provide long-term benefits. Compound interest allows the initial investment to grow exponentially over time, as the interest earned is added to the principal, and future interest is calculated on the increased amount.

For example, if you invest $1,000 for your child at an annual interest rate of 5%, after the first year, the investment would grow to $1,050. In the second year, the interest would be calculated on $1,050, resulting in a total of $1,102.50. Over time, this compounding effect can significantly increase the value of the initial investment.

By starting to invest early for your child's future, you can take advantage of the power of compounding. Even small, regular contributions can grow into a substantial sum over the years. For instance, if you invest $100 per month for 18 years at an annual interest rate of 6%, you would have over $40,000 by the time your child reaches adulthood.

It's important to consider various investment options such as 529 college savings plans, custodial accounts, and long-term investment accounts to maximize the benefits of compound interest for your child's future. Additionally, seeking professional financial advice can help you make informed decisions tailored to your specific financial goals and circumstances.

References:

• Investor.gov - Saving and Investing for Children
• U.S. Securities and Exchange Commission - Introduction to 529 Plans
• FINRA - 529 College Savings Plans