How to Save Money for Children

How to Save Money for Children

Raising children is expensive which can make setting extra money aside for their future challenging. Whether you want to save for their first car, their education, their first home, or even their retirement, starting as early as possible and saving a little bit here and there can really add up over time. This article provides 10 easy tips on how to save money for children.

1. Create a savings plan.
   The first thing you need to do is create a clear savings plan. This plan should include things like who you are saving for, what you are saving for, how much you want to save, and a timeframe for when you will hand the savings over to the child.

2. Open a separate savings account for each child.
   To help keep you focused on your savings plan/s, it is beneficial to open a separate savings account for each child you are saving for. Doing so will help you clearly track your progress and reduce the temptation to spend your money on other things. It’s also important to select a savings account that meets your needs. Some things to consider include an account that charges low or no fees, is easy to access, and pays a higher interest rate so your money can grow faster.

3. Make savings automatic.
   Consider setting up automatic transfers to your savings account/s on a regular basis. Examples include making transfers each time you get paid, weekly, or monthly. This set-it-and-forget-it approach saves you time and minimizes the temptation to use your money in other ways.

4. Sell items as your child outgrows them.
   The needs and wants of children, especially young children, change quickly. As you child moves from one phase to the next, sell items they outgrow or no longer want or need. Then, deposit the proceeds into their savings account. Examples of items to sell include cribs, strollers, clothing, toys, books, sporting equipment, and even prom dresses.

5. Gift money instead of things.
   Help teach delayed gratification early by gifting money instead of things. Make deposits into your child’s savings account in honor of holidays, birthdays, or other special events. This doesn’t mean you can’t give them a physical gift but consider putting all or part of your gift budget into their savings account instead of toward something they will quickly outgrow. Money never goes out of style, and your child will be thankful to have more of it in the future.

6. Don’t underestimate the value of the piggy bank.
   Whether you use an actual piggy bank or a coin jar, extra change can really add up over time. When cashing in your coins, deposit this “extra money” into your child’s savings account. It’s an easy way to build their balance without impacting your budget.

7. Leverage financial windfalls.
   If you receive a windfall such as a tax refund, bonus, or birthday check, put some or all of it in your child’s savings account. While it may be tempting to spend these windfalls foolishly, imagine they joy you will feel in reaching your savings goal and handing it over to your child in the future.
   
   
8. Invest in a 529 College Savings Plan
   A 529 College Savings Plan is a state-sponsored investment plan that provides tax-free growth and withdrawals for qualified education expenses like tuition, books, and room and board. While contributions are made using after-tax money, many states offer a state income tax deduction or credit for 529 plan contributions. While there may be residency restrictions for tax benefits, you are allowed to invest in any state’s 529 plan.

9. Contribute to a Roth IRA.
   Roth IRAs are an option that can be used to save for retirement but can also be used for a first-time home purchase and for qualified education expenses such as tuition and fees. Like a 529 College Savings Plan, Roth IRAs are funded with after-tax dollars and grow tax-free.

10. Teach your kids about saving and managing finances.
    While you are saving for your child’s future, it’s important to teach them sound financial habits along the way. Examples include how to save money, smart spending habits, the importance of building and maintaining credit, and saving for their own retirement. Doing so will help ensure that when you hand over the money you’ve working so hard to save for them, they will appreciate it and use it wisely.

Saving money for children doesn’t have to be hard or complicated. Saving even small amounts over time can really add up. If you want to start saving money for a child but aren’t sure where to start, a Personal Banker at FNBO can help. Call or stop by a branch location today.