As a parent, you can’t care for your kids forever, but you can give them a priceless gift that lasts a lifetime.
By planning ahead for a college education, and by teaching your children the lifelong habits of saving and responsible spending, you can put them on the road to long-term financial security.
Here we take a look at how to save money for your kids, as well as great ways to inspire financial responsibility in your children as they grow.
Baby Steps to Big Strides: Smart Saving for Your Child
When our children are born, we take care of all their needs, but as they grow they become ever more independent. Much as we would like, we can’t care for them forever. Planning sensibly for your child’s future is one way you can have a positive long-term impact on their future.
Most important is planning for your child’s education, including college and perhaps even graduate school. The more you can do to help fund the expense of this critical career launchpad, the better the start in life you’ll be able to give them.
Don’t, however, forget about the potentially life-changing effect of being able to help your child purchase a first car or undertake an unforgettable post-graduate overseas trip.
You can also make a lasting impact on your child’s financial future by teaching them good financial habits. Making saving a habit and managing money sensibly are skills that too few parents pass on to their children.
How can you do this? Let’s start by considering some smart financial steps you can take today to help plan for your child’s financial future.
6 Smart Ways You Can Save Money for Your Child
Time is the most precious gift you can give to a child. When it comes to money, that means acting early so the money you invest will have longer to grow before your child needs it. Here are six ways to help make the money you set aside for your child go further.
1. Open a Kids’ Savings Account
Start your child’s financial journey by opening their own savings account. Banks and credit unions offer savings accounts geared to the needs of their youngest clients with special programs to encourage savings.
Put aside any money you can as early as you can, and allow your child to contribute once they are old enough. It’s a valuable first lesson in planning for the future.
2. Open a CD
Once you have a small nest egg saved for your child, consider shifting the money to a certificate of deposit (CD). You won’t have access to the money for the term of the certificate (anything from six months to five years) but you’ll earn higher dividends than with a typical savings account.
Jeanne D’Arc Credit Union allows you to open a CD with as little as $250, so you can start to grow your child’s savings sooner.
3. Open a Money Market Account
If you’re serious about setting money aside for your child over time, it may help to open a money market account. You’ll earn better interest on the money you set aside, but unlike a CD, you can dip into your cash stash if you need to.
4. Set Up a 529 Plan
If you’re ready to start putting money aside permanently towards education, then consider a 529 college savings plan. 529 plans are offered by many states (and independently by some banks and private colleges) and let you set aside money for college and some K-12 expenses.
529 plans allow you to invest after-tax earnings which grow tax-deferred. Withdrawals are free from federal taxes when they are used for qualified higher education expenses.. Some plans allow you to freeze tuition rates at in-state institutions at the level they were at when you opened your 529 account.
5. Open a Coverdell Education Savings Account
Likewise, a Coverdell Education Savings Account (CESA) offers tax-advantaged savings similar to a retirement account. You or other close relatives can contribute up to $2,000 a year to a CESA account, depending on your income.
Savings grow tax-free and can be withdrawn without penalty provided they are used for qualified education expenses, including a wide range of K-12 and college costs. Unused funds can also be transferred to benefit a second child.
6. Open a Traditional or Roth IRA for Yourself
Opening a retirement account for yourself can be a smart way to plan for your child’s future. Ensuring you have money to live on in retirement lets you free up extra cash for your child. And, both Roth and traditional IRAs allow you to withdraw money to pay for college costs.
8 Ways to Build Your Kids’ Money Skills
While you should do everything you can to start saving early and regularly for your child’s future, teaching your child to be smart with money, including saving and spending wisely, is just as important over time.
Here are eight great ways to help your child master critical money skills early on in life.
1. Set Meaningful Savings Goals
Have your child save towards a realistic goal, like a toy or a trip to a theme park. Watching their own money grow steadily, whether in a piggy bank or a kid’s savings account, can be a lesson in patience and persistence they will remember forever.
2. Provide an Allowance
Earning an income changes the way you think about money. Providing a regular allowance encourages your child to begin to make important choices about budgeting, spending, and saving—which will help them to start thinking about the value of money.
You can encourage savings habits by providing matching contributions to money they choose to set aside towards a future goal.
3. Talk About ‘Wants’ vs. ‘Needs’
Understanding the difference between things you need and things you’d simply like to have is a key part of financial prudence. Perhaps the best way to do this is to help your child create a simple budget including items they need as well as discretionary expenses.
4. Involve Children in Financial Decisions
Involve children in discussions about family finances, like vacation planning or major purchases. Demystifying these “adult” topics gives your child a practical window into financial priorities and decision making, plus provides a sense of empowerment.
5. Familiarize Online Banking and Mobile Apps
As technology advances, it’s important to teach older children about online banking and mobile money apps. These are powerful financial tools that need to be handled responsibly but can bring great benefits when used wisely.
6. Visit Your Credit Union
Demystify the world of money by taking your child with you to your credit union or bank so they can take part in financial transactions firsthand. Visiting a credit union, in particular, can be a valuable experience in the power of being part of a cooperative financial community.
7. Find Out About Financial Literacy Education
Credit unions also offer special financial literacy programs tailored to the needs of younger members. Jeanne D’Arc Credit Union offers comprehensive MoneyStrong financial wellness workshops to schools, after-school programs, community youth groups, adult programs, and senior centers.
MoneyStrong Seminars cover a range of valuable topics, including:
- Basic Banking
- Consumer Awareness
- Employability Skills
- Needs vs. Wants
- And more!
Start Small, Dream Big With Jeanne D’Arc
At Jeanne D’Arc we know strong roots and steady growth turn small beginnings into big results. That’s why we offer our members a full range of financial tools from CDs to money market accounts to IRAs, helping you make the most of saving at every stage of your financial journey.
It’s also why we’re committed to offering schools and teachers in our communities many resources including workshops, Save-at-School Days, and internships to help make financial wellness a lifelong habit for every student.
And, it’s why we offer our youngest members and their families access to our M3 Money Club kids’ savings account.
With no fees, no monthly minimum, and a generous interest rate, we make watching your first $5 turn into your first $500 an exciting lesson in the power of planning for a better future.
Click below to learn more!