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Starting Our Child on the Right Financial Path

by Ryan Guina

My wife and I recently had our first child, and we are still adapting to being parents. In addition to caring for our child, there is an assortment of things we had to do, such as add her to our insurance, get her a Social Security Number, add her as a beneficiary to our insurance policies, name guardians, etc. We also opened a savings account for her. I think it is important to start your children off with a strong financial foundation, regardless of age.

Starting our child on the right financial path

Opening a savings account. Our daughter is two and a half weeks old and she already has a high yield savings account. I already had an account with Capital One 360, so once I had her Social Security Number, all I had to do was apply for a joint account, and it was good to go.

Our daughter is obviously too young to understand money, but I think it is important to have her money working for her as long as possible. Our plan for now is to place the monetary gifts she receives for her birthday, Christmas, etc. into her Capital One 360 account. Compound interest and regular contributions should help her account grow to a sizable sum by the time she is ready to use it.

When she grows older we will come up with a plan to teach her about money, give her an allowance, and teach her about saving for short term and long term goals, giving, and spending. But that should be several years down the road. For now, everything will go into her savings account.

College Savings. Next on our list is to open a 529 College Savings Plan for her. College is still 18 years off, but based on how quickly today’s tuition rates are rising, I shudder to think about how high they will be when she heads off to college! There are two tax advantaged college savings plans to choose from, the 529 Savings Plan and Coverdell ESA. These college savings plans offer tax advantages when the money is withdrawn for qualified educational expenses.

The goal is to start her off right, not do everything for her. It may seem like we are doing a lot, but I know how important it is to learn about finances and get off on the right foot. Our long term goal is to teach her how to be responsible with her money so she can make wise decisions when she is on her own. In the mean time, we will put the instruments in place and start her off with good habits.


Published or updated April 12, 2013.
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{ 16 comments… read them below or add one }

1 HisHersMoney

Are you able to open a Roth IRA for a child? Not sure, but if so the compound interest over the next seventy years or so plus tax free withdrawals would be great!

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2 Ryan

His and Hers, Our child would need to have earned income to open a Roth IRA for her. She doesn’t have a job right now, and few children do (though I know a couple parents who have gotten modeling jobs for their children and they invested that in tax deferred investments and college savings accounts). As for now, we are limited to taxable savings accounts and college savings accounts. But I think it will be enough to get her started on the right path. :-)

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3 PT Money

Good moves, Ryan. She will be blessed to have such financially sound parents.

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4 My Journey

HisHersMoney,

To set up a Roth you need earned income. I think it is more important that they set up a 529 asap and push all gifts that come in through the parent’s bank account and then into the 529 (you get a tax deduction in most states) and the temptation to use the kid’s college money is taken away.

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5 Ryan

My Journey, the college savings plan is pretty much our plan for now. I also plan on putting a little away for her savings so she can have a liquid account as well. I’m sure there will be a time when she needs some money.

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6 Miranda

Looks like you’re off to a great start! Or at least your daughter is :) Best of luck.

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7 Lynn

We decided to do the same with our twins but we didn’t start until they were 6 months old (they are 2 1/2 now). We opened ING accounts, coverdells and 529’s for both of them. We are slow going with the 529/coverdells and are only putting $50 into each of them each month for both of them. Once we completely tackle our debt we will ramp these up but for now its just slow and steady. Our goal for the ING accounts is to put in $1K a year for each of them so that they will have $18K by the time they are 18. I am the primary account holder (and am paying the taxes) so I will decide when they get the money. LOL! We haven’t decided whether or not we are going to tell them about the money. If we decide to tell them then we don’t know when we will do it because they will just think they can spend it on anything. Once they are old enough to save money for themselves we are going to open up another account that they will be able to access when they want.

Good luck with your saving. :)

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8 Ryan

Lynn, Sounds like you have a good plan going! and you are doing the right thing by tackling your debt before putting more money away for them to use later. They will always have the chance to earn money later, or borrow for school. It’s important to slay your debt first.

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9 Melanie

That is great work that you are starting so early. We were a little later getting started in the game, but we have picked up the pace now. We have savings accounts for both children, as well as RESP’s (The canadian version of the 529). As well, my son is turning five next month and will begin getting an allowance. This will begin the trend of discussing money and savings openly and I hope he will make smart decision with his money as he gets older.

Enjoy your newborn, they are fantastic!

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10 Ryan

Melanie, Glad to hear you have gotten started already as well. I know a lot of people who don’t put any thought into it and as a result, their children expect their parents to be a source of money whenever they want it. hopefully I will be able to teach our daughter how money works, and how to work a budget, etc.

We are enjoying her. She is a little blessing. :-)

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11 Miss M

This is wonderful, I wish all parents were as concerned about their children’s financial future. I’m still a few years from having any of my own but I already read all I can about starting kids off on the right financial footing. My parents taught me nothing about money, I won’t make the same mistake. Hope you’re having fun with her!

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12 Ryan

Miss M, We are having fun with her. She is a little blessing. :-)

My parents taught me a little about money, but not too much. I just got interested in it as I was growing up and took it upon myself to learn more about it. This blog is a result. ;-)

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13 Matt Jabs

Man I wish my parents would have had this passion for me when I was being reared! She stands to be blessed with financial wisdom from you which should give her a HUGE leg up in this world.

I say bravo!

“The goal is to start her off right, not do everything for her.” – I believe this is the toughest part of the equation… maintaining this balance – but since your goals are to teach her how to manage it & not simply to give it to her – you should succeed nicely.

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14 Ryan

I hope so, Matt. My parents opened a saving account for me and gave me an allowance when I was growing up, which was a good start. But they don’t have quite the same passion as I do regarding money. Hopefully I can teach my daughter a little more than I learned as a child. :)

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15 Blake Erickson

Wow, ever since my daughter was born 3 months ago I have off and on thought about opening a savings account for her. Thanks for the extra reminder! While I barely even have enough for me to put away, I think that no matter how small the contribution now it will definitely pay off to at least be in the habit of contributing to her college fund so that when I do make more money I won’t waste any time.

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16 Ryan

Blake, even if you can’t put much away, it will set up a good habit of saving money, and she will thank you later. :)

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