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 These college savings plans offer tax advantages when the money is withdrawn for qualified educational expenses.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.