My wife and I opened a savings account for our daughter when she was born. Of course, she didn’t have an immediate need for money, but eventually we want to teach her the concept of money, get her started on an allowance, and help her learn to set and achieve savings goals. In the mean time, we want to grow her savings account as quickly and painlessly as possible. And we are taking a multi-tiered approach to her savings.
Help Children Reach Their Savings Goals
Saving money is great, but it works best with a savings goal in mind. There are a couple reasons for this, but mostly because it is easier to save when you have a defined purpose. The most common savings goals for children are cash savings and college savings. So you want to make sure you are saving money in the right type of account. You also want to save money for your children without hurting your own financial goals. The following tips offer a few recommendations for the best places to save, and a few ways to easily save money without stressing your budget.
Save More Money for College without Breaking the Budget
Saving for your child’s college is an excellent goal, but it should never come at the expense of your retirement or other financial needs. Remember, you or your child can always borrow for college, but you can’t borrow your way through retirement!
There are two main types of college savings plans you should consider – the 529 college savings plan and the Coverdell Educational Savings Accounts (ESAs). Both have tax advantages that allow you to make contributions now, let your investments grow tax free, and make tax free withdrawals for qualified educational expenses. Some states even offer additional state income tax exemptions for 529 college savings plans – check with your state for more information.
Make college savings painless. College savings doesn’t have to break your budget. You can set up an automatic transfer to your child’s college savings account for a small amount every month – something around $25-$50 per month can make a substantial difference if you start early enough. College savings plans also allow other people to make contributions on behalf of your child, which is a great way to give or receive gifts.
Another way to increase college savings is to use Upromise, which is a free rewards program that pays cash rewards which can be used for college savings. You can also link your Upromise account to a Sallie Mae Savings Account for a bonus rewards program, good for an annual 10% bonus on rewards earnings.
Additional college savings information. You should compare 529 plans and Coverdell ESAs before opening an account to determine which plan is the best option for your child’s college savings account. Here is more information about opening a 529 College Savings Plan and opening a Coverdell ESA Plan.
Help Children Save Money in Savings Accounts
I’m a firm believer that every child should have a savings account. We opened one for my daughter a week after we brought her home from the hospital and received her Social Security Card. We have been making regular contributions to it ever since then. Once she is older we will work with her to better understand how savings works.
There are several ways you can help children increase their cash savings, and the most effective ways include giving them savings goals and a hands-on experience. An example would be matching savings contributions or requiring a portion of their allowance goes directly toward savings, then taking them to the bank each month to deposit their money. The more hands on you make the experience, the bigger the impression it will make.
How to make savings painless. In addition to giving your children hands on experiences, you can set up an automatic transfer. Again, something small, like $25 per month can make a big difference over several years. Many online savings accounts make it easy link a child’s bank account with their parent’s account and set up automatic transfers.
Put cash gifts into savings. Most children don’t have large spending needs. So it’s easy to deposit cash gifts from friends or relatives. As children get older, they will naturally want to spend their gifts. So you can allow them to make more decisions as they mature. You can let them spend the money all at once, suggest they save a portion and spend a portion, or any combination. The key is saving when possible, but also allowing your children the opportunity to gain experiences, and even make mistakes. It’s better they make money mistakes and learn from them while they are young, versus making them for greater stakes when they are older!
Use Smarty Pig for savings goals. Smarty Pig is a savings account designed to help people reach savings goals. It has numerous cool features, chief among them being one of the highest interest rates in the nation. The idea is to create a Smarty Pig account, set a savings goal and set up an automatic transfer. This is a great tool for teaching children about savings, and makes it easy to track your progress. There are a couple other added benefits: You can redeem your savings for discounted gift cards at a fairly substantial savings to make your money go further, and you can allow other people to help fund your savings goals, making this a great option for grandparents and other relatives to help children reach their savings goals.
Use bank referral bonuses, such as the Capital One 360 bonus. Many banks offer a sign up or referral bonus for opening a new bank account. One such bank is Capital One 360. They offer solid interest rates and many other great features. One of the benefits of Capital One 360 is the $25 Capital One 360 referral program. When you refer a new customer to Capital One 360 and they open an account with $250 or more, they get a $25 bonus, and you get a $20 finder’s fee. You can choose which account receives the referral bonus, so if you have a have a child you can send the referral bonus to their account. $20 doesn’t sound like a lot, but it can add up quickly, especially when you use the referrals to open up multiple accounts within the same family and then refer family members and friends. Every little bit helps!
Do you have any easy ways to help children save money for college or other savings goals?