One of the best ways to prepare for the future is by saving money, especially when it comes to your children. The earlier you start, the better off your kids will be!
Read on for some great tips to help you save for life’s big milestones while also teaching your children great financial skills from an early age.
Why Do You Need to Start Saving for Your Child’s Future?
First, you should think about what your desired goal is. Do you want to save enough money to send your kids to college? Do you want to pay for their wedding, or pay to rent their first apartment? Whatever the answer, it will help determine how much money you need to save to reach that goal.
Then, determine how much money that would take and how often you can contribute. The amount of money required will depend on how quickly you want to achieve your goal. In many instances, the amount of time you are saving or investing money can be more consequential than the amount of money you’re putting in each pay period, so the sooner you start, the better.
Remember, it is still important to make sure your own savings needs are met (such as an emergency fund or a retirement fund) before, or in addition to, the money you’re saving for your child’s future expenses.
Options for Starting a Savings Account or Special Programs for Kids
It can be hard to think about saving money when you have so many other expenses to take care of. Fortunately, there are some great ways to specifically save money for your children.
One option is to open a special savings account just for children called a UGMA/UTMA account, which stands for Uniform Gifts to Minors Act and Uniform Transfer to Minors Act.
You open an account with a bank or credit union and deposit any amount of money into it. You can also add any stocks or bonds that you might already own. The best part about this type of savings account is that it will grow tax-free until your child turns 18, meaning they’ll never owe taxes on any interest earned during their childhood.
In addition, if you would like to name someone as a custodian for the account, such as yourself or another family member, these funds will not count towards your federal estate tax threshold. There are also 529 plans available if you want to invest in higher education.
These accounts allow you to take money out without penalty up to age 30 (depending on state laws) if you use the money for qualified education costs.
Teaching Your Kids about Personal Finance at a Young Age
Teaching your kids about managing and saving money will help them make better decisions in their adult life and be more self-sufficient when they are older. Here are some great tips for teaching your children how to save money:
- Start with an allowance. Allowance teaches children the basics of earning, spending, saving, and sharing their hard-earned money.
- Teach them how to use credit cards wisely as teens by letting them manage prepaid cards.
- Open a savings account and let them open one as well. Let them see their savings grow!
- Encourage your child to set financial goals based on their interests and help them track their progress.
It is essential to start teaching your kids about personal finance as soon as possible, no matter what stage in life you’re currently in or what type of income you have. Teaching them these things will give them tools they can carry with them for the rest of their lives. In addition, the earlier they start learning, the sooner they’ll grow into financially savvy adults.
Learn how to start saving money so that your child can have as many opportunities as possible in their adult lives. CashFurther is a community of people who want to improve their personal finances and interact with other like-minded individuals for support in their journey.
Join CashFurther today to get started improving your financial literacy, now and for the future!