The word planning in itself talks about a long-term situation and when we combine the word Finance with the same then it tends to get even longer.
The cost of raising a child born in 2015, from birth till 17 years of age is roughly $233,610, so yes you need to start saving today!
And if you’re planning majorly for your kids’ Education then you need to understand that: How much is the average cost of college?
On an average, the cost which differs for various Universities comes up to be between$5,000 to $50,000 per year for tuition fee and Costs for food and living are normally between $8,000 and $12,000 per year.
This cost will differ if your kid is looking to join a university in some other state and will sum up around $24,930 per year for out-of-state residents attending public universities and $33,480 per year at private colleges.
Most of the top American Universities (like Yale and Harvard) will typically cost around $40,000 a year.
And to be able to achieve funding of this sort you need to start saving even before your kids come in this world.
So, it’s better to start with the planning and to help you with the same, please find the below mentioned ways via which you can start Saving Money for your kid’s bright future.
1. Invest Early
Question: How to Save Money for your Kids?
Answer: The very first step that you need to take when you’re planning to save for your kid’s future is that you need to start investing at an early age.
If you’re married and are planning to start your family then this is exactly the time when you need to start saving for your kids.
But also make sure that your own finances are sorted before you plan on taking the next BIG step, because it might seem easy but kids are a huge responsibility, ask your parents or ask your friends who have kids.
2. Start Saving with a Piggy Bank
The next step in Saving money for your kids is about teaching your kids about the importance of money at an early age.
So once your kid reaches 5 years of age make sure that you hand them a piggy bank and ask them to fill it up with coins and dollars till there is no room left.
Your kids can earn this money from you for their Piggy bank, so you can start giving your kids small chores according to their age, like keeping their toys at one place, setting up dinner table and taking out the garbage once they grow up.
These small tasks will help your kids in realizing and learning the fact that money is hard to earn.
3. Set up Saving Targets
Once your kids begin with the process of saving money, the next step that you need to take is to start giving them small targets.
If your kid wants to eat ice cream on the weekend then make sure that your kid saves up that money and pay for themselves.
This can further turn into a year-long goal where you can ask your kids for saving money for the favorite toy that they want for their birthday.
4. Sell Things as your Kids Grow Up
Next step is to plan about your family, so if you’re not planning to increase your family size then you can start selling your kids stuff as and when they grow up.
Crib, strollers, clothes, toys and items in the list are endless for the things which are no longer of any use for your grown-up kid.
So, help your kid in setting up a yard sale and help them in making money from their own stuff. You can save this earned amount and ask your kids to encash the same for their prom or any other such big event.
5. Avoid an “Open Wallet” Policy
Don’t give your kids an open line of credit, even if you can afford to spoil them every once in a while. Your kids need to learn that money does not grow on trees and it takes a lot of efforts in earning pennies.
And also make your kids realize that the things that they want are even worth spending the amount or not. So, don’t buy anything and everything for your kids, instead let them buy stuff for themselves, from the saving that they have.
6. A 529 College Savings Plan
The best way to start saving early for your kid’s educational requirements is through a 529 Savings Plan.
This is a state-sponsored saving plan that comes with tax-free growth and your family and friends can also make contributions in your 529 Savings Plan.
With this plan, you make contributions and invest money and when the time comes to pay college-related expenses such as tuition, book, room etc, you can withdraw money tax-free.
But with a 529 savings plan you can only pay for your kid’s educational requirements and if you use the funds for any other purpose then it might result in a penalty.
7. A 529 Prepaid Tuition Plan
Next option to save money for your kids can be a 529 Prepaid Tuition Plan.
Many states offer prepaid tuition plan which let parents buy tuition at today’s rates, this locked tuition rate might be a slightly higher rate than the current prices but is definitely lower than future prices.
You can use this prepaid tuition at any school, including private colleges, anywhere in the country, also make sure to go through the rules and regulation which may vary according to different states.
8. Custodial Accounts
Custodial accounts are usually managed at a bank and these are placed in your kid’s name.
There are 2 Custodial accounts which are well known for savings; Uniform Gift to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA).
The only drawback with these accounts can be that when your child reaches adulthood i.e. 18 to 21 years of age (Depends on your state rules), then the parents will no longer have access to these accounts.
You kids will be the sole owner of these funds and will be able to use the funds as and when they like, so it is always advised that you should not keep bigger amounts in such accounts as they’re taxable as well.
Your kids can use these funds for other purposes as well when they are no longer minors, so all the funds might not get used for education.
9. Retirement Accounts
This may seem unusual but setting up a retirement account for your kid has a lot many benefits, as these accounts can be used for just about anything.
Roth IRA withdrawals can be done tax-free as long as it is solely from the person’s contributions and not from earnings.
Let’s understand better by an example, if you contribute $1,000 every year for 5 years then you will be able to take out $5,000 the following year and it will be tax-free and penalty-free.
10. Brokerage Accounts
There is an amazing option for you to save money for your kids with a Brokerage Account.
In brokerage accounts you invest after-tax income, this is a dedicated account for your kid which provides maximum flexibility and the potential for high returns over long term.
You can set up an account directly linked to your paycheck so money will get transferred into the account at each payment period.
11. A Dedicated Child’s Savings Account
There are various online savings account which are now providing a better interest rate, so you can open up a savings account in the name of your kid.
Kid’s savings account also offer better options as there is no fees and better interest rates along with other facilities.
But the availability of these accounts depends on the state you’re living in along with the bank that you want to operate with.
So, checkout for a kid’s Savings accounts and start your savings as early as possible.
12. Your Employer’s College Savings Plan
Some companies offer direct deposit into a college savings account, this makes it easier for you to Save Money for your kids’ education.
A lot many perks and benefits are provided by various companies and contributions for your kid’s education is the best one amongst them.
So, ask around from friends in your company and avail most of the benefits provided by your company.
And companies also giveaway Scholarships for their employee’s kids so contact the Human resources department and get to know more about it.
13. CD Ladder
Saving Money for your kid’s is a long-term process so, if you’re looking for a safe source for investment then Certificate of Deposit (CD) is a great option for you.
With a CD ladder, you purchase multiple certificates of deposits, which all come with different maturity dates and interest rates.
This means that when a CD matures, you can roll it over into a new CD, and you can keep on repeating this process for as long as you want to keep saving.
14. Plan Finances along with your Kid
Apart from opting for various money saving options, you also need to realize that as your kids are growing you need to make them understand the importance of Money.
So, when your kids reach a sensible enough age make sure that you start discussing money matters with them, about investments and about future planning.
Also, keep on educating your kids about Finance, they need to understand about taxes and savings at a much younger age to start implementing them once they are 18 and above.
Making healthier financial choices at a younger age will help your kids in NOT ending up with debt.
Every parent wants the best future for their kids and in order to make that happen Financial Stability is of utmost importance.
And to answer your question: How to Save Money for your Kids?
All the parents need to realize that if you are planning for a Financially stable future for your kid’s, then you need to make sure that you have Financial Stability for yourselves.
Well, whatever your requirement is we are together with you in your journey and are here to help you solve your Problems.
Just type in the magical words and get started, as we understand that EVERY BUCK COUNTS!