Opening a Savings Account for Your Child
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The other weekend ING Direct had a special on new accounts, including a $27 bonus for opening a kids savings account.
Gift Money = Savings Account
We decided to go ahead and take advantage of the deal. We opened a savings account and used gift money our daughter got from her Nana (great grandma).
Why Save Money So Early?
What are we saving for? We honestly don't have an idea right now. We're using it to hold gift money that our family and friends have gave to our baby.
It's small now, but we're looking at options for the account in the next few years.
There are some ways we can use the money for our daughter that I can think of, such as:
- General Savings: I think the savings account at the very least will always have a chunk of money in it for savings. I'm think more for long term goals vs a toy fund.
- Car Fund: One day our baby will get old enough and responsible enough to want to drive. We could use her little stash to cover the car expenses.
- College: When the balance has a bit of a buffer in there, we may take a portion to open up either a 529 College Savings Plan or a Coverdell Education Savings Account.
- Investing: Perhaps when she gets old to want to understand the basics of investing we could use a little bit of this money to open an account.
Whatever we decide to do later, we'll discuss it together. Our hope is that our daughter can use this account to not only learn about finances, but also responsibility.
Good news is that we got some time – she's only 4 months!
Thoughts on Saving for Your Kids
I'd love to hear from other parents. How many of you have opened up a savings account for your child? What money goes into the account?
We opened an account for our boy after his Christening (kind of a big deal in the Greek Orthodox world)…all his cash goes there. I am hoping that one day it’ll buy him something fantastic when he gets older.
Great plan Evan- saving up his gift money.
My family had a credit union savings account for me when I was a kid. I didn’t buy a lot of stuff, so my mother put most of my gift money in there. I admit I kinda forgot about it until she brought up the topic a couple years after college. Now it’s pretty much paying for my wedding!
Thanks for sharing that plan as well; it would be nice to have money set aside for her wedding.
Grandparents have bought our kids savings bonds. We are looking to open of 529 plan, but haven’t pulled the trigger quite yet.
If you decide to open a 529 plan, please let me know how the process went for you. We’re thinking of finishing off our student loan debt before opening an account for our daughter.
When my son was born in 1996 I purchased EE Savings Bonds with money he received. I’ve continued to purchase bonds but instead of EE I’ve purchased (and converted) all of his bonds to I Bonds. At an interest rate of almost 9% they’ve done well. I Bonds can be ‘owned’ by minors whereas many investments must be held by someone over 18. Check out Treasury Direct website for great information ~ http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_ibuy.htm
With the interest rate down to a little above 3%, I Bonds aren’t all that attractive right now so I’m holding his savings in an online savings account. At 15 my son is spending money for things like fixing up a truck that his dad says will belong to him ‘someday’. He has little value for saving right now. We have an agreement that he saves 20% of everything he earns/receives in my household (his dad and I are divorced) and then together we decide where to invest when the sum reaches $50 in the past for bonds.
There are many programs that allow you to automatically invest in increments as small as $50 or more monthly but you must commit to monthly deposits. I’ve been meaning to talk with my son about this and your post has spurred me on to have a conversation with him today. I’m going to propose that he contribute $10 a month and I will contribute $40 until he turns 16 and then he will need to contribute 30%. We’ll see how this discussion goes . . ..
I didn’t know that about bonds Darris, thank you!