Giving Your Kids The Gift Of Savings

Start Saving While They're In The Crib
Start Saving While They're In The Crib

Breaking It Down, One Penny At A Time

I can remember watching TV shows as a child where parents put away large sums of money for their children’s college fund. We may have all heard this from time to time growing up and even been fortunate to be that child - not having to work like mad to pay for school. For the majority of the population however, this wasn’t the case and many watched their dreams of college float away unless you qualified for financial aid and student loans; which only further put you in debt by the time you finish college. Here is a great way to make sure that rather you have a small child, teenager or child on the way that you have the ability to provide for them.

First Things First...

If you are working and your job allows direct deposit you are already well on your way. Decide how much of your paycheck you can afford to contribute to your child’s account. Fifty dollars /week is a good starting point but something you need to decide rather you are comfortable with.

Next open a custodial savings account for your child. You will need to provide the bank with proof of your child’s social security number and possibly a copy of their birth certificate. In fact, many banks such as Bank of America allow you to open accounts up right online while funding the opening deposit from another bank account with from their bank or another.

Once the account is open ask the bank for a direct deposit form. Most employers require a voided check for checking accounts and some form from the bank for savings accounts. If you have opened the account online, you can easily call the bank and ask them to confirm the routing number and account number and fax documentation to you or print something directly from the online banking site. Once you have set this up, blank it out of your mind. You will soon see that you don’t miss this amount at all and in fact probably find that you may have been wasting more than that each week. These simple steps can be followed for your own banking account as well!

The Long Awaited Tax Refund Season...

Now that we have set things up, let’s look at some other opportunities to add to your child’s account. When tax time comes around people often think of all of the things they need to do with their refund, but the fact of the matter is, much of this money is squandered away on momentary things - Shopping sprees, a big screen TV, vacations or even a new car. If you are like so many who uses sites like to do your own taxes, you can set up your child’s account as one of the accounts to automatically deposit a portion of the refund in, giving your little one an extra boost in savings each year.

Don't Forget Your Child's Year Round Financial Gifts...

Don’t forget birthday’s and holidays where your child may receive money in a card from relatives and friends. By all means allow your child to spend away, but try to set some ground rules early on that your child will become accustomed to as they get older. Try teaching your child that they can spend half of what they receive while saving the other half. As your child gets older the idea of a job may quickly pop into their minds. Don’t be passive especially if your child has expensive school plans ahead of them. Remember YOU are the adult and you need to help lead your child even as a teen in the right direction. Help him or her to set up direct deposit with their employer as well keeping with the same values that you instilled earlier that they must save a portion and are able to spend the other portion.

Now that we have the general idea, let’s go over the numbers. You’ll be amazed!

Let’s go over a few scenarios.

If you are a single parent or a dual parent single income household, and you decide to put away 50.00 per week from birth until they are 18.

When calculated you have saved $46,800 not including any interest.

(Multiply $50.00 x 52 weeks x 18 years : 50x52x18 = 46,800 - Even at half of this you still should be proud)

Let’s also factor in that out of your tax refund every year you add $750.00 to their account. That’s an additional $13,500 by the time they are 18.

(Multiply $750 x 18 years: 750x18 = 13,500)

Let’s say you manage to save about $100.00 a year from birthdays, and other holidays throughout the year. That’s another $1,800.00.

(Multiply $100 x 18 years: 100x18 = 1,800)

Finally let’s assume that your child gets a job at the age of 16 and after taxes and their own personal spending money they have managed another $80.00 a week until they are 18 – which we all know is the best case scenario – keeping in mind this may go up during the summer when they can work more hours. You have now added about $8,320

(Multiply $80.00 x 52 weeks x 2 years: 80x52x2 = 8,320)

In total with this scenario you have saved $70,420.00 not including any interest. Not too shabby at all!!!

(Add: 46,800 + 13,500 + 1,800 + 8,320 = 70,420.00)

Let’s say that you use the exact same scenario as above but instead have two incomes in the home. Even if the second person only puts away $30.00 per week you have added an additional $28,080 bringing your total to $98,500. How amazing is that?!

(Add: 70,420 + 28,080 = 98,500)

Let’s use the same scenario as the first and assume that you are able to add $1,000 per year out of your taxes instead of $750. This would bring your total to $74,920 and if you added the second income’s contribution, your total would be $103,000

(Add: 46,800 + 18,000 <instead of 13,500> + 1,800 + 8,320 = 74,920)

(With the second income : 74,920 + 28,080 = 103,000)


You can probably see where this is going. Even if you only manage to do this for a few years, money certainly adds up. Be sure to set up certain provisions as the more zeros there are, the more a child sees other things he can use his or her money for. Look into trust accounts and other ways to minimize their access until such a time where you feel they can manage on their own.

Saving doesn’t have to be difficult, especially when you don’t have to put too much thought into it.

Are you saving for your child?

If you have never put away money for your child's college - what was your top reason?

  • I don't make enough to put money aside after bills.
  • I didn't know where to start
  • I never had a college fund set up for me and hadn't thought about it until my child reached college.
  • I always meant to but ended up sending it on something else.
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