Where should I put my child's money?

Question

My son just turned a year old and received some money for his birthday. I would like to start saving this money for him. Should I open a separate savings account for his money? Should I leave it in his piggy bank since it is a relatively small amount? Any other suggestions?

Answer 1

I have done a variety of things for my kids, and so there is no one right answer. I like using a combination of things because it is real world theory - "don't put all your eggs in one basket ". Each type of saving vehicle is useful so here is a combination that works for me.....

If you are looking to save this money then the 529 plan is a good option (better than the Uniform gift to minor act). The money is in your name, intended for the child to use for higher education. The earnings are tax free, and you only pay tax if it is not used for higher education. It is a benefit when the child is ready fo college because it has a favorable impact on the FASA Calculation (the federal financial aid stuff). You can also have grandparetns deposit money here if they want to save for the child's education (you get a much higher rate than with a savings bond).

You can easily teach your child money management skills with other small sums. I have always used the bottle return money for that. We recycle bottles and when the child helps, the child gets to keep the money and spend it on what ever. They learn to earn and save or make appropriate spending decisions.

A savings account is good because the child can go to the bank and make the deposit. The downside is that the interest rate is poor so the money isn't doing much. The upside is tht you have a place to turn around small amounts of money and let them grow until they are large enough to move or spend.

We also use the piggy bank for small change around the house. Then we take an afternoon and roll the coins and bring them to the bank for deposit into the savings account. The process helps them to see that even small amounts can add up. When the money is significant, you can take it form the saving account and either deposit in the 529 or buy a CD.

In any event, showing your child the importance of saving is an important lesson that many parents themselves probably don't do enough of. You are setting a good example and setting your child up to have a stable financial future.

Good Work and good luck.

Answer 2

Most banks and financial institutions have accounts available that have low or no fees for children even if the balance in the account is relatively small. These accounts are sometimes called called Custodial Accounts. You could open such an account or purchase a US Savings Bond for your child. You and the child could be the Co-Owner of the Bond and you could use the child's social security number. The US Savings Bond can be bought at a bank; it can be cashed after one (1) year, interest rates are competitive, and the value of the bond doubles by the maturity date. The minimum amount you can pay for the bond is $25.00; that $25.00 will become $50.00 on maturity. I would not leave the money in the piggy bank. Time goes faster than you think, and if you save and invest, the money will add up relatively quickly.

Answer 3

I started a piggy bank for my children, for birthdays, or anyother holidays that they recieve money, i put in there piggy bank and when it gets full, I will open up a savings account for them, and then start the piggy bank process again. When they find change around the house they put it in there piggy. Plus I waitress part time and the next morning I give them each a dollar and tell them " go put it in your piggy" and then clap and say yeahhhh when they do it. The down fall to the savings account is my bank only allows 1 parent on the savings account for the child, meaning myself or my husband are the only ones allowed to deposit money to there account. I hope this help you out on your question.

Answer 4

It depends how much money it is, I guess.

I love the Section 529 plans for college accounts, but the downside to that is it is hard for him to grasp where the money is and what it is for.

There is some merit to keeping some of the money in an account he has access to so you can dialogue with him about money management skills.

I have seen a lot of kids whose parents do a good job saving a bunch of money, but their kids just turn around and waste it because they haven't learned how to handle it.

Good luck!

Ken Clark
Certified Financial Planner

Answer 5

I would open a savings account for him. I know many local banks in my area have savings accounts specifically for children. I'm sure you could find one in your area that has them as well. If you periodically take him to make deposits as he grows up, he'll learn the value of a dollar and the importance of saving money, which will be invaluable to him as an adult.

Answer 6

Most financial institutions have special savings accounts for children with no fees and which allow low balances. You can use this account as a teaching tool as he gets older to show him the importance of saving money for the future.

Good luck.

Answer 7

Save it in a savings until you have enough to invest in other things like homes and property or stock. If you are investing in stock you should focus on companies that are changing society. I invest $100 in my company and am looking to eventually invest $1000 per month in other companies that are changing the world for the better also. You have to have vision of the future. Check my source. This will give you an idea.

Answer 8

As a very young child, I was given money to put in the offering plate. As years passed, I began to get an "allowance" from my parents, out of which I was required to put a "tithe" in the offering collection. I think there may have been a couple of reasons for this: - My parents thought that giving money to the church was required and necessary, and were training me from an early age to do this, as they trained me in so much else (much of it religious and of questionable correctness). - It also may have often been a simple reaction they didn't think about much.

Answer 9

Try to put the money in stocks or OUIs try to get 25%/annum once you've got a couple thousand though you should buy some books maybe get into stocks or real estate. That birthday money (and other money that goes into his investment portfolio) may pay for his college!

Answer 10

I would suggest a savings account. It will encourage him to save when he's older.