I've been saving money for my kids since they were born. Their dad and I opened an account in each of our kids' names and have been depositing money from birthdays, holidays and gifts into their accounts ever since.
When they are 18, I'll be able to transfer the account into their names, and I hope they will use it to pay for things like education and travel.
I didn't realize how important that decision would be all those years ago, but saving for your kids can really pay off. A recent study showed that children from low or moderate income families are three times more likely to pursue higher education and four times more likely to graduate if they have a savings account, even if the account has less than $500.
One U.S. report suggested that students are seven times more likely to attend college even if their savings account had as little as $1.
Experts say that having a kids bank account and a financial structure in place changes the way kids think about their future. It makes them more financially aware and it changes expectations—both for students and their parents.
It's never too early to get your kids on the right track. Even though they are little, my kids are learning the basics of saving. They know a bank account is a safe place to keep their money. It's also earning interest, which means that in a few years they'll have more than they expected. From time to time, we can log into their account and check their balance.
I try to talk to them about how much things cost and the importance of getting a job and working. So far, they are very frugal when it comes to their money and they save more than they spend. All their savings will no doubt come in handy when they come of age and have a little nest egg.
If you're trying to save for your children, you can begin as soon as they are born. Open an account in your child's name and ask about interest rates on savings accounts. Opt for an account with no minimum balance and low initial deposits.
When they are 18, you'll likely want to get your child a debit card and switch to a youth plan that enables them to make unlimited monthly debit transactions. You won't want all that hard-saved money to be put toward banking fees.
As soon as you'd like, you can also begin a Registered Education Savings Plan (RESP) for your child. This plan allows you to save for your child's education with a tax-deferred investment plan featuring government financial incentives. Speak to your investment advisor for more information.
Do you have a savings account or RESP for your child? How much is a good amount to have saved by the time your child is 18? Let me know.