As the years go by, the costs of products and services seem to steadily increase. Having a child means facing this reality not only for yourself but also for your children. Children are unable to save money themselves when they are born, so it is up to the parents to do that for them. Here are some ways to save money for a child’s future.
Step 1: Immediately after the child is born, establish a savings account for him or her. Rather than opening an account with a physical bank, establish an online high-yielding savings account. These tend to earn more interest than brick and mortar bank accounts. Less car trips are required because the money can be transferred online directly from the local bank checking account into the online savings account. Account holders can even set up an automatic money transfer schedule.
Step 2: Once there is approximately $500 in this account, establish a Section 529 educational savings plan. The purpose of the plan is to finance higher education costs and investor benefits include tax advantages. If the plan contains contribution fees, continue investing money in the online savings account and make only periodic deposits into the 529 plan.
Step 3: Establish a free account with Upromise and link all grocery, debit, and credit cards to this account. The account provides a return of a portion of the money spent on eligible purchases. The money accumulates in the Upromise account until the account holder invests it in a Section 529 plan, uses it to make payments toward student loans, or pays for college expenses. These tax-free payments toward higher education can be made in the present or future.
Step 4: Once the child is old enough, teach him or her about responsible savings habits. Have the child allocate a portion of the allowance to a savings account. Establish a Christmas Club at a local bank to encourage savings for expenses like holiday gifts. If the child wants an expensive new toy or electronic device, require that he or she contribute money toward the purchase.