As parents, we are always looking out for the welfare of our children. We make sure they have enough to eat, clean clothes to wear, and a good education. It often gets overlooked though it is helping them achieve a strong financial footing when they grow up. Opening a child savings account can be a good way to ensure their financial security later in life. Or better yet, open them a ROTH IRA when they have earned income to give them an even better boost financially later in life.
Opening an account for your children while they are still young accomplishes a few goals. First of all, you won’t have to deposit a lot of money weekly or monthly to have a very large nest egg for your kids when they need it if using a state-sponsored 529 College Savings Plan. For more on 529 plans, visit https://kgmeyerpc.com/basics-of-a-529-educational-savings-plan-2/. If you start early enough by the time they’re ready for college, you could have tens of thousands of dollars saved even if you could only make small deposits and didn’t receive a very high rate of return.
Another benefit of opening an account for your kids is teaching them to sound financial habits from a very early age. Most kids don’t get much financial education at school or home. This puts them at risk when they go off to college, and the credit card companies are there just waiting to sign them up for a credit card. That is the first step to financial problems for many young people. They don’t have the knowledge to handle credit, and they quickly get in over their heads.
As soon as your child is old enough, please encourage them to participate in the banking process. Take them to the bank when you make a deposit, show them how to fill out a deposit slip, encourage them to put a little into their savings account whenever they get some money for birthdays or holidays, etc.
One word of caution: saving is a good financial habit of starting, but you don’t want your kid to grow up with a feeling of scarcity or lack. You want them to understand that having their cash to use if something unexpected comes up is true freedom, but you don’t want them always thinking about and preparing for the worst.
Make sure they keep their saving habits in balance. They need to be able to spend their money occasionally too. That’s the only way they’ll learn how to be savvy shoppers later in life, and they need to learn that money, and to a degree, things can be a good thing to have. It’s a reward for working hard at a job. Teaching them to budget at a young age is also extremely beneficial as it will get them in the habit of living within their means and budget. For more on budgeting, visit our affiliate at Simple Planning.
Helping your child achieve a secure financial future can start with such a simple thing as opening a child savings account, a 529 College Savings Plan, or a ROTH IRA while they are still young. Teach them strong financial habits from an early age, and they will be far less likely to get in over their head when they are an adult.
