I wish I would have known sooner the major importance of building savings at a young age. After spending years of letting our kids blow their birthday money on shopping sprees, we finally decided to start being smart with their savings. Not many parents are aware of savings accounts for kids beyond what their local bank has to offer. Encouraging your kids to save at a young age is critical, there is no way around it. Building any kind of savings for them is a smart move, but you could be leaving money on the table. So what savings accounts should you look into for your kids? Let’s talk about how to start a successful college fund for your child on a small budget.
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Talk to kids about saving
Before you start saving money for them, be sure you are talking to your children about money and the importance of saving.
Many children grow up only hearing about financial struggles. Things like, “We can’t afford that.” or “We don’t have any money.” Even though you may be financially struggling, it’s super important that you encourage your children to grow up with a healthy money mindset.
Remind them of how putting money into savings accounts is beneficial for them. If they want to be “rich” they can only do that by not spending money.
The importance of saving at a young age
Let’s face it, starting anything earlier in life usually gives you an advantage later. Start exercising at a young age and you’re more likely to experience better physical fitness into your golden years. The same goes for building savings.
Take a look at this Dave Ramsey chart that shows the importance of building savings at a young age.
In this scenario, you’ll see two brother’s savings plans. The first brother, Ben, saved $2,000 for 8 years from the age of 19 to the age of 26. His brother Arthur then caught on to the benefits of saving and opened a savings account for himself. Arthur then began to save $2,000 a year.
While Ben stopped saving, Arthur continued saving from the age of 27 to the age of 65. When they both hit retirement, Ben still had more money than Arthur even though Arthur had saved his money for 30 decades longer than his brother.
Why this is important
This simple chart shows the importance of building savings at a young age. If you as a parent are able to help your child save money for only the first few years of life, the lasting effects can go all the way into their retirement if you are smart about how you do it.
The best savings accounts to gain interest
There is no doubt that contributing to a Savings Builder account with CIT Bank for your children is the simplest way to get them earning interest on their savings at a young age. And you only need $100 to open one!
When you are first starting to save for your children, a basic account with a lower interest rate will work just fine. When you are ready to open a high yield savings account, be sure you have at least $100 saved up before you begin the process.
Other smart money posts:
- Setting Your Teen Up for Financial Success in Adulthood
- The Simple Investment Plan to Turn $50 into $150,000
- Find the Best Savings Account to Earn Money and Save Big
How to start saving at different ages
Saving will look different depending on your child’s age. Here are a few ideas on how you can begin helping your children start to save no matter what their age.
Birth – 5
Take advantage of these early years before children start to really crave toys and presents. Invest money wisely.
- Ask for money instead of birthday gifts
- Save any financial gifts they are given
- Set up automatic withdrawals each month from your account to go into their savings
Baby years savings plan:
- Save $100 per month for your child.
- After 5 years they will have a savings of $3,000
- Put this money into a Savings Builder Account and continue contributing until they are 18. This account gives you a 2.45% interest rate for only $100 per month!
- By the time your child graduates, they will have over $27,000 saved
These are the years when your children can start being more hands-on with their money and their savings. Be sure to include them in it and let them know if you are helping them save as well. Here are some ideas on how they can start being more involved.
- Contribute 30% of their chore money to their Savings Builder
- Put half of their birthday and Christmas money into savings
Age 5-10 savings plan
- Continue contributing $100 per month to savings
- Encourage children to contribute an additional average of $20 per month
- This will give your child around an additional $4,000 by the time they graduate
Now are the years when children can start working to find their own ways to make money beyond chores and birthdays. Encouraging them to find ways to earn money through dog walking, lawn mowing or babysitting is a great way to instill a strong work ethic at a young age.
- Start looking for ways to make money
- Look for the first job
- Start managing their own money beyond savings
Age 10-18 savings plan
- Continue contributing $100 per month to savings
- Continue to contribute extra $20 from chores and/or birthday money
- Begin contributing 10% of paychecks into savings
No matter what, any amount of savings that you can do for your child is going to be beneficial. Make sure to take advantage of great accounts like the Savings Builder in order to get the best interest rate possible!