9 Best Ways To Save Money For Your Kids
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When it comes to saving money for your kids, it all boils down to two main aspects:
1. Parents Saving Money
2. Educating their Kids about Personal Finance
Figure out a plan for these two aspects and the financial problems that your neighbour faced won’t be faced by you or your kids.
As a parent, you will always want what’s best for your children. You teach them how to behave, get admissions in the best school in town, put them in chess, swimming, basketball, football or archery classes to ensure they learn and grow to be successful in life.
While you teach and make them better and smarter, you’re probably forgetting (ignoring) to educate them about money.
Money is a personal subject, it’s not hard to teach but most parents ignore this subject because they believe – Money is the Root of All Evil. Remember this: Money is neutral, what we do with it is Good or Bad.
What we do with money depends on what we learn about money. So make sure you teach your kids the importance of money so they don’t spend much and invest much more.
To ensure your child’s financial future is bright, this article will be divided into two parts:
In the first part, we’ll discuss how parents should save, make and invest money. I’ll share with you the steps to save money for your kids.
The second part will focus on educating kids about money management, this includes budgeting, debt, tips, emergency funds, etc. I’ll also link some articles where I’ve gone more in-depth on saving and budgeting.
Part 1: How Parents Should Save Money For Their Kids
Raising kids is expensive! Right from medication to monthly new clothes to schools to extracurriculars, spending money for kids never ends. And when most expenses seem to reduce, your child grows up and plans to attend college.
Now we all know how expensive universities are! Generally, parents take on debt to tackle all such finances but debt is a temporary solution to a massive problem. The only solution is To Save Money. But how can parents save money for their kids?
How can they take certain measures to ensure money won’t be a problem to raise their child? I did some research online but they talk about the same old stuff that most people do (most people don’t succeed).
So let’s get a fresh perspective and try solving our savings problem. Now I’ll dive deep into the best ways to save money for your kids’ future.
Note: If your kid just started his awesome college life and it’s time he manages his finances all alone, you might want him to read this article – 33 Money-Saving Hacks for College Students.
Open a Child Savings Account
You can open a bank account for your child. While a savings account will offer extremely low interest rates, it is the most secure place to store your store for your child’s future, which means it’s risk-free.
Also before you start earning more interest on your cash, you need to build a habit of saving your child. Having a savings account can help them save instead of spending all the cash. They can only invest the money once they’ve saved it right! Ensure you have access to the savings account till the child is a minor.
Open a UTMA Account with UNest
There’s an ongoing debate that the 529 College Savings Plan is best suited for children. I prefer to open a UTMA account because the spending of these funds is not limited to college expenses. You can use the money for your kids business, wedding, college expenses, vacation, etc.
Your child may not attend college but he may need the money for other important expenses, in such cases a 529 College Savings Plan isn’t appropriate.
By opening an account with UNest, you open a UTMA/UGMA account where your money is invested based on your personal investment risk capacity.
The UNest App is an investment account for kids with the sole purpose of making saving and investing easy for kids. Your portfolio, transactions and everything is all inside the app presented on a dashboard which makes this app seamlessly easy to understand.
By opening an account with UNest you can:
1. Teach your kids to save and invest all through the app
2. Save for your child’s marriage
3. Save for your child’s business
4. Save for your child’s life experiences
5. Save on Taxes
6. Save for your child’s college
UNest has a calculator to help you decide how much you need to save to reach your savings goal. They charge a monthly fee of $3 and you have tax benefits too.
Listen Up: To get a better understanding of UNest, you can check my 2,000 words in-detail Unest Review.
Start a Part-Time Gig
Don’t you want a little bit of extra income each month to make life easier? Having an additional source of income means having more money to put towards your child’s future.
The sole purpose of starting a part-time gig is that it shouldn’t take up much time and the skills required must be easily learned.
A well-paid part-time gig in 2023 is Proofreading. Do you get annoyed when someone makes grammatical mistakes? Have a keen eye to catch English errors?
Proofreading requires attention to detail and the pay is great. But you’ll need to learn some basic proofreading skills first.
I’ve got you covered – Meet Caitlin, a proofreading expert that has bundled an online proofreading course that will teach you how to effectively proofread, attract new clients, and make a full-time income as a freelance proofreader.
She is the founder of Proofread Anywhere, you can trust Caitlin as her course is packed with practical content and she has been featured on Forbes, Business Insider, and other well-known websites.
If you want to learn more about this amazing course, you can check out my in-depth Proofread Anywhere Review here.
If you want to know my top recommendations for proofreading courses, here you go!
🏆 Best Proofreading Courses (2023) 🏆
|1. Proofread Anywhere (review)||4.8|
🏆 Best Proofreading Courses (2023) 🏆
|1. Proofread Anywhere (review)||4.8|
Stop living paycheck to paycheck and start a part-time job as a professional proofreader today!
Part 2: Educating Kids To Save Money For Their Future
You can either do all their work or teach them to do the work themselves. Financial Literacy is a very important subject in every human’s life. Without money, living and moving around in life is tough.
I know you don’t want your kids to ever face the hardship you or your relatives might have faced. To ensure this doesn’t happen to them, you must teach your kids to be responsible with money from an early age. The more they learn about money, the better are the odds of them being financially successful in life.
The problem is that parents get too afraid to teach their kids about money because they don’t know what to teach and how to start teaching. Here’s what I want to put forth – Your kids will learn a lot of things in life from friends, experiences, strangers, you, etc.
They’ll learn about money too but what they learn about money may not be what they should learn about money. What would you prefer?
Them learning the wrongs of personal finance or you teaching them the right way for managing finances? So gather some courage and teach them what most colleges won’t.
As for what your kids should learn, I’ve made a list of 9 key points that you must teach your kids very well. These 9 points will lay the groundwork and help young children understand the power of money management.
The how-to can be your backyard or your living room, somewhere quiet and peaceful would be great. Include practical examples to explain these points in more depth (kids grasp examples quicker than theory). Let’s begin!
1. Wants vs Needs
The first thing you need to teach your children is the difference between Needs and Wants. Ask them what they think needs are? Ask them to name a few (do the same for wants). Then explain what things are considered wants and needs.
Give examples, an iPhone is a want while a normal touch screen phone is a need. Fruits and vegetables are needs while burgers and pizzas are wants. Giving real-life examples will be the easiest way for your kids to understand these financial concepts.
2. Earn their Own Money
You can’t learn about money without having any money at your disposal. No matter how much time you invest teaching your kids the importance of money, they won’t give it their all till they realise the value of money.
That will happen when they earn and spend. Get them working somewhere, then let them spend it any way they wish to spend. Let the cycle repeat again and again till they realise that money should be saved, grown to build financial wealth.
3. Tracking Expenses and Budgeting
Saving = Budgeting. These two terms go hand in hand. The minute your kid starts earning, he needs to create a budget and write down all his expenses systematically. If your kid’s too lazy to make one, here’s a budget template you can download for free.
You and your child need to know where all the earned income is going each month, how much is being saved vs spent, spent on what exactly and can the money be utilized for a better purpose. A good budgeting system provides all these answers.
Don’t forget to touch on the concept of an Emergency Fund.
4. Investing in Money Generating Assets
Investing can be slightly risky, but to beat inflation and increase your child’s earned income, they need to spend time learning investing strategies. Your job is to bring forth all investment assets you’ve heard of – stocks, bonds, forex, mutual funds, gold, crypto, real estate, etc.
Then explain each of these assets (don’t go too deep, stick to basics). Let them do their research and learn more. I don’t expect you to know everything but learn as you’re teaching your child. For some help, you could check out my Invest money Page.
5. Set Financial Goals
The incentive is key to understanding why we earn and save money. Your kids are young, they won’t listen when you ask them to save. Did you ever save when you were a kid? I doubt so! You need to show them the bigger picture, why buy a $50 toy car if they could buy a real car worth 100 times more.
But these goals are too far fetched, so you could give better incentives – Let’s say Tim earns $10 a week and you tell him to save his money to buy a gaming console worth $100. If he wants the gaming console, he’ll do anything to get it, thus saving 10 weeks of earned income.
Start selling small incentive ideas in your kid’s mind and as his income grows, keep his goals bigger and better, like real estate, stocks, businesses, etc.
6. Read Financial Books
Reading books is for people of all ages. They pack so much value that we must read them to grow more. You or I won’t be able to teach your kids everything there is to learn about money. At one point, their go-to source would be a book.
Instilling the idea of reading books in your child’s mind is the way to go. If she learns and likes to read at an early age, I can vouch that her future seems bright as the sun. If you’re not sure which books to start reading, you can start by picking up any of these top personal finance books.
7. Multiple Streams of Income
My economics professor told us once that having one source of income is a crime. I remember this so well because he isn’t wrong.
You can have a decent lifestyle with one source of income but if you branch out and create additional sources of income, you can live a rich lifestyle.
If you were fired during a pandemic and you didn’t have multiple streams of income, wouldn’t it be better knowing you can rely on that side hustle you started a few months ago?
Start by creating one additional source of income, keep adding and diversifying your income sources to de-risk yourself.
8. Be Their Creditor
2 in 3 Americans are in debt today. The concept of not spending more than you earn is fading away. People spend without thinking and get caught up in the crisis bubble.
Let’s say they want a gaming console for $100 and they ask you to fund it. Say you’ll give them the money at a nominal interest rate (6%). So they pay you $10 + 5% interest per month till they return $100 + 5% Interest.
Now there are two ways your child can react to this problem:
1. He borrows more money from you or someone else
2. Or he saves every penny earned and understands that delayed gratification is good and credit is bad.
If he takes Option 1, he’ll regret it soon enough, then he’ll come to Option 2. In the process, don’t forget to discuss what a credit score is and the benefits of a good credit score.
The bottom line is: Your child will learn the greatest money lesson that most adults don’t understand even at the age of 40.
9. Learning Basics of Taxes
To be honest I can’t think of one person who likes taxes; most of us don’t understand taxes and are too afraid to learn. We depend on our accountants from time to time to file our income tax. While taxation isn’t going to get easier, everyone has to pay tax and therefore must learn the tax.
Now giving tax lessons to your children is not what I expect parents to do because I’m sure you and I don’t know much about taxes, you can buy an online basics of taxation course and learn with your kids.
Just imagine that your young kid understands taxes, fascinating isn’t it! If you’re an accountant, be the teacher but if not, an online course would be great.
Don’t Forget To Prioritize Your Retirement
Worrying immensely for your child is great but if your awesome plan involves creating a safety net for your kid but not for your retirement, you’re calling for trouble. Save money for your kids but prioritize your retirement savings too.
Your child has a long way to go but you don’t, they have many years to financially stabilize their lives. Focus on your retirement goals first, then save money for your kid’s college and other future expenses. Don’t wait to create a retirement plan for yourself, it’s essential, do it now!
Saving money for your kids doesn’t mean you work hard day and night to save and invest for your kids. It also means your kid contributes to their education by working, practising saving habits, investing with caution and learning more about personal finance.
By consistently educating your children about personal finance, you can instil good money habits that will ensure a bright financial future for your child.
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