Every parent wants to help their child make a solid start in life financially, but what is the best way to save money for the future? Whether you’re setting aside money for college or looking for a way to teach basic money management skills, here’s how to save money for your kids.
Think Ahead: Smart Ways to Save Money for Your Kids
Parents who are looking to start a nest egg for their child’s future or are seeking a way to encourage healthy savings habits from an early age have a number of options to choose from. Let’s take a look at a few of the most popular ones.
1. Savings Accounts
Most banks or credit unions allow you to set up one or more savings accounts linked to your checking account. Setting up one specifically for your child is a safe and convenient way to put aside money when they are young. You can even arrange for an automated debit from your checking account to ensure you contribute every month.
While interest rates are usually modest compared to higher-risk investments, by starting early you are giving your child’s money plenty of time to grow. Savings accounts typically offer several other advantages including:
- Low fees and minimum balances
- Easy access via online, mobile, and ATM banking
- Free transfers between your other accounts
- Federally insured deposits
For example, Baton Rouge Telco’s Regular Share Savings account offers competitive interest rates and monthly fees with a minimum balance of just $5. Credit union owners get access to full banking services and deposits are insured by the FDIC up to $250,000. It’s a safe and reliable place to start your child’s financial future.
2. Money Market Accounts
If you already have a little money saved then it might be worth looking at a money market account for your child. With all of the flexibility and convenience of a regular checking or savings account, money market accounts offer access to significantly higher interest rates but usually require you to start with and maintain a higher minimum balance.
Baton Rouge Telco’s Money Market accounts, for example, require a minimum deposit of $2,500 but currently offer an annual percentage yield (APY) twice that of a regular savings account—a difference that really adds up over time! You also get:
- No monthly fees
- 24/7 access via online, mobile, and ATM banking
- FDIC-insured deposits up to $250,000
3. Certificates of Deposit
If you’re serious about thinking long-term then a certificate of deposit (CD) is a good way to get started. By committing to invest an amount for a set period, from a few months to several years, you will earn regular dividends at a higher APY than that offered by most conventional banking accounts.
Best of all, because the rates of CDs are fixed, you’ll know exactly how much money you’ll receive from the outset, while your initial deposit enjoys the same level of federal insurance as a checking or savings account.
Baton Rouge Telco allows parents to open a CD on their child’s behalf, starting with a minimum deposit of $500 and with terms between three months and five years. APYs are well above those on conventional accounts and are higher on longer-term CDs.
4. Youth Accounts
While many credit unions or banks will allow your child under 18 access to open savings or money market accounts provided there is also a parent or legal guardian on the account, if your goal is to teach financial responsibility and independence, then you might want to look at an account specifically designed for young savers.
Youth Accounts can be individually held by savers under the age of 18, allowing them to get started with basic banking services. Young savers can open an All Star Savers account at Baton Rouge Telco, allowing them to earn a generous APY on deposits while earning bonus rewards when they reach savings milestones.
Meantime, Baton Rouge Telco members aged 13-24 can open a Student Checking account with as little as $5, allowing them to receive services, including:
- Free checking services via online, mobile, or ATM banking
- No minimum balance
- No monthly fee
- A generous APY on balances up to $10,000
5. College Savings Plans
If savings for your child’s education is a priority, however, it’s hard to do better over the long term than the 529 college savings plans offered in many states. There are two types of plans:
- Prepaid tuition plans allow you to buy tax-free credits at any participating university that allows you to lock in current prices for future tuition. Most plans have state residency requirements. In some, but not all cases, deposits are guaranteed by state governments.
- Education savings plans allow contributions to an investment account. Contributions and earnings are tax-free and can be used towards tuition, room, and board at universities and to a limited extent at elementary and high schools. These plans have fewer residency requirements, but state guarantees of invested contributions are limited.
6. Roth IRAs
Roth IRAs allow pre-taxed contributions to grow tax-free until the holder reaches retirement age. But there’s an added benefit that money can be withdrawn early without the usual penalties if it is to be used to pay for higher education costs. That makes a Roth retirement account a smart way to save for retirement while also setting aside money for your child’s education.
Bank for the Future With Baton Rouge Telco
It’s never too soon to start planning for your child’s financial future. While there are many ways to secure money for your child, Baton Rouge Telco has the tools you need to get started today, including:
- Low-cost savings accounts
- Competitive money market accounts
- Innovative youth banking services
Click below to learn more about how to get started building savings for your child.