Creating saving accounts for your children is a great way to set your child up for their future. Many parents who save for multiple children ask if they should have one saving account for all of their children or have separate savings for each individual child. We think that saving for children should be individualized. Here are 4 reasons why:
1. You Can Keep Track of Gifts or Additional Money
By saving for each child individually you are able to better track gifts and additional funds that are put into the accounts. So if your child receives birthday money, or wins money, you can add that to the account of the child who received it. This way you don’t have to worry about keeping track of who contributed what and when. This keeps it fair and simple.
2. Kids Can Help
Allowing each of your children to add to their savings accounts will also give them a sense of financial responsibility. If your child gets a job of their own they can add money to their own saving account and watch it grow. This is a great way for children to see the payoff for hard work and learn the importance of saving money.
3. It Helps Keep Parents Accountable
Oftentimes parents are tempted to borrow from children’s accounts for a number of financial needs. We understand that making these kinds of decisions to borrow against your children’s saving is not ideal, but sometimes it happens. You are more likely to return the money borrowed from your children’s accounts if you’ve borrowed from one child specifically other than if you borrowed from the children as a whole. Often times we see that parents borrow from children’s savings only to never return the funds, usually splitting the remainder evenly amongst the children. By borrowing from one child you will be more inclined to replace money borrowed and to continue saving for their future.
4. It Keeps What the Children Get Fairer
By setting a savings goal for your children and creating savings accounts for each (outside of gifts and the children’s contributions) you won’t necessarily have to worry about what is fair. For example, by setting a savings goal of $13,000 per child by the time they are 18 you then can save as much or little as you need to get to that goal. Sometimes when saving for all children in one account you may disperse one child too much from the savings leaving other children with a smaller amount.
Saving for your children’s future is a great way to set them up financially and help them begin their life with a positive net worth. It’s never too late to start planning for your children’s future savings on their behalf. If you’re ready to sit down with a member of our team and discuss saving options, please contact us here. We are here to help you on your financial journey.