This post over at The Simple Dollar about starting a savings account for a new baby suggested putting away $5 or $10 a week for the child until adulthood. Trent did the math, coming up with numbers between $9,000 and $39,000, depending on the amount invested, the type of investment, and the age of the child when the account is given to him.
Since Alex and Tyler are still so young, I haven’t quite thought through the system I want to use to teach them to manage their own money. I do plan on giving them an allowance, and teaching them to give, save for both short-term and long-term goals, and to spend wisely. But in the meantime, I’m not putting aside money for them to have when they’re older. I’m taking any money that I’d give them and putting it in education funds.
But what I have done is open UTMA accounts for them, using money that was given to them or to us to spend on them. Marc and I agree that we can afford to buy the boys everything they need, and they have more than enough toys to play with. The best gift we can give them is to invest the money and let it grow into a much bigger gift than the original. Because the money is in a UTMA, each child will gain possession of his account when he turns 21. I hope that by then, wise money management practices will come naturally to them.
I like that what Marc and I are doing requires no extra investment on our part. We can continue to devote all of our savings for our children to their education; yet when they turn 21, they’ll have access to a substantial sum of money that can help them buy a house or pay for grad school. Other ways to save “free money” for your kids are:
- Sell their gently worn clothing and used toys and books.
- Sell your own clothing and books if you’re not wearing or reading them anymore.
- Take the money you would normally spend on holiday and birthday gifts for your kids and invest most of it – especially if they’re too young to know the difference.