As a family, it is necessary to carefully review your financial management and set aside at least three months’ worth of living expenses for emergencies. It is equally necessary to invest in savings accounts for various purposes that you can draw from when necessary. When you start saving for a family, it is important to set aside money for your children too. With some smart planning, you can set up long-term savings for your children.
- One of the methods you can choose to set aside money for your children is to set up a children’s savings account. Banks offer the option of doing this. Parents can hold something like a joint account for the children which they can manage. This help teaches the children to save too, instead of spending unnecessarily. Parents can set it up in such a way that the recurring allowance transfers help the children to actively involve themselves in the saving process. There is interest added to this as well. So they can both save and earn here. Once they grow older, the account can be made a teen checking account. They can be given a debit card with spending limits on it to teach them to manage their finances better. The parents can still opt to be co-owners of the ten checking accounts.
- Another way to help secure savings for your children could be through a custodial account. This works well if you do not want the children to access their savings until they are an adult. The account would be in the child’s name but the parents manage the funds. Custodial accounts give way for children to own assets that would otherwise not be legal for them to own. They are not known for their tax benefits but are good options for parents who are not sure if their child would like to go to college later.
- Another important account you can save in for your children is the 529 college savings. As is a prepaid tuition plan. As per a survey conducted recently, only 44% of parents in the country utilize these plans, making these plans quite underappreciated for the value they offer in terms of savings. 529 plans are of two kinds. The first is a college savings account where parents can save money in, and which can be used in any educational institution later. Sometimes, there is a tax deduction for the savings and withdrawals for the sake of education are not taxed either. The second kind is a prepaid tuition plan. This plan sets current tuition rates locked in. This is a great benefit for parents looking to educate their children in public institutions.
- Coverall education savings account also assists parents to save money for their children’s college or private education expenses. You cannot deposit more than $2,000 a year, and this is not tax deductible. Withdrawals, however, are exempt from taxes. However, when compared to 529 plans, coverall education savings are less favored because 529 plans have more benefits to them including tax deductions and the no limitations n deposits per year.
