Best ways to save for kids and secure their futures
Every parent dreams of a bright future for their children. And one of the best ways to support those dreams is by saving for their future needs.
Whether you’re planning for their education, first car or other milestones, a solid savings strategy can make all the difference.
The most important thing is to get started, said Dupaco Community Credit Union’s Tami Brandenburg.
“Expenses for children don’t just happen when they go to college. They happen in elementary school or high school when they want to join a club team or play a band instrument,” Brandenburg said. “You have to plan to be ready because these expenses happen sooner than you think they will.”
Wondering how to start saving? We’ve rounded up some popular savings strategies to help you figure out the best way to save for children.
It’s OK to start small
Saving for your child’s future starts by looking at your budget today. Your goal: Look for places where you might be able to cut unnecessary expenses that can be used as savings.
Even starting with just $5 a week can make a big difference over time. The key is to start now and build the habit of saving regularly.
“You’ll want to take a hard look at what and where you’re spending now because you’ll blink, and your child is heading to college,” Brandenburg said.
Need help figuring out where to start? A free Dupaco Money Makeover could help you identify areas where you can save more effectively. It’s like having a financial cheerleader by your side!
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Challenge yourself to find more ways to save
As you adjust to your new budget, you can gradually increase the amount you save for your kids. This way, you won’t feel the pinch, and your savings will continue to grow steadily.
“I think about how much more money I could have saved that I spent on little toys that ended up in the backseat of the car,” Brandenburg said.
She’s a big fan of saving through payroll deduction. This way, the money you earmark for savings comes out of your paycheck before it lands in your account.
The next best option? Take advantage of your credit union’s automatic transfers—where your money moves automatically from one account to another on a regular schedule that fits your needs.
Choose savings accounts that work for your family’s goals
Pause and ask yourself: What are my hopes and dreams for my child? Knowing what you’re saving for can help you choose the best account (or accounts) to support your goals.
529 college savings plan
If you’re relatively sure of your kids’ education plans, a 529 college savings plan is worth considering.
These plans are sponsored by states, state agencies or educational institutions, and they’re designed to encourage you to save money for educational purposes. You may also be able to use money toward a student’s K-12 school tuition.
Earnings can grow tax-deferred, and qualified withdrawals are also tax-exempt. Depending on your state, you may also qualify for a state income tax deduction or other perks. Plus, many states allow for low investment minimums, often as small as $25.
“I was thankful we had that money when it was time for my daughter to go to college,” Brandenburg said.
You don’t have to be related to set up a 529 plan to help someone save for college. Keep in mind that the person who opens it retains all control of it, including who receives the money and how it’s invested.
But what if plans change? You may face taxes and penalties if you withdraw funds for non-qualified expenses. You can transfer the money to another qualified beneficiary.
Learn more about those options here.
Meet with Dupaco to see how 529 plans could fit into your strategy >
Term-share certificates
If you know what you’re saving for—and when you’ll need the money back—a term-share certificate may be another great way to save for children.
A certificate, similar to a bank CD, lets you save a lump sum for a set period in exchange for a higher dividend rate than you might get with a traditional savings account. Certificates are federally insured up to $250,000 by the National Credit Union Administration.
Bonus: With your dividend rate locked, you’ll have peace of mind knowing exactly how much you’ll earn over the life of your certificate!
Calculate what your certificate could be worth >
Minimum opening balances and term lengths vary among credit unions. (Dupaco offers certificate terms as short as six months and as long as 60 months.)
But you typically can’t add money to a certificate after you’ve made your initial deposit. You also can’t withdraw your funds before the maturity date—unless you pay a penalty.
Knowing when you’ll need your funds can help you choose the best term for you.
Learn how to ladder certificates for more flexibility >
Money market accounts
You may benefit from a variety of savings options. If you want the ability to make regular deposits, you could consider a money market account.
These accounts offer higher dividends than a regular savings account—while still giving you easy access to your funds. They’re also federally insured up to $250,000 by the NCUA.
Minimum opening balances can be higher than a regular savings account, and vary among credit unions.
But once you open your account, you can add money to it whenever you’d like. Just like with other savings accounts, you can set up automatic transfers to help you continue saving regularly.
Custodial savings accounts
Another way you can save regularly is through a custodial account. At Dupaco, this option is called an UTMA, or Uniform Transfer to Minors Act, account.
This type of savings account holds and protects assets for minors until they’re old enough to manage the money themselves. The money can be used for anything that benefits the child—not just education.
The funds are technically the property of the minor, but you manage withdrawals and deposits. That means your children won’t have access to the funds until the “age of majority,” which varies by state.
On the flip side, kids get access to that money when they hit that age of majority—which might be too early for you, depending on how responsible you think they are.
These accounts are also federally insured up to $250,000 by the NCUA.
Regular savings account
When your child’s old enough to understand what they’re signing, you might consider opening a separate savings account in their name. It can help your child practice spending, saving and sharing.
“This account becomes a teaching tool for you as a parent,” Brandenburg said.
These accounts are also federally insured up to $250,000 by the NCUA. And you and your child jointly own the savings account. This means it also comes with fewer controls on withdrawals.
“Once you put your child on this account, they can access that money,” Brandenburg said. “You’ll want to consider what level of access you’re comfortable giving your child—with or without you there.”
It comes down to finding the right balance between teaching financial responsibility and ensuring their savings are protected.
