In order to find the best saving plan for children, you need to understand what exactly it is. Many parents want to give their children a chance at financial independence, but they don’t know how to go about doing it. The reason that they don’t know how to go about it is usually because they don’t have any experience in finances, and they are afraid of making a mistake.
The truth is, if you approach managing your children’s finances correctly, it can be easy and very rewarding. It may even be one of the best experiences that you will ever have in your life.
Personal bank accounts
This one is self explanatory but the best way to explain is to use the example of your children. Your children can open a checking and savings account together. If you have an accountant with them, explain to them the advantages of having both types of accounts. It will save them time and they will feel more confident about making financial decisions.
Child’s tax information
This is probably the most important element of your child’s savings plan. Explain to them the different rates of interest available. Have them take the time to sit down and compare the choices they have. It may be easier than you think if you have them share some information with you.
All transactions must be in a specific format
Make sure you explain to them the difference between direct and indirect deposit. They should understand how their account will be accessed. It is important to know what is happening if they choose to use another bank. They should know how the fees and charges work and why.
Some banks offer an annual fee for opening an account for a child. Find out the details and find out if it is beneficial. If you don’t need to access the money often, it isn’t that big of a deal. If you need the money every month, look into the options for direct deposit or electronic funds transfer where it will cost you much less money than it would to maintain two separate accounts.
If you want your children to put some money aside each month, be clear on your goals. Do you need it for immediate needs like rent or car repair? Is this account to act as a college fund or as a children’s saving account? Make sure you clearly define the purpose before you open the account.
How much interest?
You need to know how much interest you are likely to receive. The higher the interest rate, the more money you are potentially losing. Find out if it is a fixed rate or a fluctuating rate, so you can determine whether or not it is going to affect your overall savings.
Some banks require specific minimum amounts for various savings options. Others may not have any minimums at all. Determine the requirements for the products you are interested in and compare these with the amount you expect to need.
Some children qualify for tax-deferred programs
This can be a wonderful source of money to give to children. However, it takes a lot of planning and careful record keeping in order to qualify. Before you begin, however, it is best to have a good idea of how much you plan to contribute each month to the best saving plan for children.
Giving money to children in the form of gifts is an especially nice idea. Parents may choose to give money for their child’s college or university education as well as money for their child’s personal expenses. You will probably want to do your research and make sure that the gifts you purchase match the financial needs of your children. For example, you may not want to spend too much money on a sports kit when your child rarely participates in the sport. You may also not want to purchase too many new video games each holiday season.
College Savings Accounts
There are some banks that offer special savings plans for children that allow you to make contributions to a college savings account. These accounts may be linked with government funds so that interest can be deducted at tax time. This is one of the best ways to ensure that your children will have access to money to help them with college expenses down the road.