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Financial Matters for Parents
How to Start Planning for Your Child's Future
By Jean H. Manrique
It starts as early as your baby shower – friends and relatives often write generous checks in Baby's name in lieu of gifts. Even though it may seem early, now's the time to put those checks away and start planning for Baby's future!
There are many ways to save for the future of your baby, regardless of whether you have a little or a lot to put away. Even if you start small, with the right strategies you can make your child's financial outlook a lot brighter.
Many new parents are given this advice. But along with the advice, myriad questions arise: What if we are just starting out and don't have much to contribute to an account? When should we start saving? What type of an account should we open? What should we do with a large gift of money given to our baby?
Whether you have a little or a lot, almost everyone can begin saving for their baby.
"My advice is just start – even if it's only $5 a month," says Barry Gore, a father of two from St. Paul, Minn. Most banks allow an account to be opened with a balance of $10.
Gore's mother began a savings accounts for him and his three siblings when they were very young. "At first she just kept the money in an envelope," Gore says. "Then, as the savings grew, Mom opened a savings account in the bank for each of us."
Through the account, Gore's mother gave her children the opportunity to learn about money management. "We had to fill out the deposit slips, sign the backs of checks written out to us, learn all the paperwork involved," Gore says. "It's a way to teach kids so that when they start raking leaves or mowing lawns they can contribute to their account and become savers." Gore is now saving for his children, regularly putting money away for their college years.
James Knoll, a tax and financial advisor at J.M. Knoll & Company in Minneapolis, Minn., stresses the importance of beginning early. "Parents should estimate projected college costs and what their annual funding should be to cover these costs," Knoll says. The ability to spread out the cost of college out over a long period of savings "will reduce the financial stress associated with education planning."