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How do you save for your kids?

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  • How do you save for your kids?

    My kids get $50 from their grandparents each birthday and Christmas. They may get other small amounts of $20 here and there. They are seven years old so have no real need to spend. They currently have some of their money in their little money jars in their room. I want to make sure I can provide any advantage possible for them while they are young. I have considered opening a savings for each of them and taking them to the bank to show them how to save (Covid has put a bit of a damper on any physical travel to a bank as I would not consider this essential since there are other ways to deposit). I have wondered if there are other ways for them to grow their money while they don't need to withdraw. Wondering what people have been doing - savings, versus piggy bank, versus investing (I don't even know options for investing for them). They already both have 529s in their name.

  • #2
    1. Open a taxable account for them in Vanguard. There are lots of good lessons you can teach when you check the account.
    2. When they start working during high school/college, open a Roth IRA for them. Do a Daddy Match. They will thank you when they are in their 30s because they realize the importance of what you did.
    3. Encourage grandparents to contribute to the 529s as well. You have no idea what is ahead of you with your children's education. It is not at all going to be like your experience. Regardless of how you feel about private/public schools, a 529 will provide more options...not just college and beyond.

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    • #3
      Some interesting thoughts here

      https://www.mrmoneymustache.com/2015...n-about-money/

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      • #4
        All of these random $20 here, $50 there from aunts/uncles, etc we diligently cash and then make our own one time contribution in that amount to their 529s. Our kids are young and don’t have their own savings accounts yet.

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        • #5
          Originally posted by okayplayer View Post
          All of these random $20 here, $50 there from aunts/uncles, etc we diligently cash and then make our own one time contribution in that amount to their 529s. Our kids are young and don’t have their own savings accounts yet.
          That is exactly what I do. It provides me with dollar bills so I never need an ATM and I put the money towards something that will be more useful to them.

          I felt odd for a while because it was like I was stealing their money because the 529 is technically mine. But then I remembered that I put extra money each month in there and also buy them all their material wants and desires. I also guess if they do not use the 529 for whatever reason I can always cash it out and give it to them. Or keep it invested and give them an equivalent amount.

          We will have to figure out what to do when they are older because they will be less willing to give it up.

          Right now I tell my 6 year old that I will put it in an account so that it will be more money for when he needs it. He is happy with that for now.

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          • #6
            You can open up a UGMA account for them at Schwab, Fidelity or Vanguard. It's a custodial account that you run until they are older (18 I believe) but they own the assets. It can be used for education or anything but legally it is theirs.

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            • #7
              Originally posted by Bev View Post
              1. Open a taxable account for them in Vanguard. There are lots of good lessons you can teach when you check the account.
              2. When they start working during high school/college, open a Roth IRA for them. Do a Daddy Match. They will thank you when they are in their 30s because they realize the importance of what you did.
              3. Encourage grandparents to contribute to the 529s as well. You have no idea what is ahead of you with your children's education. It is not at all going to be like your experience. Regardless of how you feel about private/public schools, a 529 will provide more options...not just college and beyond.
              Agree with all points.

              As my kids get closer to their twenties and work, does anyone do a 401(k) match for their adult children? I've thought about doing this [between my children's of ages 22-30 and if they are gainfully employed and have access to a 401(k)] for a few reasons:

              1) to promote retirement saving at an early age
              2) to take advantage of the power of compounding at an age with the greatest potential effect
              3) if the kids were to have any inheritance, I'd rather give it with a warm hand instead of a cold one

              Thoughts?

              Comment


              • #8
                Originally posted by StrabismusBusiness View Post

                Agree with all points.

                As my kids get closer to their twenties and work, does anyone do a 401(k) match for their adult children? I've thought about doing this [between my children's of ages 22-30 and if they are gainfully employed and have access to a 401(k)] for a few reasons:

                1) to promote retirement saving at an early age
                2) to take advantage of the power of compounding at an age with the greatest potential effect
                3) if the kids were to have any inheritance, I'd rather give it with a warm hand instead of a cold one

                Thoughts?
                I wouldn’t go further than $6k and direct it into a Roth with the understanding that they are not to touch or the match stops.
                Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  We did this with all gift money: Bank of Mom+Dad. $$$ given to them and they sign over the dollars; we matched 1:1 and save for mom/dad approved purchases in the future with minimum 3months -- delayed gratification and savings; banking learned.

                  They almost always chose this route vs spending on their own.

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                  • #10
                    Another vote for a physical savings account in addition to whatever else. I feel that there is a lot more buy-in with the cold hard cash passing back and forth from the teller than the print out of a brokerage transaction.

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                    • #11
                      My kids are 21 and 19. Here’s what I did:
                      1) Funded 529s to mostly pay for four years of college
                      2) Funded UTMA accounts for “roaring 20’s” - grad school, house down payment, apartment deposits and furniture, staring a business, travel, continuing to build nest egg, 2nd car, whatever... Each account has about $150k.
                      3) Matched contributions to Roth IRA from money earned in high school and college jobs.
                      4) Continued an allowance through high school and especially college that was intentionally not as much as they would need to do all that they wanted to do, so they would have to make choices or get a job
                      5) All gifts went into UTMA account or local bank. If a grandparent gave $100 as a gift, we would let them have $25 to buy something.

                      Early results - My 21 year old son is a hard worker, likes to work, is eager for more money, is starting to save up for big purchases or trips. Other than paying for his car (and gas and upkeep), cell phone, and educational expenses, he expects little or nothing from us.

                      My 19 year old daughter, well, she needs some more work.

                      Comment


                      • #12
                        Originally posted by VagabondMD View Post
                        My kids are 21 and 19. Here’s what I did:
                        1) Funded 529s to mostly pay for four years of college
                        2) Funded UTMA accounts for “roaring 20’s” - grad school, house down payment, apartment deposits and furniture, staring a business, travel, continuing to build nest egg, 2nd car, whatever... Each account has about $150k.
                        3) Matched contributions to Roth IRA from money earned in high school and college jobs.
                        4) Continued an allowance through high school and especially college that was intentionally not as much as they would need to do all that they wanted to do, so they would have to make choices or get a job
                        5) All gifts went into UTMA account or local bank. If a grandparent gave $100 as a gift, we would let them have $25 to buy something.

                        Early results - My 21 year old son is a hard worker, likes to work, is eager for more money, is starting to save up for big purchases or trips. Other than paying for his car (and gas and upkeep), cell phone, and educational expenses, he expects little or nothing from us.

                        My 19 year old daughter, well, she needs some more work.
                        Wondering on the UTMA -- did this impact any financials on the colleges? We probably not getting anything anyways, but stayed away from UTMA for the hopes of maybe a dollar or two somewhere. Also didn't want to be bothered by multiple tax returns and kiddie tax....too lazy.

                        Comment


                        • #13
                          Originally posted by StarTrekDoc View Post

                          Wondering on the UTMA -- did this impact any financials on the colleges? We probably not getting anything anyways, but stayed away from UTMA for the hopes of maybe a dollar or two somewhere. Also didn't want to be bothered by multiple tax returns and kiddie tax....too lazy.
                          In our experience (twin seniors in HS) UTMA has had no impact on awards thus far. Only one school has required FAFSA as a condition of scholarship awards, and this is the one school that has yet to tell us anything. (We submitted FAFSA to only this school).

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                          • #14
                            When folks are choosing to “match” Roth IRA or 401k contributions for their young adults, I’m presuming that means funding the Roth with $1 for each $1 of earned income in the first case and providing $1 of take home pay for every $1 of 401k contribution by the young adult. At least at income levels of $15-20k or less. (Still living at home or in college type earnings). That’s what we are doing in the former case for our older high school child with her first part time job. I don’t see any other way to do it in the latter scenario with regard to contributing to a 401k. (Not an issue so far for us). We are also transferring 20% of each direct deposit paycheck from her checking account to her savings account. Both to help with the savings mindset and help prevent her from getting in the habit of spending everything she earns. I suppose we could use that 20% for Roth and then match to 100% of earned income, but so far these are twice monthly paychecks of $60-120, so the numbers are still rather small. I would be interested to hear how others are doing these matches.

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                            • #15
                              As a kid I loved earning money. Outside of chores which paid $5/week I could iron my father’s work shirts for $1/shirt. Bagging/raking leaves also paid—but I hated that so no shot.

                              My parents encouraged us kids saving by matching everything we would save. In high school I had 1-2 jobs at all times & probably spent 1/2 the money I made and watched my parents match the other half I saved. It was understood that my savings was 100% for college.

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