10 Simple Ways to Save Money for Your Child's Future

Photo credit: Getty Images
Photo credit: Getty Images

From Woman's Day

There are no two ways about it — kids are expensive.

If you're not already a parent, you might think, "They don't eat very much and they share my house, so how expensive could they be?" But according to a cost calculator from BabyCenter.com, my 11-year old daughter will cost me over $22,000 this year alone. That figure includes several factors, like housing, food, transportation, and health care, but it doesn't take into account savings for college and living expenses once she leaves the nest.

So what are the best ways for aspiring or current parents to sock away cash for their pricey progenies? I asked finance experts to share the best ways to save money for a child.

Understand Your Cash Flow

According to Douglas Boneparth, a CFP and president of Bone Fide Wealth, a financial planning firm in New York City, the most fundamental aspect of saving for your child's future is have a deep understanding of your own cash flow.

"I call it being a master of cash flow," Boneparth said. "That’s intimately understanding how money comes in and out of your life. This way you can make informed decisions about which expenses you want to continue paying for, or cut back on if you’re looking to increase your savings, or if you’re looking to allocate money towards new expenses related to having a child. We really want people to understand their own data and understand their own spending behaviors and habits."

There are a number of online tools that Boneparth recommends parents check out to help them better understand their spending habits, including Tiller Money, Mint, and You Need A Budget.

Be Consistent

When it comes to both tracking your money and savings, Boneparth says that it's crucial that you keep up with it consistently — always monitoring your spending and saving goals week after week and month after month, and not letting your tracking fall by the wayside.

"I just want people to get into the habit of knowing where their money goes so that they can consistently save for their goals because it’s about consistency," he said.

Invest Early

It make sense that the more years spent saving, the more money you'll have, but when it comes to future expenses with a deadline, like college, this is especially important. Nick Holeman, CFP at online investment platform Betterment, suggests a 529 fund for this purpose.

"A 529 account specifically allows money to grow tax-free, as long as withdrawals are used for a qualified educational expense," he says. "You can start contributing to a 529 as early as you want, and kids can contribute a portion of their own money as well."

Photo credit: Getty Images
Photo credit: Getty Images

Go Beyond the 529

A 529 plan is not the only way to go when saving for college. "Other plans, like the Uniform Gift to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts, offer more investment options," says Jack Schacht, founder of My College Planning Team, a company that provides college planning assistance for families. "Just remember that both a UGMA and UTMA require that you hand over control of the account to the student when they reach a certain age."

Keep Things Separate

Setting up a savings account that is separate from the accounts you use regularly can help keep the money where it belongs—in the account. Jennifer Barrett, Chief Education Officer at Acorns, a micro-investing platform, suggests a high-yield savings account at an FDIC-insured bank for this purpose. "You want to get the best rate possible—think 1.5 percent APY or more," she says. She also suggests giving a nickname to your account, like "My Baby Fund." Research shows that giving your savings account a name that's meaningful can help create an emotional connection that motivates you to keep saving.

Photo credit: Getty Images
Photo credit: Getty Images

As They Grow, Sell

Part of the reason that kids are so expensive is that they grow out of what you purchase for them. That highly-rated car seat you invested in and those super-warm snow boots that you sprung for last season? They have a shelf life. Thankfully, there are many services out there that allow parents to sell the items their kids outgrow. According to OfferUp, a platform that lets you sell gently used items to people who live near you, there are certain times of the year when parents can get the best value for certain items:

  • Crib: If you sell your crib in March, you can earn 30 percent more than if you sold it in December.

  • Stroller: Because more babies are born in July and August, necessary items, like strollers, are in high demand in June, earning you 10 percent more than any other month.

  • Snow Gear: October, right before the snowy weather begins, is the best time to sell your snow gear. You could earn $110 in October versus $90 in November.

With your earnings, you can buy new or used items that your kids currently need, or sock that money away.

Photo credit: Getty Images
Photo credit: Getty Images

Insure, Sensibly

When you're shopping for insurance, look for a company that offers extra benefits that you can partake in. For instance, DIY expert Chip Wade found that bundling his insurance allowed him to save every month.

"Through Liberty Mutual Insurance, a company I do some consulting for, you can be looking at savings if you bundle a home or renter's policy with your existing auto policy," he said. "They also offer a new discount on pet insurance as well as one for installing smart home technology." You can also save when adding teen drivers to your auto insurance, especially if they maintain good grades. So, when you're shopping for insurance, ask what the company can do for you before committing.

Work Perks

Sometimes employers offer perks that can be beneficial to your saving efforts. Jordan Sowhangar, CFP and a wealth advisor at Univest Investments Inc., suggests taking a closer look at the perks available to you. "Benefits could include a Health Savings Account (HSA) or discounts on things like daycare," she says. "Sometimes you can even get discounts on items like laptops if your child is high school or college age."

Financial Gifts

Family members might be in a position to help out with big expenses, like tuition. But, before accepting any financial gifts, make sure you know the rules.

For instance, while a relative can give their child or grandchild up to $14,000 a year without incurring a gift tax, that money can reduce their grandchild's eligibility for aid on their FAFSA (Free Application for Federal Student Aid). Schacht suggests that relatives ask first before offering money as a gift. "If the family is applying for aid, you might want to hold off on helping out during the college years. Instead, consider a generous gift once the child graduates," he says.

Teach Along the Way

Your saving efforts can also present opportunities to teach your child about money. They're going to be on their own at some point, so why not set them up for success? Sowhangar suggests getting them involved early on by teaching them the value of money and setting realistic expectations. "They can learn there is a value to a dollar, money does not just grow on trees and hopefully, they will be less likely to put pressure on the parents in their teen years," she says.

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