Giving A Child The Gift Of Savings

Came across this study on giving money to children that was done in England, but I’d assume that the numbers are probably similar in the US:

A study by the Building Societies Association (BSA) showed that 40 per cent of adults had considered giving a child money instead of or as well as a gift. This figure rises to 60 per cent among parents.

However, very few parents actually request that friends and family contribute to a savings account for their child at Christmas or on their birthdays.

“These figures are very revealing,” Brian Morris, head of savings policy at the BSA. “Clearly, many people are happy to contribute financially to a child’s future, but only a small proportion of parents have ever asked for money for their own child.

“Christmas is a perfect time to kick-start a savings habit for your child or grandchild and parents should think about asking friends and family to help build a nest egg.”

There are a wide variety of ways that you can give money to a child. I would suggest that it is done in conjunction with some type of account or financial instrument so that the child can actually learn about how different systems work (whether it be a banking account, a bond, stock or something else). It’s a wonderful opportunity to give and teach at the same time.

I also think it’s a perfect time to open an online bank account with your child. Having the child go through the steps to open the account will be a great educational experience and you can teach him/her about checking accounts (free, minimums, fees, etc) and online banks (interest rate differences, how it works, etc). It’s also nice that in the end the child will get a $25 bonus for the effort of doing so.

And while we’re on the subject, another story about teaching kids about finances that may be of interest.

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2 Responses to Giving A Child The Gift Of Savings

  1. Chrees says:

    One thing I think I will do for my children (once they are old enough) is to tell carve out a certain amount of my investment account for them. It will be theirs to do whatever they want, as long as it stays in the investment account.

    My plan is such that whatever amount of this carveout is theirs once they graduate from college will be transfered to them. Several thoughts on why this might be the way to go: the account is under my name so it will not count as their asset when calculating financial support; they will control those stocks or investments, so they will have investment experience in their teens; and I will control the transactions so I won’t allow “cash it out so I can buy some XBox games” transactions.

    Hey, it might not work, but I think the more experience people have in the investment markets, the better off they will be in the long run. I guess instead of giving a child the gift of savings, it is teaching them how to save/invest.

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