6 Ways to Save and Invest Money for Kids

Heather Q. says:

I love the Money Girl podcast! I just opened a 12-month CD for my daughter and plan to give her the money when she’s an adult. But I have about eight more years to save for her. Should I open new CDs as I save more, or should I add money to the same CD once it matures?

Thanks for your question, Heather! I know your daughter will be thrilled to have a financial leg up as she launches and becomes independent. If you also have children or are thinking about starting a family, it’s essential to get familiar with strategies and accounts that make it a little easier to save and invest for your kids.

This post will answer Heather’s question by reviewing six savings options and the pros and cons for each one. Plus, I’ll discuss when to begin saving for a child’s future and how it should fit into your big financial picture.

When should you begin saving for kids?

Being a parent means you've got plenty of expenses and maybe ongoing financial stress. You want the best for your children, but you also need to make wise decisions for your own future. While the cost of college seems to rise faster than hot air, we're living longer and may have less Social Security retirement income to count on in the future. That means you likely need a bigger nest egg than you think.

My point is that you should never forgo saving for your retirement to pay for a kid's college or any other significant expenses. Instead, create a financial plan that includes your retirement and savings for kids as soon as you start a family.

The sooner you begin saving for short- and long-term goals, the less stress you'll feel in your budget and emotionally. If you get a late start and can't afford to pay for a child's education, don't feel guilty about it. Remember, putting retirement first is in your entire family's best interest.

If you sacrifice your financial security for your kids, you may find yourself relying on them to support you in your old age!

If you sacrifice your financial security for your kids, you may find yourself relying on them to support you in your old age! While it might seem coldhearted for a parent to refuse to pay for a child's education, don't forget that kids have options, such as working, getting scholarships, and taking out federal student loans.

But there no loans or grants to support you after you stop working. If you're less than 20 years from retirement and haven't reached 80% of your savings goal, stay exclusively focused on building your retirement nest egg.

Again, shore up your financial well-being first, even if that means saving nothing or less than you'd like for your kids....

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