Starting a savings or investment account as an adult is good, but starting one as a child is better. You can start saving for a child’s education or even retirement as soon as they’re born—whether the baby is yours, a family member’s, or a friend’s. Here are a few ways to save money for kids.
- College savings plan: A 529 college savings plan is the easiest way to save for a child’s education. These allow money to grow tax-deferred—and if it’s spent on the specified list of education-related expenses, the withdrawals are free from federal income taxes, too. You can contribute to an existing one or set one up on behalf of the child. Learn more about 529 plans here: https://www.savingforcollege.com/college-savings-201
- Roth IRA: A retirement fund for a baby might seem strange, but starting a custodial IRA early means even small contributions will grow exponentially over time. It can be a great way for children to learn good financial habits. Learn more about custodial Roth IRAs here: https://www.investopedia.com/open-a-roth-ira-for-someone-else-4770855
- Savings account: Any adult can open a good old-fashioned savings account for a child, provided a parent or guardian is the main person on the custodial account. This kind of bank account grows with the child as they begin to earn their own money and is another good way to build positive money habits.
