As a parent, you worry about your child’s well being; meeting her needs, being prepared for emergencies, providing for her future. For many during these trying times, it is a challenge to scrape together the resources to meet the needs of today, much less tomorrow.
Developing a plan that you can stick to is key. While there is no set blueprint to successful saving, most experts will agree that it is important to define the plan, establish specific goals, prioritize, set realistic targets and revisit the plan – often.
Plan for Emergencies
A leaky roof, car repairs, meeting an insurance deductible or covering uninsured expenses, job loss –– the list is endless when it comes to potential challenging setbacks to your savings plan. If you can set money aside for emergencies, you’ll be less likely to be tempted to dip into savings designated for your child’s future or your retirement when the unexpected happens.
Carefully evaluate any major expense that has potential to derail your plan to save for your child’s future.
If you just learned that your child needs braces, but your dental insurance won’t cover the expense, ask if treatment can wait while you save for it or research insurance options. If it is in your child’s best interest to act now, ask for an affordable, interest-free payment plan rather than borrowing from an education savings account. If your current provider is not willing to work with you, shop around and find someone who will.
While it is important to develop and nurture your child’s talents, be careful not to short-change his future to cover expenses for classes or activities. Before succumbing to the temptation to use money set aside for college to cover dance program tuition, sports team fees or expensive equipment, look elsewhere for a way to fund your child’s activities. Check into programs offered through non-profit agencies, look for program scholarships or ask about fundraising options to cover the expenses so that your child can participate in that activity.
How to Save
There are many ways to save, share Devaney and Stein in their May, 2013 Forbes.com article, Saving For Your Children’s College Fund On A Budget, including state sponsored 529 plans that let parents save, tax-free, for college. However, while many of these state funds are allowed to be used for colleges in other states, monies not used for specifically designated education purposes could be subject to tax.
Other options, Devaney and Stein add, are life insurance policies, Coverdell education savings accounts (which limit yearly contributions but are tax-free when used for the purpose of education), and even prepaid college plans. Prepaid plans vary by state, but allow parents to pay now – at today’s locked-in rate – for their child’s college education down the road. Other ways to save include IRAs or custodial savings accounts.
While saving for your child’s future, make sure to save for your own. It’s never too early to meet with a professional to discuss both endeavors and to fully understand the tax implications and specifics of each choice.
My God will supply every need of yours according to his riches in glory in Jesus Christ. —Philippians 4:19, KJV
Teach Your Children about Money Management
Teach your children about money management through example as well as by providing them with opportunities to save, give, account for — and when they are ready — to earn their own money. Many parents find it helpful to use tangible or at least visual aids to teach these important life lessons.
If a child is old enough to understand that a dollar is equal to four quarters, 10 dimes, 20 nickels (and so on), then he is ready to learn about managing money.
For a young child, you can set up four boxes, or piggy banks. One box will be for saving, one for giving, one for spending.
An older child — tween or teen — can learn to manage his own bank account and his own simple budget that you help him set up.
Not only will this help your child understand saving and allow him to experience, firsthand, what it is to give and donate, but it will also provide you with an ongoing teaching tool for money management principles.