Whether you’ve been saving for your child’s financial future already or you’re just getting started, there’s no better time than the present to explore some investment options. Why? Because once you have good savings plans in place, you not only have compound interest on your side, but you’ll be modeling good financial behavior and teaching your child valuable life lessons. Read on to learn more!
- Help Your Child Open a Youth Savings Account at Chambers Bank
A youth savings account is an excellent tool to help teach your child money management skills. At Chambers Bank, a Youth Savings account can be started any time with a few simple steps. And while you’ll have joint ownership and oversight capacity, your child will be able to view the account, make transactions, and earn quarterly credit on the account balance.
Once your child’s Youth Savings account is funded, encourage the habit of setting money aside regularly. Try helping him or her identify and develop a few short- and long-term savings goals—whether it’s saving money for a new video game or putting money aside for a first car. Having set purposes for saving money can go a long way as far as helping your child stay motivated to both earn more money and resist unplanned spending.
You can also encourage your child to save by setting up an automatic “allowance” deposit from your Chambers Bank checking account to your child’s Chambers Bank Youth Savings account. By sending a portion of allowance funds directly to the account versus handing out cash, he or she gets the opportunity to think about savings goals while also watching the account balance grow.
Chambers Bank Youth Savings accounts have a number of great features including a low starting deposit, quarterly dividends, no monthly service charges, and free Online Banking and Mobile Deposit. When the time is right, your child can also receive a debit card for making transactions. To get started, simply schedule an appointment with your local Chambers Bank representative or call 1-800-603-1226 for more information.
- Actively Teach Your Child About Finances
While saving money for your child’s future is an important part of your parenting journey, so is communicating good financial lessons and habits. You can start teaching your child about money at an early age by including him or her in discussions and decisions about spending.
Here’s an example: when you go grocery shopping, find some age-appropriate ways to involve your child in picking out food. A three-year-old can weigh different amounts of fruit to reveal price changes. A six-year-old can discuss the costs and benefits of buying boxed muffin mix over premade bakery muffins. A teen can calculate the percentage of money saved buying eggs on sale versus buying regular-priced eggs.
Being open about your budget is also a way to help your child learn that goods and services cost money. You don’t have to disclose the fine details, but by showing your child the bills you pay each month, they learn why you need to work and save. Depending on his or her age, challenge your child to find ways to save money on expenses, from conserving water and energy to finding free entertainment and cutting the grocery bill.
If you’d like some resources to help teach your child about finances, check out the free download “Family-At-Home Financial Fun Pack” from the Council for Economic Education. It’s chock-full of age-based activities, worksheets, games, and book recommendations. The Consumer Financial Protection Bureau also has a great web page called “Money as You Grow: Help for Parents and Caregivers” containing free activities and tools to teach kids of all ages about money.
- Invest in Chambers Bank CDs
A certificate of deposit (CD for short) is a savings account product that offers a fixed interest rate over a fixed time period. CDs typically have better interest rates than traditional savings accounts and are considered low-risk investments. And as long as you leave a CD’s principal funds untouched until maturity, you will earn interest on the money invested and avoid any early withdrawal penalties.
So, what are CDs good for? Let’s say you want to set aside money for something like a summer sports camp or a semester abroad. A Chambers Bank CD is a great savings vehicle because you can invest in a CD for a specified time period and then, at maturity, use the principal and interest earned for the earmarked expense. Because early withdrawals from CDs are penalized, you won’t be as tempted to take money out of your CD before maturity and spend it on something else.
Here are some features of our Chambers Bank CD products:
- A variety of terms, from 3 months to 3 years.
- Interest paid monthly, quarterly, or semi-annually based on CD deposit terms.
- The interest you’ve earned can be added back to the CD, deposited to a Chambers Bank checking or savings account, paid out by check, or deposited to an external account.
- Start a 529 Plan for Education Savings
If you want to save money for your child’s education, a 529 plan is a popular tax-advantaged investment option to consider. Money allocated to a 529 plan can be used for qualified expenses at any eligible college, apprenticeship program, or K-12 institution. You can also use 529 funds to pay off up to $10,000 of a child’s student loan obligations.
The Arkansas 529 GIFT Plan is sponsored by the State of Arkansas and is managed by the Vanguard Group. Any U.S. citizen or resident alien with a physical address can open an account for a beneficiary of their choosing; there are no state residency or income requirements. If you are an Arkansas taxpayer, you can deduct up to $5,000 of your annual 529 GIFT Plan contributions (up to $10,000 for married couples) from your state adjusted gross income when you file taxes. Plan contributions and earnings can be withdrawn state-tax free when used to pay for qualified educational expenses.
Other Arkansas 529 GIFT Plan benefits include low maintenance fees, transferability between beneficiaries, a wide selection of investment options, and a $500,000 contribution maximum per beneficiary. You are in control of the account, and if your child doesn’t need the funds, you can transfer the plan to someone else, use it for your own education, or withdraw money for non-educational needs (with a 10% federal tax penalty). You can learn more about Arkansas’s plan by visiting www.arkansas529.org. For links to all state 529 plans, see www.collegesavings.org.
- Use Your Roth IRA to Help Fund Your Child’s Education Expenses
If you’re looking for additional ways to fund your child’s qualified education expenses, a Roth IRA may be an attractive option if you’ve got your own retirement planning on track. Roth IRA contributions come from after-tax dollars, so both your contributions and earnings grow tax-free for the life of the investment. There are also no required minimum distributions.
With a Roth IRA, you can withdraw your contributions at any time without taxes or penalties. Earnings can be withdrawn for education expenses penalty-free before you reach age 59 ½, but you will have to pay income tax on those earnings. It’s also important to note that you are not limited to whose education you fund, and whatever money doesn’t get used for education can continue funding your retirement.
As you plan your Roth IRA contributions, keep in mind that in 2022, your individual gross income must be $144,000 or less ($214,000 or less if married filing jointly) to participate. Your annual contribution limit is $6,000, and $7,000 if you are over age 50.
Summing It Up: New Year, New Ideas
Now that we’ve shown you five ways to invest in your child’s financial future, start the new year strong by trying one of them this month. And if you need any assistance with budgeting or starting accounts, call us at 1-800-603-1226 or stop in at one of our branch locations. Our banking representatives are always happy to help you find more ways to reach your savings goals.