Family Financial Planning: Saving for Your Child’s Future

April 24, 2025

Saving for your child’s future can be a stressful time and there are so many ways you can save. Today, we’re going to break down the many different options there are and why it is important to save for your child.

What’s the Best Way to Save?

Each family will differ on what works best for them. Let’s go over the options to help you decide what makes the most sense for your family.

1. Children’s Savings Account

Most credit unions and banks offer children’s savings accounts. The parents can co-own these accounts, and they are great options to have when your children are young. Not only can you save for future moments in your child’s life, but you can also teach them young about saving their money.

2. 529 Plan

529 plans are widely used and come with a couple benefits that might be appealing to you. For example, in most states, contributions made to a 529 plan are tax-deductible. This means you could reduce your state income tax bill if you are actively contributing to the account. These plans also are tax-free and withdrawals used for qualified education expenses are tax-free.

3. Roth IRA

To use your Roth IRA for child expenses, you need to plan properly. It might not always be smart to dip into your retirement savings, so it is crucial to plan if this is the route you want to take. Roth IRAs may offer flexibility because the principal amount can be taken out at any time. You might also want to have your teens open up their own Roth IRA when they start working, helping save more money.

Balancing Saving for Retirement and Your Child’s Education

When you start your family, you might feel overwhelmed with the thought of not only having to save for retirement, but also having to save for your child’s education. Consider following these tips to make your saving more manageable:

• Start saving early: Saving early will not only help you have money when you need it, but it will also allow more time for compound interest to grow. Consider automating contributions to both your retirement and child’s future savings accounts. Start contributing money to a 401(k) or a Roth IRA when you start your first job.
• Don’t neglect your retirement savings: It might be more tempting to start focusing more on your child’s future savings once you start your family, but it is just as important to focus on your retirement savings. Prioritize your retirement savings so you have a reliable income once you retire, taking the burden off your children. Read more about planning for retirement.
• Have open conversations with your child: It could be helpful to talk to your children about scholarships and part-time jobs. This will teach them financial independence and can also help alleviate some of the financial stress you might have. Be open about how much you plan to contribute to their education, that way they know how much they need to save.

Teaching Your Child About Money

It’s never too early to start teaching your child about money. In fact, it’s a very good idea to start while they are young. While they are young, you can:

• Introduce the value of money: A way you can teach your child about the value of money is having an allowance. Reward them by doing chores, helping them develop a strong work ethic. This will also teach them how to spend their money wisely.
• Emphasize saving: Your child might want to instantly buy something when they earn money. Consider teaching them to set a certain percentage aside to save. That way, they are still able to spend the money they earned while also learning how to save and be responsible.

Once your child becomes a teenager, there will be a shift in what you are teaching them about money. Consider doing the following:

• Encourage them to get a job: You can help encourage your child to get a job. This will help them stay busy and earn money for college. If they are in a lot of extracurriculars, encourage them to get a summer job when they have more time. This is usually the best time for teenagers to earn money for college.
• Introduce them to credit: Enrolling your child as an authorized user on one of your credit cards can be helpful and set them up for success in the future. This is a great way to teach them about the responsibility of paying back borrowed money. To ensure they don’t use the card irresponsibly, have them pay you back any money they spent. Read more about ways to be a responsible credit card holder.

Once they are young adults, you might not have to do a lot of teaching anymore, but you can still be there for a couple of things.

• Help them set a budget: When your child starts college, setting a budget will help lead them to success. You can help them with their budget and give them ideas on how to not only set one but keep one. Consider showing them your budget to give them a better understanding of how you document yours.
• Teach them about investing: When introducing your child to investing, you should first teach them the basics. Consider starting with companies they already know. You can teach them about the importance of diversification to get the most out of their investments.