What do you do when your child receives monetary gifts?
My mom just found this letter my grandmother saved.
It is funny to see my 8-year-old self, writing about accumulating savings, confirming to me that saving has always been a part of my life and that saving habits taught early on are likely to continue into adulthood.
The habit of saving monetary gifts still exists in my life today. Every birthday check to every dollar we received as a wedding gift were viewed as unexpected dollars. They were given as a present to keep, not spend. All were and will be deposited into savings, available for an emergency or to save for a larger purchase.
You can instill this savings habit to your children/grandchildren by following these first financial steps:
- Open a custodial savings account (an account in your name for the benefit of the child).
- Deposit all checks (and cash!) gifts the infant/child receives for holidays and special occasions.
- Once $1,000 is saved, open an investment account to purchase stocks. The investment account will also be used as a teaching tool as they grow.
- When the child is around 4 or 5 years old, begin making a big deal about adding the gifts to their savings account and show them how their balance grows with each deposit. They will begin to comprehend the ownership of a monetary asset. The hope is to create a feeling of satisfaction by saving rather than spending to buy another “thing”.
- Always include the person who gave the gift in the savings process. They are always happy to know there is a message going along with the gift and that it is a gift that keeps on giving…a lesson from my Mom, as I’m sure she was the one who encouraged me to write this thank you letter to my grandmother and great-grandmother. Thanks Mom!
- Once the child begins to earn money from chores and then a summer job, encourage the Spend, Save, Share Method. If you are not familiar with this method, don’t worry, we will introduce you to it soon!
Being a parent is expensive, do not add your savings to a child’s custodial account! One common mistake we see is parents saving for their kids before securing their own financial future. Typically, adding money to a child’s custodial account is not the most efficient use of your dollars.
This is the child’s account and they should be the one adding to it with gifts and earned income.
Give your child an EPPIC™ financial start. Don’t delay, start today! Create this essential savings habit to help your kids and grandkids grow up to Be More Healthy, Wealthy and Wise™!
Stock investing involves risk including loss of principal. No strategy assures success or protects against loss.