If the thought of being able to put money into savings makes you laugh hysterically, clap your hands.
If you clapped, you’re not alone. It can be incredibly difficult to put money into savings. And that’s just when the savings are your own. When you start considering how you’ll manage to save any money for your kid’s future — well, that can seem even more impossible.
If you want to save money for your kid’s future, or at least want to try, here are a few tactics to consider:
Start a 529 Plan
Like a 401k, a 529 plan is helpful, but it can be daunting if you’re new to it. The IRS has a detailed and helpful Q&A page that makes for a great introduction to this popular college savings plan.
The short and sweet explanation is this: A 529 plan allows you to save money specifically for education costs without being taxed on the account’s earnings — provided you spend those earnings on approved education costs. It’s considered your asset, so it won’t affect your kid’s financial aid and you can transfer it to their sibling if they’re not interested in pursuing higher education.
Be savings savvy when you choose your credit cards. Provided you’re not spending beyond your means and you’re paying off your monthly balance in full, credit cards with cash back rewards are a great way to save.
One way to save while sticking to your budget is to choose cards that give cash back perks for major budget items like gas or groceries. Remember, if you have to spend money on things you wouldn’t normally buy to get rewards, you’re not really saving anything.
The upside is treasury bonds are an incredibly safe investment. The downside is that same safety means they likely won’t increase in value as much as other investments.
Although interest rates on treasury bonds are unlikely to match skyrocketing tuition costs — or even rising car costs — they can still act as a safe little emergency fund. When every little bit helps, a few treasury bonds certainly don’t hurt.
Buy Life Insurance
There’s nothing like talking about death to really spice up college savings tips.
But to be serious, death might not be anyone’s favorite subject, but failing to consider your untimely demise is a surefire way to derail your kids’ financial future.
Although you hope it’s never needed, your life insurance can help cover mortgage, car or debt payments in the event of your death. Ideally your life insurance will cover your debts and funeral costs, allowing your kids to grieve without the added weight of your unpaid debts hanging over them.
Start a Savings Account
Opening a bank account in your kid’s name isn’t going to yield astronomical growth, but it’s a sure and steady way to put aside some savings.
Just keep in mind that once your kid turns 18 or 21 — depending on the state — and gets control of the account, you will no longer have control over how they spend it.
Teach Kids How to Save
Whether or not you’re going the savings account route, it’s incredibly important to teach your kids about money management.
Teaching your kids the importance of saving and how to contribute to their savings can start at a young age. Teach them how to put part of their allowance in savings. When they’re old enough to take on their first job — raking leaves, babysitting, mowing lawns, pet sitting — teach them to put a percentage of that money in savings too. Keep building on lessons of putting money in savings, delaying gratification and saving up for big wish items as they graduate to their first part-time or summer job.
Get the Family Involved
Have well-meaning grandparents/aunts/uncles/third cousins who overload your kid with toys every birthday and Christmas? While your kid may see no problem with that, an overabundance of stuff might: a) not fit in your home, b) not fit with your parenting views or c) seem like a waste given how quickly your kid outgrows or loses interest in said stuff.
It’s always awkward to have money talks with family, but consider asking these generous relatives to diversify their generosity. Let them know that a few physical gifts are appreciated but that contributions to Junior’s 529 or savings account would be a long-term way to show their love and support.
Sell Your Car
Stop. Breathe. This doesn’t mean you have to sell your car and put that money into your kid’s 529 or savings account. Of course, if you’re already planning to sell your car and embrace the bicycling life, more power to you.
But what more parents might be able to consider is this: Make your old car your kid’s first car.
If you’re savvy about buying vehicles that will last more than a few years before becoming a black hole of repair payments, consider selling your used car to your kid. With good planning, you can have this overlap with the time you would typically upgrade to a new vehicle anyway.
The average price of a used car rose by over $10,000 in the past 10 years. By selling your old car to your kid, you can ensure they’re receiving a quality vehicle and you can likely offer a far more competitive price. From there, it’s up to you what you do with your generously low purchase price. You can put it towards a new family car or sneak it into your kid’s 529.
Make Savvy, Personal Choices
It’s hard to keep up with the Joneses when the Joneses are buying each of their 2.5 kids new top-of-the-line cars, paying for four years at a competitive private college and contributing a down payment for a house.
With competition like that, it’s no wonder well-meaning parents are stressing about how to provide for their kids’ future.
Although it’s hard to ignore cultural pressure, remember this: You’re not a bad parent if you don’t match the proverbial Joneses. Putting off buying your own car or house or neglecting your own savings or financial responsibilities won’t do your kids any favors.
It’s important to be honest with yourself and your kids. Be honest about what you can and can’t afford. And, more importantly, be honest about what your kids truly want or need.
As you kids grow and mature, help them figure out if a four-year college is right for them. Would they prefer to live at home and commute to a trade school? Would they prefer to get gen ed credits out of the way at community college before transferring to a bigger institution? Are they interested in joining the armed forces? Or would they be interested in a career that involves training via apprenticeship rather than classroom studies?
While it’s important to start saving early, it’s also important to keep your unique situation and unique child in mind as the years pass. Adjust your savings plans to fit their needs and your financial realities. Keep teens involved in talks about planning and saving for their future.
In the end, teaching your kids about money is really one of the best investments you can make in their financial future. You can engage in as many savvy savings plans as you want. You can pay every last penny for their college and first car. But if you haven’t taught them how to be savvy with their own money, all that careful planning won’t amount to much saving in the end.
Jennifer Landis is a mom, wife, freelance writer, and blogger. She enjoys long naps on the couch, sneaking spoonfuls of peanut butter when her kid’s not looking, and the occasional glass of red with her husband in her yoga pants. She is the mastermind behind Mindfulness Mama. Find her on Twitter @JenniferELandis.