Welcome to another edition of Financial Friday. A series of weekly posts where we share some of financial gold with you on our personal finances, savings, and investing. Once again, these are just things we have done ourselves and might not work for you, but it doesn’t hurt to try a new way to pan for your own financial gold!
Growing up, I never realized how lucky I was to do the things I was able to do. Whether it be playing sports, scouting, traveling, or summer camp, I was able to do what I wanted to without a lot of push back. As I now have two kids of my own and have seen the cost of being a parent (holy cow, nobody ever tells you that these cute human beings will drain your wallet), I have a greater appreciation for everything I was able to do.
When I have asked my parents about this, they have always said they wanted me and my siblings to be able to experience everything we wanted to and to have experiences they weren’t able to when they grew up. They didn’t want money to be a factor in us being able to try new things out or participating in activities our friends were doing. Of course, there were times they said no… but those were rare.
It was this mentality and upbringing that made me want to figure out how we could provide something similar for our own kids. We both know that college is important and saving for college would be one avenue of how we could save for our kids but we also wanted to be able to provide experiences for our kids from birth until college. Please note that college savings has been started for both of our kids but at this time, we will not be writing about this.
We decided before our son was born that we would begin a savings account for our son. This account would be used experiences, birthday parties, and other activities for our son. Now you may ask, why wouldn’t we pay for some of these activities out of our own account. From what my parents taught me, they never wanted to say no and I wanted to take this one step further. If we had accounts with the money already pulled out from our main accounts, we would never have a reason to say no to our own kids.
Both of our kids accounts were initially funded with gift money we received when our kids were born. We used some of the money on items we needed right then and decided to save the rest. Additionally, we decided we wanted to put in a decent amount of money each month and decided we would start with $50 per month. So on the same day each month (ie. the 27th of every month) we would transfer $50 into our son’s savings account.
We also knew that we wanted to increase the amount we saved each year for our children and decided that an increase of $5 per month would be reasonable and would also not break the bank. So in our son’s first year, we saved $600, the second year was $660 and so on.
How We Saved in the Beginning
For the first three years, we put the money in a savings account first at our bank and then when we moved over to a credit union, we moved it there. On each payday (at the time I was getting paid twice a month), we would move half of the money we were saving for our son into his account. Spreading it out to twice a month made it feel like the amount we were pulling out was not as large and more manageable.
Over those first couple of years, we noticed some big things happen by setting up this savings account for our son. First of all, by adding a new child, our own personal savings took a back seat. Why should we save for a vacation or a new “toy” when we brought this new child into our lives? This has helped us frame every activity and money decision we make.
Additionally, having this savings account has allowed us to provide our son with three great birthday parties, a bunk bed, swim lessons and much more! Over time, we have balanced taking the full amount of an experience or item from his account to splitting the cost between our own checking and his savings.
Another lesson learned from my parents, is that it is great to do things today that are fun but it is also important to plan for the future. If we took all of the money from his savings today for one large event now, how would this impact a future experience for him?
Overall, we know this savings account has laid the foundation for us to provide unique experiences for our son… and now our daughter.
To Be Continued…
Check out part two of our Saving for Our Kids post next week. We will explore the addition of a second child, moving the accounts to Ally Bank, the recent change we made to saving for our kids, and the current amounts in their savings accounts.