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!
In last week’s Financial Friday, we introduced you to the concept of saving for our kids and how it has been an important aspect of our financial life since PFG boy was born in 2010. In this week’s edition, we will share with you how everything has changed with the birth of PFG girl.
Adding a Second Child
In August 2013, our lives changed once again when our beautiful daughter, PFG girl, was born. Once again, we knew that we wanted to continue saving for PFG boy and wanted to use the same savings model for PFG girl. However, this meant almost doubling the amount of money that we were putting away for our kids. (Yes, we know that the cost of having children costs a lot of money in general.) Now instead of putting $65 a month away (for PFG boy), we would be putting away $65 for PFG boy and $50 a month for PFG girl. This jump means we are now putting away $1,380 each year towards savings for our kids.
Along with this addition of a child, we decided that since we were already doing the 52 Week Savings Challenge, that this “extra” $1,378 that we were saving would be a great way to save for our kids’ savings accounts. In 2013, of the $1,378 we saved through the 52 Week Saving Challenge, $970 went towards the savings accounts. The rest remained in an account that we will use this year towards their savings accounts and where this year’s 52 Week Savings Challenge money is held.
Moving the Savings Accounts to Ally Bank
Additionally, when PFG girl was born, we made another decision regarding where the accounts were held. Initially, we had set up PFG boy’s account at the bank where we had accounts when he was born. When we transferred our accounts to a local credit union, we moved his account with us. With the birth of PFG girl, we knew we would need to open a new account and it was a good time for us to explore alternative banking options for the savings accounts.
We looked into putting it into an investment fund but that didn’t allow us to pull the money as quickly and would cost some money to do trades. We thought about leaving it at the credit union but keeping it there made it too easy to transfer it into our other accounts.
Finally, after reading many reviews of online banking, we decided to try an account that would pay a higher interest than our credit union but would still allow us to transfer and deposit money easily. While we had heard about many different online banks in the end we decided to use Ally Bank.
When we initially set up the account the interest level was 0.90% which was one of the highest interest levels for a savings account at the time. The current interest level is 0.87%.
As the accounts get larger, we will explore diversifying where the PFG kids’ savings accounts are so that we can still have access to some of the money and earn higher returns on the rest of the money.
The Big Savings Change in 2014
With the beginning of 2014, we knew we needed to begin attacking our debt in a new way and while saving for our kids and for ourselves is very important, we also knew that the quicker we could get rid of our debt, the more we would be able to save. Luckily for us, we do not have any credit card debt (on our monthly PFC Monthly Financial Review, we list credit cards but we pay it off at the end of every month.)
So beginning January 1, 2014 instead of putting away $65 per month for PFG boy and $50 per month for PFG girl, we will now be moving $25 on the 18th of every month to PFG girl’s account and $25 on the 27th of every month to PFG boy’s account. The additional $65 that normally was going into their savings accounts will now be used as a “snowball” payment (we will share our snowball payment method in an upcoming Financial Friday) towards some of our debt.
To ensure that we stay committed to saving for our kids, we will continue putting $25 each month away and keep track of the difference that we would be putting away for the kids. We believe that this will only be temporary as we continue to tackle some of our student loan and housing debt and our goal is to “repay” the savings over time.
Where the Money is Today
In a little over three years, PFG boy’s account currently has a little over $1,700 and in less than five months, PFG girl’s account currently has around $500. Note: PFG girl’s account includes cash gifts given when she was born. Our hope is that we can continue building up these accounts to allow our kids the freedom to experience the experiences they want to and have the birthday parties they want without us having to worry about having enough money in our own checking accounts.
In what ways do you save money for your kids? Do you have a separate place where you save money for them? Share your experiences with the other readers.