5 Smart Ways to Save Money for Your Children

Whether you’re putting money away for college or a rainy day, here’s a guide to making sure it grows.


For a time span of ten years or longer, Ameriprise financial advisor Dawn Jurkovich says, "Put it in a moderate aggressive investment … something with a higher dividend. Over a ten-year period, you can be more aggressive." The money can then be used for college tuition, living expenses, a wedding, or anything else.

4. A dedicated child's savings account: In today's market, savings accounts carry relatively low interest rates, but they come with other advantages, including the opportunity to teach children about money and savings as they get older. This savings account, in the child's name or the parent's name, can supplement the other, more aggressive investing strategies above. Some banks, including ING Direct, offer teaching materials along with kids' savings accounts, and waive fees for low balances as well as requirements for minimum account balances.

"Banks were charging exorbitant fees for parents to put $5 or $10 into a savings account so we created the kids' savings account," says Todd Sandler, head of product strategy for ING Direct. The website orangekids.com also helps children learn about money as they start to save and invest.

5. Your employer's college savings plan: Some companies offer direct deposit into a college savings account (such as a 529 plan), which makes it easier to automate savings. Joe Hurley, founder of SavingforCollege.com, says that while payroll deductions into 529 accounts is common, some companies avoid it because they don't want to be responsible for choosing which 529 plans they make available, especially if they have employees in more than one state. But it's worth asking your human resources department about it, and taking advantage of the deduction if it's available. Companies also sometimes offer small, private scholarships to employees' children, usually $1,000 or $2,000 to help defray some of the costs.

Beth and Sean Moynihan say they will probably start with the 529 plan and expand their savings from there. Meanwhile, they are trying to figure out how to find savings in their budget, even after their baby arrives. Says Beth: "We started talking about cutting back on vacations, traveling, and going out … Then we can have more money for the baby's needs now."

Kimberly Palmer is the author of the new book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back.