How Often Should You Set Aside Money for Your Kids? 5 Insights
Written by Jenny.
Although it’s fulfilling, raising children is probably one of the most expensive things you can ever do. There are, of course, short-term expenses that you need to address for their current needs: food and water, clothes, toys. But as a parent, you also have to set money aside for the long-term future, which involves their education, medical needs, future housing. You may even want to give them a small lump sum when they’re older to give them a head start in their adult life.
But how often should you set aside money for your children’s long-term goals, and how? To answer that, here are a few practical insights that you can use to develop your own saving patterns and strategies for the future of your kids:
1) Start Before Your Kids Are Born
On the question of when you should start saving for your kids, the answer is as soon as possible, even if you don’t have kids yet. Once you’ve decided that starting a family is the right step for your future, consider opening a separate account for your future children immediately. Once you make your first savings account deposit for your kids, you’ll be able to start a consistent habit that will benefit your family as it grows.
The amount you contribute may be small now, but an early start guarantees more funds in your child’s account as opposed to if you started saving when they’re older. The earlier you set aside money, especially if it’s in a high-interest savings account like one from Maya, the longer it has to grow. And if you already have kids, don’t stress too much about any lost time; it’s always better to start now than later.
2) Set Aside Money Every Payday
One of the easiest ways to consistently set aside money for your children is to time your deposits with your paycheck. Not only does this make it easier to remember; it could also be easier for your monthly expenses and budget. For example, if you get paid twice a month and want to deposit PHP1,000 to your kid’s savings every month, you can deposit PHP500 every payday, which can feel much easier on your wallet.
It’s also a good idea to add these deposits as a separate category in your budget, all so that you have an idea of how much money you have remaining for your everyday expenses.
3) Boost Contributions During Bonuses and Milestones
Did you receive a performance bonus, tax refund, or your 13th month pay? This ‘extra money’ is the perfect opportunity to add extra funds to your child’s savings account. For example, say you got a bonus of PHP 50,000. 20% of those funds can be an extra PHP 10,000 for your child’s education, emergency fund, or other long-term financial goal that you have set up for them. You’ll be able to make a huge deposit without it affecting your lifestyle in the future.
4) Reassess Amount Based on Financial Changes
The amount of money you set aside for your children depends on your current financial situation, which can fluctuate as your situation changes. If you got a raise or promotion, take a look at your current deposit history and see if you now have the budget to increase your contributions.
On the other hand, if your spouse recently lost their job, you might have to cut your deposits down slightly to attend to your current needs. Being flexible with your savings will allow you to adjust depending on your lifestyle changes without losing track of your goals.
5) Alternate Deposits for Separate Goals
What financial goals do you have for your kids? You might have an education fund for their future college tuition, or an emergency fund in case of illnesses or accidents. Regardless, if you have multiple goals, then it may be challenging to keep up with all of them.
Consider alternating your deposits to ensure that each goal is making progress. For example, you can deposit PHP 500 for your kid’s education fund on your first payday of the month, then set aside another PHP 500 for the emergency fund on your second. This will allow you to keep up with your financial goals without one lagging behind.
Bottom Line: Consistency is the Key
In the end, how often you set aside money for your kids depends on your financial situation and the specifics of your financial goals. However, the most important part of reaching these goals is consistency. Depositing a small amount to your kid’s account regularly adds up as the years go by, and you’d be surprised how much you can end up with by the time your children will have access to those funds. As long as you remain dedicated to reaching your goal, you’ll be able to give your kids a good head start once it’s time for them to leave the nest.
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