When should you start to save money for your child’s future? As soon as they are born. However, the extra expense of having a child may make saving difficult. But, if you put a plan in place, even a small amount each month can add up over the years.

Step #1: Open Their Own Account

It may seem odd or unnecessary to open an account for a baby or young child. However, there is one big psychological component that comes into play. If you put money aside for your child in their own account, you’ll be much more reluctant to ever spend that money yourself.

For example, assume you plan to put $50 per month aside for your child’s future college expenses. You keep this money in your own account along with your retirement and personal savings. How do you know how much you have saved specifically for your child over the years? What is preventing you from spending that money now with the promise to pay it back later on? And, will you be able to afford to repay it?

Life happens. You’ll have unexpected expenses and will need access to money. Seeing money in your own account, even if it’s for your child, is easy to spend. However, going into your child’s own account to take money for a vacation or car repairs may make you think twice.

Step #2: Make a Plan

When creating a savings plan for your child, it’s important to understand it’s best to start as early as possible. If you begin saving when they are first born, you have 18 years to save until they start college. If you wait until they are 5 years old to start, you have 13 years left. If you wait until they are 10 years old, you only have 8 years…and so on.

The earlier you begin saving, the easier it will be to save money for your child’s future.

For example, when your child is born, if you put aside $150 each month until they are ready for college, the balance would be over $32,000 by the time they reach 18. And that doesn’t even include all the compound interest you’ll be earning over 18 years.

Now, assume instead of starting early and saving just $150 per month, you wait until your child enters high school. You now have only four years to save for their college education. In order to reach the same $32,000 in the example above, you would have to save at least $8,000 per year! Not to mention all the interest you’d lose out on over those 18 years.

That is quite a daunting task; even more so if you have multiple children approaching college-age.

Don’t panic if you cannot afford $150 per month. This is especially true if you are dealing with the expenses of a new baby. However, you should get in the habit of saving each month. Put aside $25 or $50 per month until you can afford more. The most important part of saving is the actual act of putting money aside each month. You have to start somewhere.

Step #3: Put Your Savings on Auto Pilot

With help from the credit union, you can put your child’s savings on auto pilot. With Payroll Deduction / Automatic Transfers, you can set up your account to automatically transfer money into your child’s account each month.

This feature works by automatically transferring the amount you designate to your child’s account each month or each paycheck you receive. After a while, you probably won’t even notice the $25, $50 or $150 coming out of your account, but you will notice your child’s account balance growing.

You can automate it right from your online banking account or our mobile app. Set up automatic transfers from your account to your child’s so you never have to think about it. You have the freedom to choose the frequency and amount, and change it whenever you need to.

Step #4: Enjoy Compound Interest

When it comes to saving, compound interest is your best friend! Basically, when you put money into your savings account it earns interest. If you don’t touch this money, you will then earn interest on your original balance PLUS the previously earned interest. When you allow your money to grow over the long-term, this really adds up.

Using our example from earlier, if you saved $150 per month for 18 years, you would have over $32,000 saved. Factor in an average interest rate of 3% over those 18 years and that balance would be nearly $43,000 (an additional $11,000)!

Since your child’s savings most likely won’t be utilized until they reach college age, you should consider longer-term investment options, such as Money Market Accounts and Certificate Accounts. These options provide higher interest rates in return for limited access to your funds. And since you hopefully won’t be touching this money for years, they are the perfect tools to earn more.

We’re Here to Help!

We can help you create a plan to save money for your child’s future. It doesn’t have to be scary. You just need to start as soon as possible with whatever you have available. If you have questions on setting up a savings account and savings plan for your child, call, text, chat, or stop in! We’re here M-F, 9am-4m ET. (315) 671-4000.


Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.