Savings Plans for Children and Teenagers
In this month’s column, I am responding to a reader’s suggestion regarding savings plans for children and teenagers. I did some “Googling” using the terms children, teenagers and savings. What I found is that the benefits of investing in Registered Education Savings Plans (RESPs ) had extensive coverage, but that there weren’t many articles about saving money. Do we happen to live in a society that is all about consumerism?
I did come across a great interactive site called Planet Orange for children in grades one to six, from ING Direct (www.orangekids.ca) and I highly recommend that you have a look at it.
“Planet Orange doesn’t just teach about money, it shows kids how money affects their lives—now and as they grow up. It gives them good fundamentals so they can really ‘get’ ideas about finance and responsible money management.”.
The first step is to open a bank account for our children shortly after their birth and begin exposing them to the concept of saving from an early age. They learn from our actions. For example, every year, my daughter receives a small gift and a cheque from her grandparents for her birthday. Since her first birthday, we have been going to the bank or bank machine together to deposit the cheque. Her current understanding is that the money in her account is being saved for something special.
Here are a few ideas on how to make the balance grow in your child’s bank account.
The baby shower: Have a list of the items you need, if they have all been purchased, then ask that the remaining gifts be money that can be put in your child’s account. Do we really need 15 receiving blanks, 20 newborn pyjamas, 30 stuffed animals, and so on?
Childs Tax Benefit: The $100 per month we receive until our children reach the age of six is wonderful, except for being a taxable benefit. How about transferring $10, $20 or more per month into your child’s bank account?
Birthday and Christmas gifts from immediate family: Let them know what your child needs and ask that the balance be money. If your child is older, agree with them on a percentage of the money that they can spend and the balance should go into their bank accounts.
Money earned from babysitting and part-time work: A percentage should be deposited in their accounts.
Investing money: When your child’s account balance reaches a certain amount invest it in a GIC.
At the age of 18 my parents stopped investing the money from my account into GICs and as they matured it was up to me to decide if I would use or reinvest the money. It had always been recommended that I spend it on something meaningful not just to buy consumer goods. I chose to take a four month trip to travel across Canada and parts of the United States and some of my friends went on backpacking trips to Europe. I have always been grateful for the opportunity to travel and to choose to live in British Columbia. My father would have preferred that I use the money as a down payment to buy a house in my home town, preferably across the street from my parents house, poor dad!
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