There are several ways for parents to save money for their children or help their children save money for themselves, including high-yield savings accounts and 529 college savings, 401(k)s and Roth IRA (individual retirement account) plans. 529 plans are a popular way for parents to invest funds for future education; these are state-sponsored plans, and each state in the United States has at least one option for such investment, as reported by Parents.com. When children start earning their own income, the Roth IRA is a good way for them to start the process of saving for retirement.Continue Reading
UGMA and UGTA accounts offer another way for parents to help their children save, though these accounts may be best for savings not related to college. These accounts are custodial until the child reaches the age of majority in his jurisdiction, meaning the money is protected and may only be spent on things that have a direct benefit for the child.
Parents should consider what the money will be used for before opening a savings or investment account, because if the money is intended for college savings, registering the account in the child's name could have harmful repercussions on the amount of federal educational financial aid she is eligible to receive, states Bankrate.com. This is because total assets are part of the financial aid eligibility consideration, and students are expected to contribute more of their assets to their education than parents are.Learn more about Bank Accounts