If your eight-year-old daughter receives $100 from her grandparents, allow her to spend $25. Help her to make a wise spending decision, but let it be her decision. She might opt for the toy she didn't receive at the holiday, or she might head to the movies. It's her choice. Feel free to save another $25 for spending on the family vacation or later in the year. Either way, you're teaching her to save half of her money.
The benefits of the account aren't monetary. It's a safe house for the money, and it will allow your child to see the money accumulate. The small amount of interest earned won't impress anyone other than your child.
Savings bonds seem to be an antiquated way to save, but right now they're earning more interest than CDs. Pay attention to the penalties for early withdrawal and watch your rates. You can cash out bonds in a few years if CDs offer a better return. While the bond won't give it's advertised rate (most are purchased for half of the amount that they carry when mature) it will give more than the original investment. However, for extremely young children, these long standing savings are easy and guaranteed. Antiquated or not, they still work.
About The Author: Kelly Ann Butterbaugh is a freelance writer who regularly contributes to a variety of magazines and has written a history book for middle readers. Visit her website for writing help, lesson plans, history fun, or work for hire at http://www.kellybutterbaugh.com
Read feedback for this post below. Click here to post feedback.
Mine always got money for birthdays or Christmas, when he had many other presents. I always put it aside in his bank account. He never missed it. When he was older, he bought his first used car with that money (he had a job from the time he was 12 years old). He used some for college, and we gave him the rest after he was married and getting his graduate degrees, a time when he really appreciated it. It meant so much more to him when he was older and knew the value of money. He stated several times that he appreciated us saving it rather than allowing him to spend it on frivolous things. We taught him how to handle money with an allowance when he was younger; he had chores to earn the money, and it was his responsibility to keep his grades up. Now that he's an adult, he is very responsible with his bills. I cannot see giving a child of eight $25.00 when he has been indulged with several other gifts, unless you want a spoiled child.
My kids each get $100 dollars for their birthday from my grandparent's estate. We have them use the money for their birthday parties (including activities, cake, snacks, and party favors). They get to plan whatever they want and keep what money is left over. We have a few rules for example, if your party is during a meal time you must provide food.
This helps us because otherwise we wouldn't be able to afford the big skating party or whatever it is they want, but it also helps them learn to work within a budget. They plan and calculate deciding what is really important to them and get excited about finding pizza coupons and sales. They've really toned back the number of people they want to invite and how "much" they want to do now that the cost means something to them. Some years they decide to go for the big expensive outings, other years they've planned smaller parties at home with fun activities, either way they've always had a blast. Instead of throwing the money away on toys they'll forget in a few months, they are buying themselves an experience they'll remember forever.
They also get money for Christmas and always agree to pool it toward a family gift or activity. This year they're taking us to Great Wolf Lodge for two days at the water park we agreed to pay for food and their combined $300 will pay for admission/hotel room and the wand game. They had been begging to go, but we just didn't have the money to take them but they were able to make it happen by working together. One year, we decided to go without any Christmas gifts (except Santa) and pool all the money we would have spent, plus their gift money and money we saved over the year, to buy a hot tub. Another year they purchased a video game system.
We also put half their allowance into savings. This amounts to about $20 a month. This money is used for major expenses we approve, like new bikes or a DS. Hopefully this will teach them to save, plan, budget, and work together to pay for the things they want.
Add your voice to the conversation.