There’s no way around it: Kids are expensive. There’s child care, medical bills, food expenses, college and much, much more. The best way to cover all those expenses? Start saving early. Here are some of the best ways to save money for your kids.
Open a Child Savings Account
Your bank or credit union likely has a child savings account product. You can open one and co-own it with your child. Use the account to start teaching them about the importance of saving money. As your child gets older, you can transition it to a teen savings account, which is often paired with a debit card.
Open a 529 Plan
A 529 Plan is a great tool to save for education. As US News reports, you can use a 529 to save for qualifying K-12 and college expenses. There are tax benefits — withdrawals for education-related costs are tax-free — and the fees are usually quite low. Some states even provide a tax deduction for your 529 contributions.
Open a HSA
Another option for saving for your kids is to open a Health Savings Account (HSA). This could be a good choice if you have a high-deductible health insurance plan. If you qualify, you can contribute up to $7,300 per year to your HSA. The money will grow tax-free, contributions are tax-deductible and funds can be withdrawn tax-free as long as they are used for qualified medical expenses. (You can save past medical receipts that you’ve paid for out of current cashflow and use them to offset withdrawals during your kids’ college years.) If you end up keeping the HSA for a long time, withdrawals can be made for any reason once you hit age 65.