Savings for babies
April 9, 2008 8:59 AM Subscribe
What is a good savings account to set up for a baby?
Four months ago, I had triplet boys. At their recent baptism, they were given several checks. I want to set up a savings account for each boy to deposit the money into, but I'm afraid if I just go to our local bank, we're going to get an abysmal interest rate. We live in New Orleans, if that's useful to know.
I was thinking of setting up an ING account for each baby, but you can't send checks right to them, can you? So I'd have to deposit the checks into my account first and then transfer the money into each account. Kind of a pain, especially when it's for three different kids.
And what if people make the checks out to them, and not me? Can I endorse them on their behalf? Otherwise I'd have to wait a few years until they can sign their names. Ha.
I may just be overthinking this. But are there things I need to think about when setting up a savings account for a child? or three?
Four months ago, I had triplet boys. At their recent baptism, they were given several checks. I want to set up a savings account for each boy to deposit the money into, but I'm afraid if I just go to our local bank, we're going to get an abysmal interest rate. We live in New Orleans, if that's useful to know.
I was thinking of setting up an ING account for each baby, but you can't send checks right to them, can you? So I'd have to deposit the checks into my account first and then transfer the money into each account. Kind of a pain, especially when it's for three different kids.
And what if people make the checks out to them, and not me? Can I endorse them on their behalf? Otherwise I'd have to wait a few years until they can sign their names. Ha.
I may just be overthinking this. But are there things I need to think about when setting up a savings account for a child? or three?
If you're intending for your children to use this money for college, a 529 savings plan would be a good option worth considering.
posted by slogger at 9:19 AM on April 9, 2008
posted by slogger at 9:19 AM on April 9, 2008
ING is pretty easy, actually....once you open one account with them (which you can do for yourself, too, while you're at it) you can then VERY easily (like, click a few buttons and type the name of the accounts: Baby #1, Baby#2, Baby#3) create new accounts and transfer the money over. And though the interest rate right now isn't that great (3.10% I think), they historically have a better average than other savings accounts. However, I do think a long-term savings option might be a better option, as mentioned above (tax benefits, higher interest rates, etc)
posted by Grither at 9:25 AM on April 9, 2008
posted by Grither at 9:25 AM on April 9, 2008
I hope this isn't too oblique of an answer, but...
I got my son a regular custodial savings account at Commerce Bank just before he turned 2. Why there? They have no-fee machines that turn your loose change into, basically, "receipts" that you can either cash at the teller window or deposit. The machines are loud and exciting, especially for a toddler, and he loves to pour the coins in the top and enjoy the "show." We give him all our loose change and he puts it in a piggy bank, and looks forward to our periodic trips to the bank.
If you have any banks near you that have fee-free change-counting machines, I recommend that you get an account at one of those. Considering the small amount of money we're depositing for the boy, I was more concerned with getting him interested in the idea of going to the bank, saving money, learning the difference between denominations of change and cash, etc, than with getting an extra .05% interest.
posted by ROTFL at 9:27 AM on April 9, 2008 [1 favorite]
I got my son a regular custodial savings account at Commerce Bank just before he turned 2. Why there? They have no-fee machines that turn your loose change into, basically, "receipts" that you can either cash at the teller window or deposit. The machines are loud and exciting, especially for a toddler, and he loves to pour the coins in the top and enjoy the "show." We give him all our loose change and he puts it in a piggy bank, and looks forward to our periodic trips to the bank.
If you have any banks near you that have fee-free change-counting machines, I recommend that you get an account at one of those. Considering the small amount of money we're depositing for the boy, I was more concerned with getting him interested in the idea of going to the bank, saving money, learning the difference between denominations of change and cash, etc, than with getting an extra .05% interest.
posted by ROTFL at 9:27 AM on April 9, 2008 [1 favorite]
ING will allow you to mail in check deposits if you have an Electric Orange checking account, as will Schwab's checking. With ING, it's really easy to also move those deposits over to savings accounts or CDs.
posted by mkb at 9:30 AM on April 9, 2008
posted by mkb at 9:30 AM on April 9, 2008
icicibank.com has higher interest rates thatn ING. Why not just open one account, and then split it three ways when they withdraw it? Less fuss and I think more interest that way because of compounding.
posted by Penelope at 9:43 AM on April 9, 2008
posted by Penelope at 9:43 AM on April 9, 2008
Are you sure you're dealing with amounts where it's worth considering interest over convenience? When I looked into the same thing for my son it sure didn't seem like it to me. Maximizing interest seems like a lesson we can go through together when he's a teenager or something. I mean, I could just dump his gifts into our money market and keep a note of the amounts, but to me the point is to create a simple vehicle to serve as a starting point for when he's ready to start learning about money as an asset you manage.
You don't have to do anything special to execute a check in your child's name.
posted by nanojath at 9:55 AM on April 9, 2008
You don't have to do anything special to execute a check in your child's name.
posted by nanojath at 9:55 AM on April 9, 2008
Best answer: First of all, in general if you want to get the highest rate on a savings account check the BankDeals blog. It's absolutely the best resource for that.
For this particular question though, as some people have already said, setting up savings for your children has a lot more complexities than just getting the best interest rate. I think it makes sense to split it into two very different types of savings: savings that your child will eventually be in charge of (such as allowances, small birthday checks, etc.) and savings for your child's future (probably college savings). For the first kind of saving, you want to make the savings account as educational and easy to use for the child as possible, and you want to make the whole experience fun and exciting. For the second kind of saving, you want to get the best rates possible with the lowest cost, and you want to make sure that you're being smart about tax liabilities and whatnot.
For the "fun" savings account, you'll want to do something like ROTFL suggests. Wait until your children are old enough to understand the concept of a bank account, and then take them to a local bank and get them all accounts. Banks usually have special child accounts that are designed for this specific purpose. Use the accounts to teach your children the importance of saving, but don't bother trying to find the best interest rate. Until they are older, the important part is learning to keep some money aside rather than learning to get the best return on an investment.
For the college savings account, there are several different options. You can just use a savings account in the child's name, but that has several drawbacks, including that your child has full access to those funds when they turn 18 to do whatever they want with it, and the fact that it will be counted against them if they apply for financial aid to help pay for college. There are a lot of very good resources for figuring out how to save for college (just Google for "529" or "Coverdell" and you'll see tons of them), but a good high-level overview to start with is on The Motley Fool's site.
posted by burnmp3s at 11:04 AM on April 9, 2008
For this particular question though, as some people have already said, setting up savings for your children has a lot more complexities than just getting the best interest rate. I think it makes sense to split it into two very different types of savings: savings that your child will eventually be in charge of (such as allowances, small birthday checks, etc.) and savings for your child's future (probably college savings). For the first kind of saving, you want to make the savings account as educational and easy to use for the child as possible, and you want to make the whole experience fun and exciting. For the second kind of saving, you want to get the best rates possible with the lowest cost, and you want to make sure that you're being smart about tax liabilities and whatnot.
For the "fun" savings account, you'll want to do something like ROTFL suggests. Wait until your children are old enough to understand the concept of a bank account, and then take them to a local bank and get them all accounts. Banks usually have special child accounts that are designed for this specific purpose. Use the accounts to teach your children the importance of saving, but don't bother trying to find the best interest rate. Until they are older, the important part is learning to keep some money aside rather than learning to get the best return on an investment.
For the college savings account, there are several different options. You can just use a savings account in the child's name, but that has several drawbacks, including that your child has full access to those funds when they turn 18 to do whatever they want with it, and the fact that it will be counted against them if they apply for financial aid to help pay for college. There are a lot of very good resources for figuring out how to save for college (just Google for "529" or "Coverdell" and you'll see tons of them), but a good high-level overview to start with is on The Motley Fool's site.
posted by burnmp3s at 11:04 AM on April 9, 2008
I'd plunk it all into a five year cd. you should be able to still get a 4.50% interest rate (bankrate link) but I'd lock it in quickly as those are probably gonna go with the next fed interest rate cut.
then in five years see if you can find another cd that locks them down for a while. make sure the kids can't get a hold of the cash before they turn 18 or maybe even 21.
also: congratulations.
posted by krautland at 11:17 AM on April 9, 2008
then in five years see if you can find another cd that locks them down for a while. make sure the kids can't get a hold of the cash before they turn 18 or maybe even 21.
also: congratulations.
posted by krautland at 11:17 AM on April 9, 2008
I'll third the 529 answer, because it's correct. The 529 offers tax free returns on mutual funds that offer 529 plans, so you can get tax free equity returns. This money can be spent on tuition, room, board, books, and other approved expenses. Any money that's not used can be rolled over to another child.
posted by Pants! at 4:43 PM on April 9, 2008
posted by Pants! at 4:43 PM on April 9, 2008
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posted by Salvatorparadise at 9:11 AM on April 9, 2008