Ask Terry Questions Which savings account is best for kids

Which savings account is best for kids

By Terry Savage on November 20, 2017 | Chicken Money

So I want to open a savings account for my kids. I was looking online and noticed a difference in interest rates available. The plan is to just deposit money from birthdays and holidays that the kids receive. And as our sons earn money teaching to put into their savings too. So considering current interest rates, compounding interest(daily/Q/yr) and fees Which savings account would you set up if you had to start with $0 today? And why? And if you were to prioritize the 3 things listed what would the highest priority be?

Terry Says

Well,  you're not going to expect this response!  DON'T open a savings account for your children.  First of all, when they reach the "age of majority" -- likely 18 in your state -- they money is theirs, and they can do with it what they wish.  Second, money in a child's name weighs 5x more heavily against the family in the Federal financial aid formula.   My suggestion would be to open a 529 college savings account, assuming they are planning to attend college.  There it will grow tax-free for college expenses.  And it won't impact financial aid nearly as heavily if they have this type of savings. One line in your question was a bit confusing.  I assumed these were children, but then you mentioned they will earn money teaching.  If they have jobs, you can open a Roth IRA at a major fund company, such as Vanguard or Fidelity, and get them started on retirement savings.   In either case, it's not the rates on savings accounts that matter.  These are long-0term alternatives, and should be invested in a diversified way in the stock market for the long run.

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