5 Smart Money Moves To Make for Your Child (2024)

When I was pregnant with my first baby, I vividly remember lumbering into our financial advisor’s office to discuss the projected cost of college for our unborn bundle of joy. (In case you’re wondering, around $600,000 for a four-year, private university.) Then there was a long visit to our lawyer’s office to finalize wills and last testaments.

At home, we fine-tuned our budget, calculating price-per-diaper by brand and the projected costs of formula feeding versus breastfeeding. Getting family finances in order is often top of mind for expectant parents. But affecting their child’s future finances can happen earlier than you might think.

We spoke to Raquel Curtis, the Boujee Banker, a former finance professional turned international finance and business coach, about the top five money moves to make for your child.

Start Saving for College

It’s never too early to start, Curtis says.

“The power of compound interest can significantly benefit you over time, allowing your investments to grow and accumulate wealth for your child’s education,” she explains. “Starting early also provides you with a longer time horizon to reach your savings goals and potentially mitigate the need for excessive borrowing.”

And she’s right. Recent data shows that college students at a public university borrow an average of $32,880 to attain a bachelor’s degree, while private university students borrow an average of $35,983,

A 529 college savings plan is a popular option for money-savvy parents saving for their
child’s college education. It offers advantages like tax-free growth and withdrawals for education-related expenses,

But it isn’t a one-size-fits-all scenario, Curtis warns. “[I]t’s important to research and consider other savings plans as well, such as Coverdell Education Savings Accounts (ESAs) or custodial accounts like UTMA/UGMA,” she says. “Each plan has its own advantages and limitations, so it’s crucial to assess your individual financial circ*mstances and consult with a financial advisor to determine the best fit for your needs.”

Open Their Own Bank Account

Though an important financial move for your child, the right time to tackle this depends on your individual child’s maturity and readiness.

“Opening a checking account for your child can be a valuable financial lesson and an opportunity for them to learn about managing money,” Curtis says, though she recommends the early teenage years and a joint checking account so you can have some oversight.

“This allows you to teach them about budgeting, saving, and responsible spending. As they become more independent, you can transition to a separate checking account solely in their name, giving them greater autonomy and accountability,” Curtis says.

Build Credit

Next up? Helping your child build their credit.

“[C]onsider adding them as an authorized user on one of your credit cards, as long as you have a strong credit history and responsible financial habits,” Curtis says. “This can help them establish a credit history and learn about responsible credit card usage.”

Once they master this, encourage your teen to open their own card (and use it responsibly). A few things to keep in mind—help them make payments on time and keep their credit utilization ratio low.

“Building good credit takes time, so it’s important to start early and guide them through the process,” Curtis explains.

Protect Their Identity

Did you know that 1 in 50 children have their identity stolen each year? Children have all the information scammers are looking for—birthdays, social security numbers, etc.—but most parents don’t notice until their child is old enough for a debit or credit card of their own.

That’s why it’s important to monitor your child’s credit as they grow to make sure nothing nefarious pops up on their report. You may also want to opt for an identity protection service to automate this. My husband and I both have identity protection through Lifelock, and were able to add our three and five-year-old to our plan relatively easily.

Introduce Investing

This can begin as early as elementary school. “If they are old enough to understand video games, they are old enough to understand investing,” Curtis says.

She said you can start by introducing them as sight words like stocks, bonds, and mutual funds. Then explain the importance of saving and the concept of earning returns on investments. “Help them understand the concept of risk and reward and the importance of diversification,” she added.

Discussing important investing concepts, like compounding returns and the benefits of starting to save and invest early can also be beneficial to kids, she notes.

Get Life Insurance

Another important money move parents should take for their kids? Get life insurance. Experts generally suggest 6% of your gross income, plus an extra 1% for every dependent. Naming a guardian and having an up-to-date last will and testament is also important.

Curtis agrees. “Life insurance can be a valuable tool to provide a financial safety net for your child and your family,” she says. “It can help cover living expenses, mortgage payments, education costs, and other financial obligations… [H]aving a comprehensive estate plan, including a will, is essential. A will outlines how your assets will be distributed and who will be responsible for your child’s wellbeing in the event of your passing.”

While my visit to our lawyer’s office to finalize this was punctuated with many bathroom breaks, I remember feeling a sense of peace when we were done, knowing that my baby (and eventually his little brother) would be cared for by family if my husband and I weren’t able to do so.

Sure, teaching your young children about saving, investing, and compound interest may not be top of mind when you’re knee-deep in diapers or potty training. But, just like anything in parenting, the time to start talking earnestly about finances with your kids comes faster than you think. What’s the saying that we all hate? Oh yeah—the days are long and the years are short—especially when you’re saving for college.