Should You Set Money Aside For Your Child Or Encourage Them To Save For Themselves?

Some parents will save money for their kids to use when the time is right. You might have a separate savings account or bank account that you deposit money into every month. When your child reaches a certain age, you give them access to this account, and the money is theirs. It's not an uncommon thing to do, and it's usually done so your child has some money to call their own. Some parents let their kids have the money when they turn 16, others do it when their child is an adult or going to university. 

Either way, is this a smart idea? Should you do this, or are you better off encouraging your child to save for themselves? There's a hot debate over this concept, so let's explore the main sides of the argument to see if there's a solution!

You don't teach your child the value of money

The main argument against this idea is that you don't teach your child the value of money. They grow up and are suddenly gifted with over a decade worth of savings. They did nothing to earn the money, so it seems invaluable to them. Some parents worry that this encourages bad spending habits in teens and young adults. 

You're giving your child a head start 

On the opposite side of the argument, many parents say that this is a way of giving your child a head start. It's particularly helpful when they're an adult and going to university or college. Having some extra savings will help them get through each semester without flying through their student loan. It could be argued that not saving money for your kids is rash as it puts them in a bad financial situation when they're older. 

What is the perfect solution?

Realistically, neither approach is right or wrong. In an ideal world, you will actually use a combination of these arguments to help your kids. When your kids are young, teach them about saving money. Sites like pigly.com have calculators that let you show how much money they can save over the years. This demonstrates the importance of saving money, so they learn about it from a young age. 

Then, you give them a head start by depositing money into a savings account. You could choose a lump sum or a monthly/annual amount, but it will gain interest over the years. Your child will understand how this works because you told them about it. Then, you let them know that they'll need a job when they're older if they want to add money to this account. Basically, you have the best of both worlds as you have given them a leg-up and taught them the value of money and why saving is essential. They shouldn't rely on you for money, and they shouldn't be in a bad financial situation when they're older. 

That's the secret to being a good parent; it's all about compromising and meeting in the middle. It's rarely a good idea to take a radical approach in either direction. Mostly, the best methods are ones that fall in between.