Saving for the Future
Learning ways to save money teaches your student how to be financially responsible and about the benefits of delayed gratification. Designated savings or a 529 college savings plan for education or training after high school will also help reduce future borrowing.
Why It Matters
- Financial responsibility includes savings.
Your student is learning to be responsible for many things, and finances should be an integral part of that education. At some point, your student will want to be able to fund purchases like college, a car, vacation or a home. Savings will help minimize debt—and stress—when making those purchases. - It’s a good way to learn appreciation.
Your student may have a good idea of how much things cost, but is the value of money clear? If your student uses your money to make spending decisions, it’s easier to spend unwisely. Dipping into hard-earned savings can make these choices more thoughtful. - Delayed gratification can help your student learn self-discipline and goal-setting.
Successful adults are in control of the decisions they make, including spending decisions. Delaying gratification by saving for a specific purchase will help your student understand responsible decision-making and help achieve any long-term goals that have been set.
What Your Student Can Do Now
- Determine how to earn money.
Your student may be old enough to earn money through baby-sitting, odd jobs or a personal business. In addition, monetary gifts may become more frequent for special occasions now that your student is older. - Designate a percentage or amount to set aside as savings.
Establishing a standard for the amount that should be saved can help your student develop a lifelong strategy. If your student knows, for example, that $5 of every $10 earned will be saved, spending decisions become more tangible. - Open a savings account.
If your student doesn’t already have one, a savings account can be set up at a financial institution or online. Once such an account is established, your student should learn how to log in and check the balance and transactions online. - Establish a savings goal.
Your student can identify an experience or item to purchase at some point in the future using savings. Your student may wish to start with a smaller purchase and then, once that goal has been reached, start saving for something larger.
What Your Student Can Do Later
- Establish a college savings goal.
As your student explores the options for education and training after high school, this goal can be revised to correspond with expected costs and your student’s own earning ability. For now, your student may wish to consider saving enough to pay for one year’s tuition, fees, room and board at a possible institution. - Understand financial mechanisms.
Your student should understand how interest works with regard to savings accounts, and how compound interest can increase a savings balance. In addition, your student may be interested in exploring how other financial vehicles, such as investments, work and the risks and benefits of each. Learning how a 529 college savings plan earns money based upon a student’s age could be the first valuable lesson in personal finance. - Earn a regular income.
As your student gets older, there will be more opportunities to earn a regular income through part-time positions. Being able to count on a certain level of earnings for hours worked will help your student better plan savings and purchases. Earning more money as your student ages may mean a shift in the amount being apportioned to savings if postsecondary education is your student’s goal.
What You Can Do
- Discuss finances with your student.
As you make saving and spending decisions, talk about them in general terms with your student. Understanding how the family budget is impacted by purchases reinforces the lessons your student is learning about personal finances. Be clear about how much the family will be able to contribute toward an education after high school and how much you expect your student to contribute as well. - Open a 529 education savings account. (contributed by the Iowa Treasurer of State)
A 529 plan is an investment account you can use to save for qualified education expenses on behalf of a future scholar. As Iowa’s direct-sold 529 Plan, College Savings Iowa can help you achieve your savings goals and earn tax breaks along the way. Investment earnings grow tax-deferred, and if you are an Iowa taxpayer, you can deduct the first $4,028 you contribute per Beneficiary account from your state taxable income in 2024. The money invested can be used at any eligible education institution in the U.S. and abroad, including colleges, universities, trade schools, apprenticeship programs and more. Don’t live in Iowa? Check here for a list of states with 529 plans.
[To learn more about College Savings Iowa, visit CollegeSavingsIowa.com or call (888) 672-9116. For additional details about the Plan, read the Program Description.] - Consider an allowance.
If you don’t already provide an allowance and would like to start, consider whether your student would benefit and whether certain tasks will have to be performed for earning it. If you already provide an allowance, evaluate whether the amount is appropriate for your student’s effort. Make sure your student is made aware of any expectations you have as to how much of an allowance is saved. - Create a timeline for large purchases.
If your student has decided to save for a large purchase, help establish the amount of time it will take to save enough money for that item. Help your student come up with ways to increase earnings or spend less on other items to reach the goal more quickly.
Next Steps
Be sure to complete the survey questions at the end of this article to be entered into the 529 deposit giveaway!
Additional references, handouts and talking points are available in the right sidebar to use at your leisure. They may prove beneficial to reference now or after receiving future emails — we’ll leave it completely up to you. Use our emails like a recipe for a successful outcome — assemble the recommended ingredients and then follow accompanying directions to add flavor and depth.