6 Little Investments in Your Kid That Pay Big Dividends

6 Little Investments in Your Kid That Pay Big Dividends

Sometimes it can feel like you're throwing your money down a black hole that happens to be wearing a onesie. Clothes they quickly grow out of, astronomical child care and food to feed a teenager--hey, where did my money go?

But there are ways in which you can invest your money in your child and see a big return, and we're not just talking about buying savings bonds.


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While many of the things you want for your children may seem out of reach now (an Ivy League college education? Trusting them to handle a credit card all by themselves? Getting them to finish their peas?), by making little investments now, you can get them where you want them to be, even while improving your own finances.

1. Paying Them to Cleaning Out the Garage

Most experts agree that paying children extra cash for tasks that go above and beyond their normal duties will help both you and them reap benefits later. Them, because they'll have solid finances. You, because you won't need to bail them out or support them.

2. A Year of Girl or Boy Scouts or Other Group

We like group activities because they encourage cooperation, learning and healthy habits. Girl Scouts is one of--if not the--most affordable activities available for young girls. But there's another reason we love a membership: Girl Scout members now learn financial literacy skills as well. Badges added to the roster in the latest overhaul include Money Counts, Money Manager, Philanthropist, Business Owner, Savvy Shopper, Budgeting, Comparison Shopping and Financing My Dreams. Boy Scouts have similar merit badges in Entrepreneurship, American Business and Personal Management, which require them to save up for, budget and plan for a major purchase.

3. A Deposit in a 529 Plan

A 529 plan lets you save tax-free for your child's college education. Because it's an investment account, money you deposit will grow at about 7% a year over the years you'll be saving. That means if you deposit just $200 when your child is 5 years old, by the time she heads to college, your money will have more than doubled, and she'll have about $500 to pick up everything she needs. Think about what depositing $200 a month will yield over 18 years!

4. The Opportunity to Make a Financial Mistake

We all make financial mistakes. But the hope is that we can avoid some of the bigger ones by learning from small ones. Keep this in mind the first time your kid blows $100 on a ridiculous purchase or silly money mistake. $100 might seem like a lot, and it is. But as Certified Financial Planner (CFP®) Sophia Bera points out, better $100 now than $1,000 or $10,000 later!

Take full advantage of this moment when it happens by sitting down with your child and asking him questions about his mistake. Was the purchase worth it? How could he have avoided this situation? What will he do next time to prepare for contingencies? Consider that $100 you just spent as education for your child. Just resist the urge to jump in and fix things--then the lesson will be lost.

5. Opening Your Child a Savings Account

According to research from the Center for Social Development at Washington University, kids whose parents opened a savings account in their name were up to six times more likely to go to college than those who had no savings account. And it didn't even matter how much was in the account--just that they had it. And of course, having a savings account teaches kids basic banking skills, especially if you get them in the habit of reviewing statements, looking for any unnecessary fees and depositing money on a regular basis.

6. Putting Money in Your Retirement Fund

How is this an investment in your child? Let us explain: You might be tempted to put off saving for retirement or maxing out your funds because you want to provide your child with everything she needs to succeed and more. However, if you get to retirement and you don't have enough saved up, guess who is going to feel pressure to pick up the slack? That's right, your kids. That's why, though we think saving for college is a great idea, you shouldn't forgo saving for your retirement in order to make that happen.


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