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Saving for the Future

Money management is an incredibly important life skill. I believe putting your money into a bank can help with the ability to manage your spending. As a minor, you have a few options as to what type of account you want to keep your money in. I am going to talk about each one to explore your options. Keep in mind, this is not financial advice. Everyone’s financial situation is different. I am not a financial professional. Always do your own research!


Banking and Savings Accounts
As a minor, the first account I got was a savings account. Savings accounts are simple, you put your money into a savings account at a bank and your money slowly gains interest. This is the easiest way, in my opinion, to start out with a bank account. Savings accounts are very safe, considering you leave your money in one place to grow, but it doesn’t grow all that much. At the time of this writing, the average savings account has an annual interest of about 0.6%, it’s not that much. If you put in $100 today, at that rate of interest, it would take about 116 years to double it (at $200). It depends on where you live and your bank because each bank (and state) has their own set of rules.

After I opened a savings account, I opened a checking account and was issued a Debit Card (age 14). Along with getting a Debit Card, you can also get an ATM card. The difference between the two, for those who don’t know, is this; an ATM card is used solely to get cash from an ATM. You can only take out as much as you have in your account, same is true for a Debit Card. With a Debit Card, you use it like a Credit Card, but it will not let you go over your bank balance. For a checking account, you have two options: with interest or without. At the time of this writing, the annual interest for a checking account is around 0.5%.


Investing Accounts
Now that you’ve saved some money, let’s look at some other accounts and even one that lets you buy stocks,:
  • UGMA (Uniform Gifts to Minors Act) or
  • UTMA (Uniform Transfers to Minor Act) accounts,

They are both custodial accounts. This means that this account is under the minor’s name and once they reach the age of 18 or 21 (depending on state laws) the accounts completely under their control. If the guardian wanted to revert the account back to their name, for whatever reason, they would have to pay taxes on the earnings.

The UGMA is used to transfer money to a minor that will be kept in their account. The UTMA on the other hand allows much more capability. The minor can receive more than just transfers of money, they can get property, assets, stocks and other securities. Parents don’t tend to like custodial accounts because of the lack of control they have over their child’s spending.

Educational Savings
A 529 plan is a qualified tuition plan meant for saving up for education. The money will grow tax-free while the money is kept in the account. And once it is time to take money out of the account for educational purposes you can take it out tax-free. As it applies to any other account, the rules vary depending on what state you live in. But with a 529 plan, you can enroll in any state, regardless of where you live in the country. They have an annual interest of 2%. This can monitor their spending as well as save money. As you get older there are more and more options open, but I believe it is best to start simple and go from there. For more information visit Investopedia.

Roth IRA
A Roth IRA is a tax-free way to save for your retirement. The money put into your Roth IRA account has to be post income tax, but after that, as long as it is held in the account you don’t have to pay taxes on it. You can add money to your Roth IRA as long as you have an income of any sort from a job. And for more details on Roth IRA click here.

I hope this will help you find a way to manage your money!

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