Gift Idea for Students: the Gift of Saving!December 11, 2013
By Kevin Rutter
As a teacher of personal finance I regularly tell my students the most important thing about building a healthy financial life is to save. Expert financial advisors say that 5 to 10 percent of your income is a good number to shoot for, but the more you save, the better.
There are three basic principals in being successful at saving money:
- Pay Yourself First (PYF). This is a strategy to stay disciplined in regularly contributing to a saving plan by paying into it first. Every time a paycheck is earned, take 5 to 10 percent off the top and add it to the savings plan.
- Save for the long term. The true power of saving money can only be unleashed when money is saved over a long period of time in an interest-bearing account at a financial institution. Money deposited at a financial institution is also insured by the federal government through the Federal Deposit Insurance Corporation (FDIC) up to 250,000 dollars per account. So, the savings cannot be lost or stolen no matter what happens to the bank.
- Start ASAP. The sooner you start to save, the sooner that money will grow.
This holiday season provides a perfect opportunity to start educating your student on the importance of savings. Use part of any gift money to open up a savings account for your child and encourage relatives who wish to buy something to do the same.
Additionally, state governments across the country are encouraging parents to save for their children’s college fund by creating special investment opportunities called 529 plans. There are significant tax breaks for those participating in these plans and other benefits depending on which state you live in. In Illinois, the 529 plan is known as Bright Start. For more information about opening this type of account and the benefits of having one, see Bright Start Savings.