Saving Daughter’s Money

Lori wants to know how to save money for her daughter for a car, and how should she match the savings?

QUESTION: Lori’s 9-year-old daughter wants to save money for her car. She has $250 saved up, and Lori wants to do the matching savings plan. Where should they put the money for the next few years?

ANSWER: You could invest it in a mutual fund, but we didn’t do that with our kids’ money. Here, you are teaching the children to build their saving muscle. If you wanted to, you’ve got 5 years here so you can play with mutual funds if you really wanted to get sophisticated and take some risk. But we just used simple savings accounts. But the interest rate of 10% or 4% of $5,000 over 5 years is just not much money. A money market account or student savings bank account is a good way to save money.