Teaching Your Kids to Invest in CDs

The importance of saving for difficult financial times has never been more evident than it has in the last couple years. The downturn of the economy and the loss of jobs across the nation have made many families wake up and start investing their money. As a result, they have also been teaching their kids how to save money for the future.

Starting young is important when emphasizing the importance of saving money. One way to do this at a young age is to teach them how to open a certificate of deposit, or CD. Opening a CD has an advantage to investing in other accounts. A CD account is not as liquid as other accounts, meaning you cannot simply take the money out of the account whenever you want it. Instead, a CD is designed for long-term investment and saving. If you take the money out of the account before the CD matures, you will have to pay a penalty. This is a good lessons for your kids to show them how to put their money away and forget about it while it works for them.

There are CD accounts designed specifically for kids, too. These types of CD accounts offer low starting investments (some as low as $100), the option of adding more money regularly and a free savings book with shows your child how their money is growing as the days and months go by. The Young Americans Center for Financial Education is dedicated to helping young people learn the importance of saving and it offers several types of investment accounts that kids can open. The money is insured by the FDIC and it gives children the opportunity to save their money safely.

If you cannot find an account like that, you can still invest in a traditional CD account. Put the account in your name but use your child’s money as the investment. They will have a stronger emotional attachment to it so they will want to watch closely as it grows.

Teaching your kids about CDs, CD rates and other things that go along with investing will help them compete in a tough world. By starting early, you may be saving them from the turmoil and other problems that many people went through recently with the economic downturn. Don’t you think your kids deserve it?