It’s 2024, and just like last year and the years before, you’ve promised yourself to start saving money for your kids.
You know that even though your job may eventually slow down, the costs for your kids won’t. Bills for clothes, school, and other things will keep coming. You need to start a savings account for your kids quickly.
Many people want to save money but don’t know how. Questions like “How do I start?”, “Where should I save?”, “How much should I save?” are common.
If you live in Nigeria, you may feel it’s hard to save money because many people struggle to pay their bills. Didn’t the NDIC boss, Mr. Bello Hassan, say in 2021 that 99.4% of bank accounts had less than N500,000? This makes saving money seem even harder.
This article will make it easier for you to understand how to save money for your kids.
Why Save for Your Kids Now?
- Rising Needs: Your child may only need clothes, food, a few toys, and some pocket money when they are young. But as they grow into teenagers, they will need more expensive things like university education, laptops, and fashion items. If you are not prepared, this can be very stressful.
- Declining Income: As you get older, you may not earn as much money as you do now.
Things to Think About Before Choosing a Savings Account for Your Kids
- Reliability: Choose a savings option from well-known and trustworthy banks. These banks should be registered and transparent.
- Accessibility: Learn how easy it is to get your money. Do you need a lot of paperwork, or is it straightforward? Some options don’t let you access your money until a certain date.
- Interest Rates: Pick an account with good interest rates. For example, Access Bank Early Savers account gives 5.4% interest, while GTB SKS offers 4.95%. If the options are similar, choose the one with the higher interest rate.
- Ease of Service: Some services automate savings for you. For example, Cowrywise takes money directly from your bank account and saves it for you. If you like modern and easy ways to save, this might be a good option for you.
Types of Savings Accounts Available in Nigeria
Most big banks in Nigeria have special savings accounts for kids with different benefits. Your choice may depend on your preferences.
First Bank – KidsFirst: This account from Nigeria’s oldest bank has no monthly maintenance fees and no minimum balance. You can deposit and withdraw money whenever you want and it also allows for automatic deposits. This account is for kids under 18.
Guaranty Trust Bank – Smart Kids Save (SKS): This account is for kids under 18 and offers a 4.95% interest rate. You need a minimum balance of N100,000 to open this account. You can open it by going to any GTCO bank branch or their online platforms.
Zenith Bank Children’s Account (ZECA): This account from Zenith Bank allows savings in both Naira and Dollars. It comes with a debit card for easy access to the funds.
Setting Up a Savings Account for Four Kids (A Case Study)
Let’s look at Jide, a Civil Engineer in Abuja earning N400,000 a month. He saves 20% of his salary, invests 10%, uses 40% for regular expenses, and 15% for rent.
This leaves him with 15% of his income. He usually can’t account for 5%, attributing it to miscellaneous expenses. Jide has four kids, and his oldest will start university in six years.
If Jide saves 2.5% of his income for each child, he would save N10,000 per child monthly, totaling N120,000 per year. In six years, he would have saved N720,000 for his oldest child’s education, covering at least two years of schooling expenses.
Should You Worry About Inflation?
With Nigeria’s inflation rate at 28.20%, it’s understandable to worry about how inflation affects your savings. Inflation makes everything more expensive, and bank interest rates might not keep up.
If you save N800,000 but the costs double by the time your child needs it, your savings might not be enough.
The following sections will offer other ways to protect your savings from inflation.
Saving in Dollar-Denominated Accounts
Because the Naira lost over 40% of its value against the Dollar in 2023, saving in Naira alone may not be wise. Some accounts like the Zenith Bank Children’s Account allow you to save in Dollars, protecting your savings from Naira’s volatility.
Should You Save or Invest for Your Kids?
Savings account interest rates are often lower than inflation, so investing might be a better option. For example, Jide might decide to save 0.5% and invest 2% in low-risk options like government bonds and treasury bills.
Investing in mutual funds is another option. For instance, the ARM Money Market Fund offered a 13.01% return in 2023. Stanbic IBTC’s aggressive fund offered 49.9%, and their balanced fund offered 26.75%. These returns are higher than kids’ savings accounts.
A more conservative approach could be saving 80% and investing 20% of the money meant for each child.
In conclusion, as the new year begins, there’s no better time to start saving for your kids’ future. Make a plan, be consistent, and take the first steps to secure a bright future for your children.