How to save money for kids—from baby gear to college tuition

Kids can be expensive—want to know how to save money for their college funds and more? Continue reading to find out.

7 min read

Working out how to save money for kids can give your children a great start in life. Whether calculating how to save money for kids’ college funds or teaching them how to be financially independent, the earlier you start saving, the better.

Don’t know where to start? Here’s how to save so you can set your children up for a more secure future.  

How to save money for kids’ college & education

According to the UK’s Child Poverty Action Group, from birth until the age of 18, the average child costs a single parent €205,000 and a couple €167,000. Yet, these figures don’t factor in the cost of college and any additional educational fees such as private school tuition.

While college tuition is mostly free for EU citizens studying in the EU, your child will still have to cover the cost of accommodation if not studying from home. Additionally, if your child wants to study outside of the EU, or your child is not an EU citizen, you can expect to pay significantly more in tuition fees. 

Imagine, for example, that your child is an EU citizen who wants to study in North America. For a four-year private college course including both tuition and accommodation fees, you can expect to pay around a staggering €185,000. Even if your child avoids paying such extortionate tuition fees by studying in the EU, if they’re not living at home you can still expect to pay around €48,000 to cover their accommodation expenses.

Calculating how to save money for kids’ college and education is, therefore, vital. Here are some tips on how to get started.

Open a designated savings account with tax benefits

Research continually shows that by giving your savings account a specific name, you’re more likely to use it to achieve your financial goals. This is because it creates an emotional connection between you and the purpose of your savings habits, which can often feel too abstract to grasp. By opening an account and calling it something like “college fund,” not only are you more likely to habitually put money in there each month, you’re also more likely to reach your savings targets.

When looking to open a designated college savings account, it’s best to choose one with the highest interest rate available. By opting for an account that offers you say, 1% interest annually, if you save €7,000 in your first year, you’ll receive €70 in added interest. This may not seem like much, but thanks to compound interest, this can seriously add up over the course of 18 years. 

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How to save money fast for kids

A common mistake many people make is to think of any equity they have in property essentially acting as a savings account. Due to the volatility of the housing market and the economy, you cannot guarantee that the money you make by selling your home would cover your child’s expenses.

Due to this uncertainty, working out how to save money fast for kids is a real concern for many parents. However, thinking long-term and planning for yourself as well as your child, are the keys to success. Here’s why.

First, take care of yourself

Although this may sound counterintuitive, by taking care of the finances for you and your partner (if you have one), you inadvertently set your child up for financial success. This means doing the following:

  • Creating a will to give your child and any potential partner security with regards to your assets if you die prematurely.

  • Paying for life insurance to guarantee that your child and a partner will be provided for monetarily if you die.

  • Prioritizing your pension fund over your child’s college fund as you can take a loan out for the latter, but not the former. Additionally, while saving for your child’s education may seem a worthy endeavor, if you’ve not secured your long-term future, that can mean your child has to support you in your old age, which will be a significant financial burden for them.

Create a budget

To successfully save for yourself and by extension, your children, it’s fundamental that you have a clear overview of your monthly cash flow. This means creating a monthly budget so you know where all your money is going each month. To set up a budget, all you need to do is follow these steps:

  • Ask yourself why you want to budget. Get your objectives clearly in mind as this will help you stick to your financial goals.

  • Track your monthly spending activities. This means keeping track of your monthly income when compared to all of your monthly expenditures. 

  • Separate your expenditures into fixed and variable costs, i.e., essential and non-essential costs. Fixed costs cover expenses such as your rent and your utility bills. Variable costs include money spent on entertainment, subscription services, and groceries.

  • Decide how much you’d like to start saving each month. Consider sticking to a plan such as the 50/30/20 budget and work out where you could start making some savings on your variable costs, such as on your weekly grocery shop.

  • Assess how well you’re sticking to your budgeting targets each month to see if you need to make any adjustments to your goals.

Sell your kid’s used stuff

A great way to save money fast for kids is to sell their used items once they grow out of them. The sheer number of things you need to buy for children as they grow up is staggering and makes up a sizeable chunk of their overall cost. 

So, if you make it a habit to sell any unused goods (think clothes, books, cots, car seats, toys, etc.) you can at least make a little of this money back. The best way to do this is to use online reselling platforms such as eBay or Amazon as they’re user-friendly and secure.

How to encourage your kids to save

One of the best ways to save money for your kids is to encourage them to become financially independent from a young age. By teaching them the value of money and how to save, you may even encourage them to pay for college themselves and set them up for long-term financial success!

Introduce your child to the savings process

By giving your child an allowance each week, even if it’s just a minimal amount, they can learn the value of saving. A great way of doing this is to give them four separate piggy banks each with a different function:

  • One for investing which they can use a few years from now (e.g., to put toward a bike they’ll be able to ride in two years)

  • One for saving which can be used to save for a more expensive item in the nearer future (e.g., to spend on a particular toy that costs quite a bit of money)

  • One for everyday spending (e.g., for buying the occasional bag of sweets)

  • One for giving (e.g., for donating to local charities)

Create a savings account for your child

If, however, your child is a little older, you might want to consider giving them their own child-friendly savings account. While you’ll have to open the account on their behalf, many banks have designated children’s savings accounts on offer. Most of these accounts include a daily spending allowance, preventing your child from splurging all of their savings at once. 

Additionally, opening a child’s savings account makes it easier to track your child’s spending habits. This allows you to go through their monthly expenditures together and to teach them the value of budgeting first-hand!

Lead by example!

However, if you really want your child to become financially independent, the best thing you can do is to lead by example. By getting your finances in check and explaining how your household budget works, you show your child the value of money and the importance of being responsible. It familiarizes them with financial lingo early, making it comprehensible and giving them the confidence to make solid financial decisions for themselves as they mature.


Your money at N26

If you’re looking for the perfect savings account to save for your child’s future, you can currently earn up to 1.38% interest with our digital savings account. As your money is deposited at one of our partner banks, you can benefit from one of the highest interest rates on the market.

What’s more, as part of our bank account, our Spaces feature lets you create several sub-accounts, each focused on a different savings goal so you can keep on track with your budget and your savings goals each month.

By N26

The Mobile Bank

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