As a parent or guardian, you want the best for your children, but raising a family doesn’t come cheap. In fact, the average cost of full-time childcare in Ireland is reported to be about €9,340 per year (Pobal, 2022).

For most people, having a family will require some financial adjustments to accommodate the annual costs of childcare, education, and essentials. Not to mention all the day-to-day expenses that crop up.

The good news is that there are lots of ways you can save money for kids, but the best approach is to start early. In theory, if you start saving earlier, the more you will potentially have in the long term. So, with enough time and a few money-saving tips up your sleeve, you may be able to provide your little ones with a good financial start in life. Here are our top tips to help you get going.  

Set up a kid’s savings account

Opening a savings account is one of the easiest ways to  support your child’s future. While Irish Life Financial Services do not provide advice on other institution’s accounts, most banks and credit unions offer children's savings accounts, which you can co-own or open in your name with your child’s name noted on the account. Some kids’ savings accounts also offer competitive interest rates and have no transaction fees. Before you open an account, make sure you compare various options available to find the best one for you and your family.

Make a budget and consider the 50/20/30 rule

Once you’ve figured out where to save money for your kids, the next step is to determine how much to save. A budget is a great financial tool you can use to track your monthly spending. It can help you manage expenses like childcare, household costs and third level education. It can also help you see how much money you can afford to save every month.

If you don’t already have a monthly budget, or if you need to adjust your budget to include your growing family, you can use the 50/30/20 rule as a handy guide. This is an easy formula that recommends spending 50% of your income after tax on your needs, 30% on your wants, and putting the remaining 20% into savings or investments. Try allocating a portion of the 20% into your kid’s savings account. You could set up a recurring transfer between your bank account and your kid’s savings account, so you don’t forget to save each month.

Create a savings plan

Maybe you want to save for a long-term milestone in your child's future, like their education. Or for something short-term, like their next birthday. A savings plan can help you understand how much you need to save to reach your goal.

Follow these three steps to create your own simple savings plan:

1. Identify your goal, e.g. third-level education costs.
2. Determine the cost of your goal.
3. Work out how much time you have to achieve this goal.

Once you’ve established these three factors, you can roughly calculate how much you should aim to save each month by dividing the total cost of your goal by the number of months you have to save for it.

For example, if your goal is to cover the cost of third-level fees for a four-year undergraduate degree in Ireland, then you will need to save €12,000 (publicly funded higher education institutions currently charge a maximum fee of €3,000 per year for Irish students). If you have 10 years (120 months) to save, divide 12,000 by 120 to estimate your monthly savings goal.

€12,000 / 120 months = €100 per month

This is just a very simple example to illustrate how to break down bigger financial goals into bite-size pieces and make them easier to achieve by starting to save early. However, one thing to note is that it doesn’t take into consideration inflation.   

Inflation is a term used to describe rising prices. It refers to a broad increase in the cost of goods and services over a period of time. The €12,000 mentioned above is expressed in today’s value, but inflation impacts how much money is worth over time. For example, in the last 10 years, Ireland has had relatively low inflation. In 2020, according to inflation.eu, the average inflation in Ireland was –0.98%, and in 2019 it was at 1.29%. But over those 10 years of relatively low inflation, the value of goods or services that €10,000 can buy has still weakened by €799 (7.9%).   

Inflation erodes your savings. As of October 2022, inflation in Ireland had reached 9.16%, the highest it’s been in 38 years. If your savings are accumulating in an account and not building interest at the same rate of inflation, they will be worth less money over time. One way to counter this is to consider other options for some of your money. You can talk to an Irish Life financial advisor about your savings and investment needs to help you make informed choices.  

As with most long-term financial goals, it’s worth reviewing your savings plan from time to time as well as your budget to ensure you’re still on track to meet your goal.  

Help their savings have more potential by investing

If you’re saving for your kid’s college education and future, you may want to consider investing. While it’s a good idea to have some money set aside in a savings account that your kids can easily access when they need to, investing could provide you with an opportunity to make long-term gains. As the money will likely remain invested for a long period, there’s time to ride out the stock market’s highs and lows and potentially provide a better return on your investment than the money in a savings account. 

If you’re considering investing for the first time, talk to one of our advisors about your financial situation and attitude to risk. They can recommend products suited to your needs and goals. You can also check out our beginner’s guide to investing. It covers everything you need to know to get started.

Set a good example

Kids never miss a trick. They see how adults spend and can learn a lot from that. We know you want to focus on being a good role model for them so why not nurture your own smart financial habits that they can hopefully replicate in the future?

When you’re shopping with young children, why not show them how money works and explain the difference between purchasing something with cash, a debit or credit card, and a voucher? Show them the receipts afterward so they can see how much things cost and begin to understand the value of money. They'll thank you later in life! 

Encourage your kids to save

Putting money aside for your children is not only incredibly generous, but it’s also a clever financial decision. It’s good to show your young family how to establish their own positive money habits so they can grow up to be great savers, just like you. 

Money-saving tips for kids

1. Give them weekly pocket money (if you can!) and encourage them to save a small portion of it. Depending on their age, they could put this money into a piggy bank at home where they can easily see their savings grow before their eyes. If they’re a little bit older, they may want to deposit it directly into their savings account.
2. Encourage them to earn their own money. Some parents choose to ask their kids to complete a few chores around the house in return for their pocket money. They’ll soon understand that money doesn’t come easy, but it certainly feels good when you’ve earned it.
3. Help them set a financial goal. Perhaps they’ve set their sights on the latest toy or a new jersey to support their favourite team. Explain how much money they will need to save each week to buy it themselves. This can act as an incentive to save their pocket money or money they receive as a gift on special occasions like their birthday, Christmas or other milestones.
4. Teach them how to budget – and stick to it! €20 may seem like a lot of money to young kids, but unfortunately, it doesn’t stretch very far these days. Help them understand the value of money. If something is out of their budget, explain to them that they either need to save a bit longer to reach their goal or reconsider if it's the best way to spend their hard-earned cash.
5. Match their savings. Another great way to encourage your kids to save more is by promising to match the amount if you can afford to. This could be a once-off or yearly incentive to inspire them to become regular savers.

Educating your children about money and making saving a regular part of your lives can help lay the foundation for a bright financial future.

While Irish Life Financial Services don’t provide advice on budgeting, we hope you found this article useful. Get a free financial review online now to take the first steps towards taking control of your family finances.