Forget about CDs for kids

Dear Dave,

Would it be a good idea to open CD accounts for my two small children?

-Abe

Dear Abe,

No. A CD is a Certificate of Deposit. Basically, they're not much more than savings accounts which carry early withdrawal penalties. They earn about the same as a regular savings account, too, which at the moment is next to nothing. There's no reason to open them for your kids.

Now, is it a good idea to save money on behalf of your children? Of course, it is. But if the idea is simply to teach and help them save money, I'd recommend simple savings accounts. If you're talking about wanting to save money for them - like for a college fund - I'd suggest an Educational Savings Account (ESA) with good, growth stock mutual funds inside.

Even if you want to put aside college savings, I'd urge you to go ahead and open regular savings accounts for each of them. We did that for our kids, and I can tell you from experience, you'll find tons of teachable moments about saving, giving and life in general!

-Dave

Dave Ramsey is America's trusted voice on money and business. He's authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. His newest book, written with his daughter Rachel Cruze, is titled Smart Money Smart Kids. It will be released April 22nd. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.