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Savings Contract

Savings Contract

My son & I talk about money quite a bit, usually in relation to how he wants a car. The last time he brought this up, I told him that for every dollar he saved for a car, I would match 50 cents, and that for every dollar he saved for college, I would match the dollar. In both cases this was “up to a certain amount, and I’m not sure what that amount is.” I’m still not sure what the matching amount limit will be, but decided to go ahead and put together a savings contract for him. Here is the initial draft.

 

Matching funds contract

I, _______, agree to match a portion of funds saved by _________ for the purpose of a college education and a car based on the following conditions:

COLLEGE
Funds will be matched dollar for dollar, up to an amount that is to be determined by (my name’s) sole discretion at a future date. Funds must be used solely for the purpose of paying for college tuition and textbooks, and must be saved in an interest-bearing account that is clearly designated as a college fund. Funds may not be withdrawn for any other purpose, unless scholarships or grants have been received that will cover college tuition. If college tuition is covered by means of scholarships or grants, the amount saved by (son’s name) will be available for any type of use and the matching funds given by (my name) will then be available for housing and transportation expenses. Funds saved must be either earned directly by (son’s name) or received by (son’s name) at birthdays or national holidays.

CAR
Funds will be matched 50 cents for every dollar, up to an amount that is to be determined by (my name’s) sole discretion at a future date. All funds must be used solely for the purpose of paying for the purchase of one car, to include costs for tax, title, and tags. Funds must be saved in an interest-bearing account that is clearly designated as a car fund. Funds may only be withdrawn for these purposes: purchase of the chosen car, transfer to college fund, or transfer to a retirement fund. Funds saved must be either earned directly by (son’s name) or received by (son’s name) at birthdays or national holidays. This car offer expires immediately upon (son’s name’s) first purchase of a car, even if additional monies are owed on that car.

See Also

Signed: (my name & my son’s name)

 

I’ll think on this a bit and see if anything glaring has been left out, but I hope it will motivate son to save a large portion of his money and NOT to buy things on credit.

View Comments (5)
  • This comes from staring at contracts all day:

    What is missing is any sort of “error” clause. What happens if the saved money is withdrawn for a different purpose?

    Also not mentioned is the application of funds in excess of the purchase price / registration / tags / taxes of a car.

    And everyone’s favorite: the termination clause.

    You could put something outrageous in there just as a teaching moment to show him the value of reading and understanding everything he signs.

    • That’s a fantastic comment, ladam8518! I’ll need to make a revised post. I like the idea of putting something outrageous in there. I had a teacher in high school who wrote on the last page of our final ‘If you see this within the first 5 minutes, put an ‘x’ through all the questions because you’ve received an automatic ‘A”. She did this because earlier in the year she told us to review a test before taking it so we know what we’re up against. It’ll help us use our time more wisely while taking the test.

  • Is there a reason why you’ve restricted the money to earnings and gifts at specific times of year?

  • plonkee, mainly because if a relative were to randomly give him a good size amount of money for college, I don’t want there to be the chance that I wouldn’t be able to match it. But if he’s working for the money or getting typical gifts, I can work that into my $ plan.

  • I like that contract. I’ve told my children that I’ll match funds for savings they have for a car and college. I’ve not ever drawn up a contract with them. It’s a great idea – makes it more concrete and gives the kids a clear goal.
    Thanks!

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