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Managing mitzvah money: Experts suggest saving most of it, spending a little

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After the excitement following the big day settles down, many b’nai mitzvah boys and girls and their families get to decide how to use gift money responsibly.

Fortunately, local bank representatives – Kevin Sulecki, vice president and branch manager of the Cedar Center Branch of Ohio Savings Bank in South Euclid, and Heathyr Ullmo, senior commercial banking officer and assistant vice president at Geauga Savings Bank – have tips for the best ways to maximize both the benefits of saving and spending.

Split saving, spending

Sulecki advises parents and children decide together how to portion out bar or bat mitzvah money. He says he typically suggests the child be allowed to spend 10 to 15 percent — or, if it seems meaningful, 18 (chai) percent — and save the rest.

To make that deal more appealing, kids can save a portion of the money for something fun they want in the near future, teaching them the value of saving for the biggest reward, he says.

“They can maybe spend a little bit of money, they could save a little bit of money for future things, or they could maybe have a goal of trying to save for something over the next year or six months,” Sulecki says.

Ullmo, who’s based at Geauga Savings Bank’s Beachwood branch, suggests portioning out gift money into five equal parts. One part can be spent on something the kid wants, three parts saved and one part spent on a good cause – possibly the same organization where they volunteered for their mitzvah project.

“That fifth part is then giving of themselves,” she says. “They will then donate to that organization as well, and it could be an organization they continue to grow with as they get older, but it’s something that means something to them.”

Best account types

Sulecki suggests families consider opening a kid’s account at his bank, which is free and can be started with $1. The child can make deposits and it’s in their name rather than their parents’ name.

“What’s nice about the kids’ account is it just gives them a sense of pride. When they open an account, they learn how to use money (and) the value of money,” he says. “It gives them an understanding of the ramifications of saving money.”

He also suggests families consider investing in the Gift of Israel program. The Jewish Education Center of Cleveland and Ohio Savings Bank partnered, along with the Jewish Federation of Cleveland and local participating religious schools, to provide a savings plan for students with the incentive for families to put money toward an educational experience in Israel.

Families put funds into an account (beginning any time between pre-kindergarten and 10th grade) and the Federation and religious schools contribute as well. The Federation will also put in an additional $300 in the account the year the child has a bar or bat mitzvah.

Ullmo says parents and kids should discuss what type of account they feel comfortable putting their money in, but says a savings account is a good bet if they want to save for something like a car and need to access the money within a few years. A Certificate of Deposit or another account type could be a good idea if they want to save the money for longer and grow interest but will not need to access it for a set period of time.

“There is no amount that is too small to save,” she says.

Forming good habits

Sulecki says since having a bar or bat mitzvah signifies taking responsibility over one’s life and growing up, it’s also a good time to discuss responsibility surrounding money and how to make good decisions.

“I think it’s very, very important to have that collaboration between the parents and the child,” he says.

Moreover, since both children and parents bear some responsibility over the money until the child turns 18, it’s good for both parties to get on the same page about what it will be used for. Thus, Ullmo says neither should make decisions about it on their own.

“I think it is probably a good idea to have a conversation between the two of them,” she says. “It’s not the parents’ money, (it’s) the kid’s money … but the conversation goes back to ‘What do you want to do with it?’” BM