Most parents want their children to grow to become responsible adults. One important lesson in responsibility is teaching the value of money and how to save. Parents who wish to teach their children this may start with piggy banks, which enable children to visualize how money “grows.”
However, that may not be as effective today as it was before. Storing money in a piggy bank and leaving it there does nothing, even if you’ve done it for years. Additionally, the temptation of wanting extra cash will most likely enable your child (or another person) to take some from their savings or, worse, steal.
Opening a bank account is one option that can enable a child to learn about the value of saving. Nowadays, various banks offer kids’ savings accounts that can benefit their children as they grow older. Depending on the bank you’d like to use, some of these accounts have added perks to help a child’s future.
If you’re on the fence about opening a bank account for your children, here are some advantages of doing so:
1. It teaches children positive money habits and various values early on.
Positive money habits involve saving money for a rainy day and learning how to budget. When a person starts a good habit at an early age, it becomes ingrained in them, thus lessening the challenges they may feel if they start later.
Additionally, opening a bank account can be a great way to showcase that money doesn’t grow on trees, thus, teaching your child that patience and time are necessary for money to “grow.”
Another lesson a child can benefit from their parent opening a savings account is the value of responsibility. Learning to manage resources and make decisions for one’s future can empower your child, helping them feel secure as they grow up, along with their savings.
2. The sooner you start, the more your money grows.
Some kids’ saving accounts have perks that a child can benefit from. Some of which include:
No monthly fees;
Low to zero opening balance requirements;
Various online tools and resources will teach a child some financial education; and
Mobile apps that help children and parents keep track of their account
Depending on your bank, a child’s savings account may automatically become a regular savings account once the child turns 18. Some kids’ savings accounts also have high APY or Annual Percentage Yield. This yield refers to the interest earned on their savings, which will help their money grow faster.
3. It prevents children from touching their money.
Some children struggle with patience and want to use their money for instant gratification instead of long-term benefits. This desire is understandable since children must understand how time can be precious regarding savings.
However, suppose parents only rely on piggy banks. In that case, the temptation to break into their savings becomes higher—making it challenging for children to establish healthy saving habits.
Meanwhile, a savings account can significantly reduce a child’s temptation to use their money. Since most children’s savings accounts come with joint ownership of a parent with a child, parents can safely monitor their child’s money growth and track any changes for them.
4. It keeps their money safe.
Opening a savings account with an FDIC-insured bank or NCUA-insured credit union protects your child’s money from being exploited or affected up until a certain amount. Even if the bank fails or interest rates drop, your child’s deposits and earnings will stay relatively safe, which ensures their secure future.
How Do I Open a Savings Account for My Child?
With all these benefits in mind, it’s safe to see why opening a savings account for your kid may be one of the best gifts you can ever give them. However, before investing money for your child’s future, here are some necessary steps to open your child’s first savings account.
1. Research your options.
Many banks offer a variety of APY rates, perks, and bonuses for children’s savings accounts. Some also have resources that enable children to start their financial journey and learn basic saving concepts. With the internet becoming readily available, mobile banking apps can help keep you and your child track your financial growth and process.
2. List out your goals.
Why do you want to open a savings account? Is it to teach your child the value of saving? Do you want to save up money for college? It would help if you considered these legitimate questions before opening an account.
If your goal for opening a savings account is to help a child develop positive money habits and have a small nest when they turn 18, then opening a simple savings account would greatly benefit them. However, a 529 savings plan may be more efficient for your child’s academic future if you plan to save up for your child’s college fees.
3. Get your documents and fees ready.
As a rule, many financial institutions require minimal fees and documents before opening an account. Some of these include the following:
A minimum opening deposit. Depending on the bank, it may range from $25 or higher. Check the perks your child can benefit from if you’re considering the more expensive option.
A minimum daily balance. While some children’s accounts may not require any money in said account, some banks do require a minimum daily balance to avoid fees.
Possible monthly maintenance fees. Many children’s savings accounts don’t require monthly maintenance fees. Still, it helps to check the fine print first before opening an account.
Important documents. These documents are for identification purposes. Some examples include your child’s birth certificate, school records, and passport.
Takeaway: Teaching a child to prepare for their future through positive saving habits can help them grow into responsible and financially-intelligent adults.
One way to gift your child a bright future is to open a bank account that will widen their possibilities and teach them important values. While opening a child’s saving account is relatively easy, it does help to do diligent research by comparing APY rates, perks, and requirements.
Nevertheless, it doesn’t stop there. Even though opening a savings account is the first step to financial security, positive habits like regularly putting aside money for savings can benefit them in the long run.