Children need financial guidance, and more parents are opening accounts for their children to help them learn about finances early. According to Statistica, 49% of children had a savings account in 2020. Spending time with your children to teach them about savings will help them establish good financial habits. Creating a solid tradition of savings early allows your children to build up the resources they will need for major expenses like college, cars, and houses.
Teaching children good financial health
Children may be aware of the basics of money and how to make a purchase, but it is essential to teach them about the tools that can help them manage their finances. Savings accounts, checking accounts, and credit card accounts have become important tools in today’s society to maintain good financial health.
Schools teach Economic and Personal Finance classes, but they don’t have to wait until 12th grade to take the required course. You can give your child a head start by opening a savings account for them. This will lay the foundation for their financial knowledge. The sooner you start teaching your kids about finances, the more time they have to master the concepts. You can guide them, help prevent poor financial choices, and help them become more mindful of their purchases.
Benefits of opening accounts early
By opening an account for your child at an early age, they will better understand how finances work. They will pick up the financial vocabulary to manage their finances and learn the differences between deposits and withdrawals. Kids can benefit from compound interest when they open an account early. Over the years, they can watch their account grow as interest accrues on their deposits.
Tips to opening savings account for kids
- Decide on the account – A savings account is excellent for general purchases, but if you are helping your child save for college expenses, a 529 account can help you save more aggressively.
- Research the interest rate – The interest rate on most savings accounts is relatively low, but it is a vital tool in teaching your child how to manage money. It would be best if you still looked for the best rate for children’s savings accounts.
- Debit cards – Some banks will allow you to have debit cards connected to the savings account. This will let the child get money from an ATM when needed.
- Automatic savings plans – Some banks have automatic savings where a set amount is deposited into the savings account each month. This can help your child establish a habit of saving because the money will be deposited even when they forget. Notifications can remind the child that they have a deposit scheduled.
- Mobile banking – Children are becoming more tech-savvy, and using apps to manage money is very popular. They may even enjoy saving more through an app on their phone. Accounts can be set up so that parents also have access to them.
- FDIC insured – Your child’s account should be FDIC insured, just other savings accounts. This is easy to check for by looking at a bank’s website. Most will state that they are FDIC-insured institutions.
What you need to open a savings account for kids
Before you open a savings account for your child, the bank will want to verify some information. You may need the following documents to open a savings account.
When you open the account online, the parent is opening the account as a joint account. If you are going to open an account from a brick-and-mortar bank, you may need to set up an appointment and visit a local branch. This can be a very exciting time for a child. It will help them to feel very grown-up and independent.
Financial accounts for kids
Many people may be hesitant to allow children to have control over money. They may not even discuss money with their children, but kids are smart enough to start figuring it out independently. Allowing them the freedom of controlling their own savings account enables them to learn how the account works. This can go a long way in teaching them good money habits for their future. Once kids have their own savings account, it is a great idea to use an online money management tool to track how much money is saved. Kids may get excited by the graphs that help visualize how their account is growing. That excitement may transfer into better spending and saving habits, creating a solid financial future for them.