Every parent wants their child to be successful in all areas of life. One way to help make it happen is to teach them about financial literacy, and there is no better way to do so than real-world experience. Opening a savings account at an early age is a great way to introduce an essential concept of prioritizing saving over spending for your child. It will teach them basic money management skills and promote positive financial habits.
When to Start
When you start a kid’s savings account, as a parent, you typically get joint ownership. This means parents can manage children’s finances until they are ready to do it on their own. That is why, usually, there is no age requirement that your child has to meet to open an account.
For most children, a simple piggy bank works till the age of 6 when cash savings are not sufficient enough. But when a kid is growing up and starts accumulating more money, it is time to give them an opportunity to grow by opening a savings account.
How to Start
Opening a savings account for your child is pretty much the same process as getting a new account for yourself. When you find a right bank or credit union that has branches, schedule an appointment to visit and bring your child’s Social Security card. If your kid has a school identification card, they should bring it along with their piggy bank. Encourage your child to put money in the account for the first time that day, and see if the financial institution offers candy or other freebies to reinforce the positive experience.
Things to Consider Before Opening an Account
Before you open an account, take some time to find the best financial institution for your child and you. Keep an eye out for the following:
A good interest rate
At most national banks, savings rates are around 0%. Credit unions and online-only banks typically offer better rates, closer to 2%.
No minimum balance requirement or monthly maintenance fees
You want your children to get a rewarding feeling of seeing their money grow. Fees that can diminish what they put into their accounts, thus, discouraging children from saving more.
The online and in-person experience
Walking into a physical branch is an excellent way to familiarize your child with routine transactions involving their account. You should also keep in mind the importance of online habits, so check for features such as online monthly statements and controls on payments. You can teach money management and internet safety together.
Debit card availability
If the purpose of the account is to provide a weekly allowance to your child that they can access, you may want a debit card for the savings account. Keep in mind that debit cards for minors should include features such as controlled spending and fraud prevention.
Fund transfers
In many cases, parents open savings accounts for their children at the same financial institution. If this is the case, make sure that the institution will allow a smooth transfer between your account to your child’s account.
Spending limits
Another thing to consider is the daily spending limit allowed and the yearly limits for both spending and withdrawals. Every financial institution has different policies and limits, so don’t forget to ask beforehand.
At Premier Source FCU, we want the best for you and your children. If you’ve decided to give a valuable financial literacy lesson to your child, we’re here to help. Feel free to contact us with any questions you have!