From Piggy Banks to Real Banks: Establishing Savings Accounts For Children
Teaching children the proverbial “value of the dollar” is just a minor step in helping children become fiscally responsible adults.
Teaching them how to manage money is critical to ensuring their future economic success, and parents can begin with opening a bank account in their child’s name. Personal banking has become more convenient than ever, making it possible for parents to open accounts for their children and allowing them to monitor their activity in order to teach them beneficial lifelong financial habits.
The Right Age for a Bank Account:
Banks usually limit checking accounts to teens but having savings accounts for your child’s college education can be started at practically any age. Even with small monthly payments, you are still earning interest on the balance, helping those regular deposits grow into a significant asset by the time your child is ready to take over the account. The benefit here is more financial than educational because savings accounts don’t involve everyday use.
All children learn at their own pace, and the only age limit you need to worry about is the requirement set by the financial institution you choose. Typically, student checking accounts can be obtained for minors age 13 or older, if an adult parent or guardian signs as a co-owner of the account. When the child reaches 18 years of age, most banks automatically convert the account into a standard checking account.
Lessons Learned from A Child Having an Account:
Opening an account for your child is more important than you may realize. Children often miss out on the kind of education that parents can provide by beginning financial education early. A bank account lets parents teach their children everything from using a debit card, to larger concepts like monthly budgeting and savings account interest. Maintaining a bank account provides children with a wealth of practical knowledge. The earlier a child can be responsible for a checking account, the earlier they learn about how to avoid overdraft fees, bounced checks and drained balances. Giving children a place to make mistakes in a controlled setting will establish smart habits and gain information they need to grow into financially independent adults.
Benefits of a Child Having an Account:
There are many benefits of opening a savings account for a child. Among them:
It teaches them to plan ahead.
It teaches them to stay focused and prioritize to achieve their goals.
It shows how their money can grow with compound interest.
It teaches them to save for the things they want until they can afford it.
It teaches them the value of money and to spend it wisely.