If you want your children to develop healthy financial habits, it’s important to begin teaching them about money at an early age. One of the best financial literacy tools you can provide your child is a savings account. Opening a savings account for your child is a great way to introduce the concepts of banking and provides a safe place to keep your child’s money when the piggy bank starts to overflow. Here are some things to consider when opening a savings account for your child:
Why Does My Child Need A Savings Account?
Opening a savings account does so much more than simply hold on to your child’s money. A savings account introduces your child to various banking concepts and teaches them how to deposit cash and checks. A savings account teaches children to save for the things they want and illustrates the value of money. It shows them how their money can grow with interest and dividends. A savings account can strengthen basic math skills and encourages children to set and work towards goals.
When Should I Open A Savings Account for My Child?
Children under the age of 18 are not legally allowed to sign documents to open a savings account. However, a parent or legal guardian can open an account in both names and remove themselves once the child turns 18. It’s never too early to open a savings account for your child, but if you’re looking to use the opportunity as a teachable moment, take your child to open their own account around 6 or 7 years old.
What Should I Look for In a Savings Account for My Child?
Before you open a savings account for your child, shop around to find an account that suits your needs. Assuming most children won’t have much money to open an account with, look for accounts that require a low initial deposit. To avoid your child’s hard-earned allowance being eaten up by monthly fees, choose an account that does not require a minimum monthly balance. You’ll also want to choose a bank with a competitive interest rate or dividend. Most national banks offer savings rates around .09% Annual Percentage Yield (APY), but many credit unions offer more competitive rates, closer to 2% Annual Percentage Yield (APY).
More Tips for Utilizing a Savings Account for Your Child:
- When opening a savings account for your child, use the opportunity to explain how banks work. You can start by explaining that banks keep our money safe and help us grow our money. As your child gets older, you can teach them about more complicated banking concepts, such as compound interest.
- Allow your child to bank online and at your local branch. Take your child into your local branch to learn proper banking etiquette. Allow your child to make deposits, hand the money to the teller, and accept the deposit receipt. Then, allow your child online access to check their balance from time to time, to watch their money grow, and to set new goals.
- Take advantage of any financial education that your bank offers. Some banks offer financial education programs that use games and other activities to teach young children important financial skills. These programs are generally free for bank clients.
- Talk to your child about how much they should be saving and what they should be saving for. They may have a simple savings goal of just enough money to get that shiny new toy they’ve had their eye on, but it’s important to encourage long-term savings too. Many banks have online features that allow you to set multiple savings goals. Let your child create short-term and long-term savings goals to work towards.
Opening a savings account for your child is a great way to prepare them for future financial success. Instill the habit of saving money early on to help your child understand the value of money and become financially responsible.
Your child can get a jump start with a free Camino Federal Credit Union Children’s Savings Account. We offer competitive dividends on balances over $15 and funds are federally insured up to $250,000 by NCUA. Children aged 12 or younger are automatically enrolled in the Kirby Kangaroo Club where games, jokes, and activities are used to teach children the basic lessons of money in a way they’ll actually enjoy.
If you have additional questions or you’re ready to open a savings account for your child, go online at caminofcu.org or contact a Camino team member at (800) 835-3400. We are here to help you on your financial journey.