It’s never too early to start a child’s financial education.
One of the ways you can help kids learn about the value of a dollar, as well as delayed gratification, and general money management (while also splurging funds for their future), is to establish a savings account in their name.
Doing this usually involves opening a custodial account or joint account that you manage but that belongs to the child. Here’s what to know about opening this type of savings account for a child and some factors to consider when taking this step.
Why should you open a savings account for a child?
Opening a bank account for a child can have both immediate and long-term benefits. As mentioned earlier, there is an obvious learning experience that comes with teaching your child about money management—and especially about save money. This education lays the critical foundation for their financial growth and journey.
“Research shows that the path to financial well-being can be taught from a young age to our guardians,” said James Morgan, vice president of savings and deposits at Capital One, retail bank. “One of the best tools to teach children the importance of finances is to help them open their own savings account.”
In addition to the conceptual value and long-term financial health benefits associated with establishing a savings account for your child, taking this step also provides opportunities to have regular money chats and creates valuable learning moments.
“It opens the door for important conversations and real-world scenarios about the basics of money—like explaining interest and how it’s compounded,” said Matt Gromada. , managing director, and head of youth, family, and starter banking, at Chase. “Second, it gives your child a sense of independence and freedom, providing opportunities for real-life experiences and learning.”
And that’s still not all. There is another benefit. Having a co-owned account gives you as a parent a sense of security, by allowing you to manage your child’s money.
Are there savings accounts just for kids?
Minors generally cannot open a bank account on their own. Doing so is often prohibited by state laws and in cases where it is not, there are often bank regulations on the issue that require an adult or legal guardian to be part of the account.
That said, however, many financial institutions offer accounts designed for children and for teaching young bankers about money with the co-ownership of a parent or legal guardian. account. Some of the best known options include Chase First Banking (available to children younger than six years of age), Children’s Savings at Alliant Credit Union story, The Northpointe Bank Kids Savings, and CapitalOne Kids Savings.
In many cases, these accounts include access to a mobile app; some even have debit cards, offering moderate to charitable interestand there is little or no charge.
Steps to open a savings account for a minor
The process of establishing a savings account for a minor is straightforward and not at all unlike opening an account for a person of any age. As a best practice, this effort should always start with doing your homework and finding an account option that appeals to you and fits your financial needs for your child and your banking style. Once you’ve decided on a specific account, make sure you have all the appropriate documentation needed to proceed.
1. Research your options
There are many children’s savings accounts on the market. So, taking the time to do your research and review the options can really pay off.
“When looking for a savings account, remember the things that are important to your family—is there a maximum withdrawal limit? Is a savings account free with no fees? Is there a mobile app with features that allow easy access to banking? Is it FDIC insured? Morgan suggested.
2. Gather documentation
As with opening any other type of financial account, you will need to provide various documentation to open a child savings account. Requirements may vary slightly from one financial institution to the next but generally you will need to provide information about yourself and the minor for whom the account is intended.
“As an adult, you need identification information, such as a driver’s license, passport or government-issued ID. You may also need identification information for your child. If they are too young to get a license, it may include a birth certificate,” said Brittany Pederson, director of deposits and payments at Georgia’s Own Credit Union.
3. Make an initial deposit
Once you’ve chosen and set up an account, it’s time to make an initial deposit. You may even want to make recurring automatic deposits from another affiliate inspection or savings account.
It’s a good idea at this point to talk to your child about how often they want to, or really need to, make deposits, as well as how they earn money to put into their savings fund and even goals they can have for of money. . “Help your child plan what they will do with their money,” said Gromada.
What to look for in a savings account for a child
In addition to the aforementioned features you’ll want to look for (such as low fees and no account balance requirements), other offers may be particularly suitable for accounts opened to benefit minors.
For example, some accounts offer special parental monitoring features that allow tracking where money is spent and how much is spent in any given transaction. Some accounts even send text alerts to your phone when a certain spending limit is exceeded.
It may also be a good idea to find an account that can be linked to your own accounts to facilitate the transfer of money when needed. Mobile apps linked to the bank account you open can also be a great visual tool for young students.
“Finding a provider with a modern mobile app feature will allow easy access to banking for kids and parents and provide instant alerts on all connected phones,” Morgan said.
When opening a savings account for a child, it can also be important to identify a financial institution with a local brick-and-mortar presence. This allows you to take your child to the bank and teach them in a more hands-on way about the deposit process.
“Also, look for incentives, such as savings rewards, associated with the account,” says Pederson. “Finally, many youth accounts offer free financial education in the form of newsletters, blogs, and videos.”
Opening a savings account for a child is a valuable step, one that opens up the opportunity to teach a young banker about the importance of delayed gratification, how compound interest work, and how to manage money responsibly. There are a variety of savings account options available for children, and opening these accounts can be quick and easy. But before settling on an account, be sure to shop around and find one that offers the best options for your family’s goals and needs.