The Best Bank Accounts For Children
Good financial practices don’t necessarily come quickly or automatically for many individuals. In general, the earlier a person can develop a consistent saving routine and make that a part of their normal day-to-day behavior, the more financially secure they’ll be later in life. Ideally, this means learning about personal finances during childhood.
The Importance of Saving
Saving is a fundamental practice that every child should learn. A piggy bank is one of the simplest and most effective ways to introduce this concept. It allows children to understand the basics of saving by collecting spare change. Once they grasp how to save and can resist the temptation to spend their coins, it’s time to transition them to a more formal banking setup.
When children receive an allowance, consider transferring those funds electronically into their bank accounts. This method not only teaches them the importance of saving but also emphasizes that money in today’s world can exist in various forms beyond just cash.
Choosing the Right Bank
Start by checking with the bank or credit union where you currently have an account. Many financial institutions offer special programs or accounts exclusively for the children of their customers. These accounts may come with reduced fees or even no fees at all, making them a good option for young savers.
Types of Accounts
- Limited Access Accounts: Passbook accounts are a traditional choice for children’s savings. Some banks still provide a physical passbook for kids to track their deposits, withdrawals, and balances. This helps children learn the concept of saving in a tangible way, moving beyond just putting coins in a piggy bank. Such accounts are particularly suitable for younger savers.
- Online Accounts: For older children, online-only accounts can be beneficial. These accounts add a layer of distance between a young saver and their money, which can deter impulsive spending. Most teenagers are adept at navigating online platforms, making it easy for them to monitor their accounts.
Considerations for ATM Access
When discussing bank accounts for children, it’s essential to think about what “children” means in this context. This includes teenagers who may have different financial needs and behaviors compared to younger kids. If you have teenagers, evaluate whether it’s appropriate for their accounts to have ATM access. Consider their spending habits and whether they have a job. While having ATM access can offer convenience, it also comes with the temptation to spend funds that could be saved.
Direct Deposit Options
If your teenager has a job, look for bank accounts that allow direct deposit of their paychecks. This can be a game-changer in teaching them financial responsibility. Direct deposit encourages them to save, as they won’t have immediate access to cash when they deposit their checks. This practice can help cultivate a mindset focused on long-term savings rather than short-term spending.
Supervision and Readiness
Ultimately, the most important factors to consider when opening a bank account for your child are their readiness and ability to handle their finances responsibly. Reflect on how closely you want to supervise their activities. It’s crucial to strike a balance between granting independence and ensuring they understand how to manage their money wisely.
Teaching Financial Literacy
Alongside setting up a bank account, parents should engage children in conversations about money management. Discuss the importance of budgeting, the benefits of saving for specific goals, and the concept of interest. Encouraging your child to set savings goals, such as buying a toy or saving for a special outing, can help make the idea of saving more tangible and rewarding.
In summary, instilling good financial practices in children is essential for their future security. Starting with simple tools like a piggy bank, progressing to bank accounts, and teaching them about digital finances lays the groundwork for responsible money management. By being proactive and thoughtful in guiding them through these steps, you can help equip them with the skills they need to navigate their financial futures successfully.
