Children’s savings accounts: what you need to know
Your child may already be familiar with bank accounts from books or on TV. But if they’re asking where the money is coming from or how to get theirs, maybe it’s time to open a children’s savings account.
A child-focused savings account gives your child insight into how banks and credit unions work and gives them a place to put the allowance and birthday money. If your child has accumulated funds and you want them to learn about banking, you can give them the option of growing their money in a savings account.
Here are the answers to common questions about savings accounts for children.
Is my child old enough for a savings account?
Usually yes, if you open the account with them. Children’s savings accounts generally require that a parent or guardian be a co-owner. This means that you can manage finances until your child is ready to handle them. Due to this setup, your child probably won’t have to be a minimum age requirement to open an account.
However, there is no need to rush to open one if you feel your child is not ready. A simple piggy bank will probably suffice for most children under the age of six.
Which children’s savings accounts are the best?
Before opening an account, take the time to find the best bank, credit union, or online bank just for you and your child. Keep an eye out for the following:
No minimum balance required or monthly maintenance fees: Children should see savings as a good thing and not see the fees decrease what they put in their accounts.
An above-average interest rate: The national average savings rate is currently 0.06% annual percentage return, or APY. In most national banks, savings rates hover around 0%. But many credit unions and online banks offer better rates. The more interest an account earns, the faster your child’s bank balance can grow.
Easy online access: Check out features like mobile apps, the ability to view online transactions, and electronic statements. Show your child how to create their own secure password, which will help them learn about money management and internet safety.
You can open a savings account for your child, as long as the account is also in your name. Savings rates are generally higher at online banks, so these accounts are worth considering.
How to open a child savings account?
Opening a savings account for your child is not much different than opening a new account yourself. As an adult, you will need identifying information, such as a driver’s license, passport, or other government-issued photo ID. You’ll also need to provide basic information for both of you, including your and your child’s birthdays and Social Security (or tax ID) numbers.
Some banks will require a minimum opening deposit, such as $ 25. Others do not have a minimum opening deposit.
Does my child need to use a banking app?
If your son or daughter is ready to make regular purchases and start practicing budgeting, a banking app could be a solid option besides a savings account. Child-focused banking apps have functionality similar to checking accounts and can generally allow minors to track their spending, set budget goals, and set up automatic savings transfers. Some have access to prepaid debit cards. Parents or guardians can open these accounts on behalf of their children and can set spending limits and keep tabs on purchases.
Prioritizing savings over spending is a valuable life lesson, one that takes time to learn. Opening a savings account for your child is one of the best ways to introduce this concept from an early age.