Why Your Child Should Have a Savings Account
Kids are growing up with more access to financial products than ever before. From debit cards to mobile apps and specialty accounts, they have many options for managing their money. In honor of Youth Month, let's look at why it can be a good idea to open a savings account for your child.
Teach the basics of saving.
One of the most important lessons you can teach your child is the value of saving money. A savings account is a great tool to help your kid understand this concept. By depositing money into the bill regularly and watching it grow, your child will learn the importance of setting money aside for the future.
Teach kids about money management.
A primary benefit of opening a savings account for your child is that it helps them learn about money management in a truly hands-on way. When your child has a history and controls their spending to a degree, they'll understand the importance of tracking their spending and setting money goals. They'll also learn how to manage an account at a financial institution. This includes depositing money, monitoring balances, and later evolving into using a debit card when they get their first checking account.
Help kids save for a short-term financial goal.
Turn the lesson of smart savings into a lifelong habit by having your child use their account to practice saving up for a short-term goal. First, talk to your child about their financial wish list, and help them choose a realistic goal. Next, help them create a savings plan while using their account, which will help them reach their destination. Your kid can now set aside money they've earned from an allowance or part-time job or that's been gifted to them for a birthday or another occasion until they have enough money saved in their account to fund their purchase.
Build credit early
A child at any age can have a savings account. Financial institutions have differing policies for the minimum age required to open a share draft/checking account, but some are as low as 13 years with a parent co-owner. Many banks and credit unions offer credit cards along with youth accounts. So, as your child reaches adulthood, please talk with your bank or credit union about getting a credit card with their name on it to help them start building credit at a young age.
Prepare for the future.
Starting a savings account and learning experiences from a young age can prepare your child for unexpected expenses in the future. As they age, their needs and costs will increase, and the more you can help them prepare now, the better off they'll be. For example, your child may need extra cash to pay for a broken phone or, when they're a bit older, for a car repair. Having money set aside for emergencies will prepare them for any financial reality.
Teach investing and interest concepts.
A savings account can be a great way to introduce your child to investing and earning interest. Many savings accounts offer compound interest, which means that the interest earned on the invoice is added to the principal, creating a snowball effect that can lead to higher growth over time. Kids can even start investing in stocks, bonds, and mutual funds with as little as $50 with some youth accounts. Teaching your child these concepts can help them develop a lifelong interest in investing and financial planning.
Build responsibility and independence.
A savings account can also help your child develop responsibility and independence. By managing their money and deciding how to save and spend it, they'll learn valuable life skills that will serve them well in adulthood.
Opening a savings account for your child is an excellent way to teach them essential money habits and prepare them for a financially successful future as more options open up. [To open a savings account for your child at Members Choice CU, call, click, or stop by today.]