Your child might have some idea already of what a bank is and does from books, TV or even Harry Potter. But if your son or daughter asks whether goblins really run the system, it might be time to set the record straight by opening up a first savings account.
Opening an account provides a glimpse into how banks and credit unions work, plus gives your child a place to stash allowance and birthday money.
Here are the most important things to know about savings accounts for kids.
Is my child old enough for a savings account?
Kids savings accounts typically give parents joint ownership. That means Mom or Dad can manage the finances until the children are ready to do so on their own. Because of that setup, your child probably won’t have to meet an age requirement to open an account.
A simple piggy bank will probably suffice for most children younger than 6. But once that money starts accumulating, you’ll want to give it the opportunity to grow.
Which kids savings accounts are best?
Before you open an account, take some time to find the best bank, credit union or online-only bank for your child and you. Keep an eye out for the following:
No minimum balance requirement or monthly maintenance fees: Children should see saving as a good thing and not have fees diminish what they put into their accounts.
A good interest rate: At most national banks, savings rates hover around 0%. Credit unions and online-only banks typically offer better rates, closer to 2%.
Online or in-person access: Walking into a branch office is a good way to help your child become familiar with routine transactions involving his or her account. Your child’s online habits — even financial — can be important, too, so check for features such as monthly statements and controls on payments and transfers from savings accounts. You can teach money management and internet safety together.
Additional perks such as an ATM card: An ATM card can show your child how transactions work and how to withdraw cash when you’re on the go.
» Want the best savings account for yourself too? See our list
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Savings rates are on the rise at online banks, so they’re worth considering for you and your child.
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How do I open a kids savings account?
Opening a savings account for your child isn’t much different from getting a new account yourself. You’ll need the same information if you’re opening an account at an online-only or a brick-and-mortar bank.
If you’ve found a good bank or credit union that has branches, schedule an appointment to visit and bring your child’s Social Security card. Children should also bring their piggy banks and school identification card, if they have one. Encourage your child to put money in the account for the first time that day, and see if the financial institution offers candy or other freebies to reinforce the positive experience.
After putting money into your child’s savings account, start teaching your son or daughter how to perform basic banking tasks. Demonstrate how to use an ATM to deposit birthday or holiday checks or money earned from chores.
Prioritizing saving 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 that concept at an early age.
Updated March 8, 2017.