Finding the best savings account for children can help you teach your children the importance of saving. Many banks offer savings accounts that are geared especially towards kids. Use this information as a guide for selecting a savings account for your children.
Benefits of Kids' Savings Accounts
The earlier you can teach your kids to save money, the better understanding they will have of finances throughout their lives. Teaching children to save money can help establish a lifelong habit of putting money away, and there are many other benefits to savings accounts as well.
- Having a savings account can teach children to use money wisely, saving for both short-term and long-term goals. For instance, children can save for a toy or a game that they'd like by placing money in their savings account, and they can also save for long-term investments like their education.
- Kids' savings accounts can teach financial responsibility. Children who learn at an early age to save money are more likely to carry that pattern into their adult life.
- A savings account can teach children about interest payments and making their money work for them.
- As children get older, they can use their savings accounts to learn how to do basic banking like deposits and withdrawals, as well as learning adding and subtracting to know their account balance after a deposit or withdrawal.
Best Savings Account for Children
Before you can determine the best savings account for children, you will need to evaluate the different types of accounts available.
Types of Accounts
- Most banks have some type of savings account that is geared especially towards children, and can be attached to the parents' bank account. These accounts typically accumulate a small amount of interest and limit withdrawals or charge a fee for withdrawal. These accounts work well for younger children who are new to savings accounts and have limited need to access their money.
- If the child is saving for the long-term, you may want to consider a longer term account that pays slightly more interest, such as a bond account which won't mature for a number of years and has penalties for early withdrawal.
- Other accounts may have an attached checking account or cash card account. These accounts work well for older children and teens who need to learn money management strategies and accounting. This type of account also transitions well for children who are going to college and need to have access to their saved money.
Selecting an Account for Your Children
When you are selecting the best savings account for your children, keep the following in mind:
- Does the bank charge low-balance fees or monthly fees for the savings account? If so, you may be able to find accounts that charge low fees or no fees at all.
- What kind of interest rates does the account offer? Opt for an account with the highest interest rates, which will yield better results over the years. Even a small percentage like a half percent can make a big difference if the money is invested for several years.
- Does the account offer any additional services such as a birthday or Christmas club or financial responsibility classes? These types of services may motivate children to save more and learn more about money management.
- How accessible is the bank? Is it nearby, and is it easy to get to the bank to make deposits or withdrawals? The best interest rates in the world won't matter if you can never get to the bank to make a deposit.
- Shop around with local banks to find out which account will best serve your kids' long and short-term needs.
Here are some additional tips once your child has a savings account to help your child become a smart saver:
- Find out what day of the month the bank pays interest so that children can make withdrawals after interest is paid.
- April 17 is National Teach Children to Save day. Banks may have specials or offer educational classes on that day geared towards teaching children about saving money.
- Some children's accounts that are part of the parents' account will allow you to directly deposit your children's allowance into their savings account using a simple online transfer.
- Before allowing your children to have a checking account or cash card associated with their savings account, teach them how to keep track of all transactions so that they do not overdraw their account.
Ultimately, selecting the best savings account for your children is based on a number of individual factors like interest rates, fees and convenience. Regardless of your choice, getting your children to start saving early could set them on the path to future financial freedom and stability.