It’s never too early to start your child’s financial education.
One way you can help your kids learn the value of a dollar, as well as delayed gratification, and overall money management (while also squirreling away funds for the future), is by setting up a named savings account.
Doing so usually involves opening a custodial or joint account managed by you but belonging to your child. Here’s what you need to know about opening this savings account for your child and some factors to consider when taking this step.
Why should you open a savings account for your child?
Opening a bank account for children can have immediate and long-term benefits. As mentioned, there are clear learning experiences in teaching children about money management—and specifically about saving money. This education lays a critical foundation for your financial growth and journey.
“Research has shown that the path to financial well-being can be taught from an early age by our guardians,” said James Morgan, vice president of savings and deposits at Capital One, a retail bank. “One of the best tools for teaching kids the importance of finances is helping them open their own savings accounts.”
In addition to the conceptual value and long-term financial health benefits associated with creating a savings account for your child, taking this step also provides an opportunity to have regular money conversations and creates invaluable learning time.
“It opens the door to important conversations and real-world scenarios about the basics of money—like explaining interest and how it accrues,” said Matt Gromada, managing director, and head of youth, family, and startup banking, at Chase. “Secondly, it gives your child a sense of freedom and independence, providing opportunities for real experiences and learning.”
And that’s still not all. There are other benefits. Having a jointly owned account gives you as a parent a sense of security, by allowing you to monitor your child’s money.
Are there savings accounts just for kids?
Minors generally cannot open their own bank accounts. Doing so is usually prohibited by state law and in cases where it is not, there are often bank regulations on the matter that require an adult or legal guardian to be part of the account.
However, many financial institutions offer accounts designed for children and to teach young bankers about money by co-ownership with a parent or legal guardian of the account. Some of the most popular options include Chase First Banking (available for children under six), Alliant Credit Union’s Children’s Savings account, Northpointe Bank’s Children’s Savings, and CapitalOne’s Children’s Savings.
In some cases, the account includes access to mobile applications; some even come with debit cards, offer modest to generous interest, and have minimal to no fees at all.
Steps to open a savings account for minors
The process of opening a savings account for a minor is quite simple and is not like opening an account for a person of their age. As a best practice, this effort should begin by doing your homework and finding an account option that fits your child’s financial needs and your banking style. Once you have decided on a specific account, make sure you have all the necessary documentation to proceed.
1. Research your options
There are many children’s savings accounts in the market. So, take the time to do your research and check out the options you can afford.
“When looking for a savings account, consider factors that are important to your family – is there a maximum limit? Is the savings account free with no fees? Is there a mobile app with features that allow easy banking access? Is it insured by the FDIC?” suggested Morgan.
As with any type of deposit account, it is a good idea to identify options that offer benefits such as minimal fees, along with generous interest.
2. Collect documentation
As with opening any other financial account, you will need to provide various documentation to open a child savings account. The requirements may vary from one financial institution to another, but usually you will be required to provide information about yourself and the minors for whom the account is intended.
“As an adult, you will need identification information, such as a driver’s license, passport, or government-issued ID. You may also need identification information for your child. If they are too young to have a license, this may include a birth certificate,” says Brittany Pederson , director of deposits and payments for Georgia’s Own Credit Union.
3. Make an initial deposit
Once you’ve chosen and created an account, it’s time to make your initial deposit. You may want to make recurring automatic deposits from your checking or other savings account.
It is a good idea at this time to talk to your child about how often he wants, or really needs to make a deposit, as well as how he can get money to put in the savings fund and even the goals he can have for that money. . “Help your child plan what they do with the money,” says Gromada.
What to look for in a savings account for children
In addition to the aforementioned features you’ll want to look for (such as minimum fees and no account balance requirements), some other offers may be suitable for accounts opened for the benefit of minors.
For example, some accounts offer special parental monitoring features that allow tracking where money is spent and how much is spent in a single transaction. Some accounts even send text alerts to your phone when certain spending thresholds are exceeded.
You can also find accounts that can be linked to existing accounts to facilitate money transfers when needed. A mobile app linked to the bank account you open can also be a great visual tool for young learners.
“Finding providers with modern mobile app features will allow easy banking access for kids and parents and provide instant alerts for all connected phones,” Morgan said.
When opening a savings account for a child, it can be important to identify a financial institution that has a local brick-and-mortar presence. This will allow you to take your child to the bank and teach them in a more practical way about the process of making a deposit.
“In addition, look for incentives, such as rewards for saving, associated with the account,” says Pederson. “Finally, many youth accounts provide free financial education in the form of newsletters, blogs, and videos.”
Takeaway
Opening a savings account for a child is an important step, which opens up opportunities to teach young bankers the importance of delayed gratification, how compound interest works, and how to manage money responsibly. There are a variety of savings account options available for kids, and opening one can be quick and easy. But before settling on an account, be sure to shop around and find one that offers the best options for your family’s goals and needs.