Best Savings Account for Kids
When your child’s piggy bank or money jar starts overflowing, it may be time to open an account at the bank.
Finding the best savings account for your child can be a little challenging because there are a lot of options. Yet, at the same time, not every bank wants to (or allows) kids to have their own savings account.
How do you balance the different issues, open a child savings account AND get a savings account that fits your child at the same time?
First, think about what would make this the a great fit in your mind. Is it how close the bank is? Or is it how high the interest rate on the account is? Does it need to be kid-friendly with child-focused programs to help teach some of the basic money lessons? Is it FDIC-insured or equally protected by NCUA if it's a credit union? It could simply be that you already have an account at the bank such as a college savings account or ESA, and it's easy to open a child savings account too.
Some of these things may be the same reasons you chose your own bank. It's important to consider them at the beginning, though, so going to the bank with your child is a positive experience. You (and they) want to enjoy it.
Second, you need to talk to your child about what having a savings account means. To kids, the money that they can touch and feel is very personal to them. It is their money, and it can be confusing to them that they need to give it to someone at the bank. How much they understand will be influenced by their age, so try to keep the conversations at their level.
Third, it's finally time for that trip to the bank. Some banks have free savings account offers, especially if you are already a customer. Some banks offer special child savings accounts which do not require minimum balances or charge fees. The best savings accounts for kids in any form will be free of fees because those charges could easily wipe out a kid's savings in several months.
You will also want to make sure that you and your child will get some kind of running record of the balance. This could either be through a monthly statement or through a book that gets filled out on each bank visit. Passbooks are not very common in the U.S. any longer, but they can come with certain child savings account programs. Having this something that the kids can see will help them understand that their money is safe.
Fourth, take all the paperwork home from opening the child savings account and review it with your child. Show her what her account number is, what her current balance is and talk
about whether the account will earn interest. She may have more questions on how to get her money back or what the bank does with her money now. Depending on her age and money knowledge, you can talk about making withdrawals and how banks loan money out to others.
When the first bank statement comes, be sure to sit down with her again and look at it. If there is interest being earned - even if it's a penny which is what my son's first statement said! - take the time to show her that earnings. Explain how that interest can grow when she puts more money in her account.
Fifth, encourage repeat trips to make more deposits. The best savings accounts for kids don't require minimum deposits so even $1 at a time can be deposited. These trips will help continue the savings habit she developed when she could put money in the piggy bank in her room.
One note of caution: If a child is under eighteen, some states will issue custodial savings accounts. These accounts list the parent’s name as the account holder and the child’s name underneath. The account ownership can be transferred to the child when they turn eighteen.
Often, the statement will still come only in the child's name so he will still know that it's his bank account.
The best savings account is a great tool for teaching money management skills to your kids. Kids can keep track of their money easily and continue the savings habits they have already started. Then, when they are ready, they can move onto opening a checking account and getting their own debit cards.
Best Savings Account for Kids
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