Financial responsibility is one of the most valuable lessons you can teach your children. Good money habits can be imparted by educating them on the importance of earning, mindful spending, saving, and investing. Opening a bank account in their name can be an additional step in your child’s way to financial success. The age limit of a child, minimum balance, cash transfer convenience, and online banking services are some things to consider while choosing a bank account. Before opening one, let us discuss a few important things to consider.
What Is a Savings Account for Children?
Children under eighteen who wish to save money can open a children’s savings account. There are two kinds of children’s savings accounts:
Custodial Account
The parent manages this savings account for the child. Until the child becomes an adult and takes responsibility for the account, they will act as a beneficiary.
Several banks and credit unions permit depositors to change from joint and custodial accounts to regular savings accounts once they turn eighteen. Selecting any one of these accounts and starting early includes several advantages, among which is that you can give your kid a proper understanding of money management. Once your kids master the art of saving, they will be capable of handling more complicated financial products as adults, for example, using a credit card, a checking account, or saving in a money market account.
Joint Account
This savings account is owned and operated jointly by the parent and the child. In this situation, the parent and child have access to the savings account similarly and can make deposits and withdrawals.
Things to Consider When Choosing the Best Savings Account for Children
Here are some questions to ask the bank or financial institution where you plan to open the account:
What are the requirements to open and maintain your savings account?
Ensure to read the tiny print thoroughly before you open a new savings account. Your bank or credit union may call for specific requirements to open an account. To keep your account active, you may need a minimum startup deposit, minimum balance requirements, or ongoing fees for account services and upkeep.
Does this account bear interest?
The savings account will boost your child’s savings and encourage them to save if they choose an account with a high-interest rate. They may be more motivated to save more money today if you show them the amount they can earn in the long run. Consider picking a high-yield savings account – even with a lower balance, your child’s savings can increase dramatically!
Will the savings account include any fees?
Children’s savings accounts, on occasion, come with no additional costs. It is advisable to inquire with your bank if there are other monthly maintenance costs or penalties they expect you to pay. Moreover, understanding the terms and conditions of the different options before choosing one can also be a good life lesson for your child.
What are the parental controls included in this savings account?
Your bank understands your child needs help opening and managing their first savings account. Therefore, your bank will provide built-in parental controls in your child’s savings account.
Ensure the account you picked suits you and your child by understanding its features and settings. Debit or prepaid cards generally come with most accounts, enabling your child to make independent purchases or withdrawals. Certain bank accounts allow you to add a specific limit on a prepaid debit card or set withdrawal limits on your child’s savings account.
Are there additional features or mobile app capabilities associated with this account?
Creating a solid foundation and providing guidance is the primary goal of a starter savings account, which prepares them to handle their own finances well in the future.
Online or via your banking app, many financial products focused on younger users contain tools for financial knowledge and budgeting. One way of providing your child with a further level of financial independence and empowering them to manage their finances is by offering them mobile app access to their account, where they can check their balance and deposit their allowance or a birthday check.
Where Can You Open A Savings Account For Your Child?
Fortunately, you have a few options when it comes to opening savings accounts for your child. In the long run, the things that matter the most will be your desired banking experience, your desire to continue with your present bank, and the benefits you consider important. However, be sure to verify if the financial institution you bank with is a member of the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA).
Basic Savings Account
This is a deposit account that a majority of the banks offer. It enables you to deposit money and earn returns on it. Various banks will provide you with different annual percentage yields (APYs) based on your balance.
Online-Only Savings Account
Through the use of a laptop or smartphone, any person can apply for an online-only savings account. One of the most significant advantages of an online savings account is lower fees, as there are no additional costs for physical locations, which can also turn into higher interest rates. On the other hand, an online-only savings account could have no ATM network, similar to credit unions. However, we advise you to check the availability of a physical debit card or ATM with your bank account.
A Savings Account with Your Credit Union
Since credit unions are non-profit organizations, they do not operate like typical banks. The management of these financial organizations is carried out by the members and for the members. In light of this, opening a savings account for your kid will most likely want you, or a family member, to become a credit union member. The biggest advantage is you will undoubtedly pay little to no extra fees to run and maintain your account since members run these organizations.
However, it is noteworthy that credit unions could have a smaller ATM network and limited physical branches than major banks. Individuals who use their bank services will be charged a membership fee by the credit unions.
How to Open a Savings Account for Your Child?
Opening a savings account for your child is simple enough. The process will be even more straightforward if you are a current customer willing to open a savings account with your existing bank or credit union. However, if you are currently not banking with that particular bank or credit union, and since you have to be a co-owner of the account, you will have to provide them with your and your child’s information.
The most crucial bit of information that your bank will require from you is your child’s personal identification, including the following:
- A birth certificate.
- A card for social security.
- A Passport.
- If your child is a teenager or old enough to drive, their driver’s license or state ID.
