Growing up, I have fond memories of lining up every Monday at the little desk where the local bank teller sat at my school, clutching a dollar or two in one hand and my deposit slip in the other. I was so excited to see my bank account grow, and I felt like a real adult!
Learning the basics of saving, making deposits, etc., as a child has helped to stand me in good stead financially, as an adult.
Times have certainly changed since the days of my “Dollarmites” passbook account (and the free tin money box that came with it.) But I plan to equip my son with the same skills, teach him the same financial lessons, and start laying the foundation for financial success that I benefited from as a child.
As part of his first birthday present, we will be opening an online savings account for him (children are never too young to start learning!)
If you’re on the fence about whether you should open a savings account for your kids, then here are 5 reasons why I believe it’s a good idea.
5 Reasons to Open an Online Savings Account for Your Kids
1. It Gets Them In The Savings Habit
I recently read some pretty scary statistics – 41% of Americans have less than $500 in savings and almost a quarter of Americans wouldn’t even be able to cover an unexpected expense of $100 – yikes.
Studies have shown that it takes anywhere from 18 to 254 days to create a habit (and regularly putting money into a savings account should be a habit of every American.) Getting young children into the habit of saving money now, will put them in good financial stead in adulthood.
2. It Teaches Them The Value Of Money
What is the value of money? We’ve all heard the expression “money doesn’t grow on trees” but for many children, it’s nothing more than a funny phrase that their parents say occasionally. By opening a savings account for your child where they can deposit their allowance, money they receive for their birthday/Christmas, etc., your child will start to learn the value of money as they watch their balance slowly grow.
3. It Gives Them a Sense of Responsibility
I distinctly remember the feeling of responsibility I had when I would line up each week to make my deposit into my savings account. I would tightly clutch my little purse containing the few dollars I’d been given to deposit, and I felt like a real adult.
This feeling of being responsible for my own money (no matter how small the amount was) is part of what I believe made me a good steward of my money into adulthood.
4. It Gives Them Spending Options
Giving your children spending options can be another great way to foster a sense of responsibility. An example of this might be spending money on a family vacation. Instead of your kids asking for different souvenirs, treats, etc., having their own money saved up gives them the option of spending it if they desire. Make sure to tell them that once it’s gone, it’s gone!
5. It Gets Them In The Game
Seeing your bank balance go up is pretty exciting. For a child, logging in and seeing exactly how much money they’ve saved, and what they can buy with their savings provides a strong positive reinforcement for continuing to save money. It gets them in the savings and money game early in life. Arming your child with some financial knowledge now will help set them up for financial success in the future.
What Type Of Savings Account Should You Open For Your Child?
Personally, I believe that a no-fee, online savings account that you also have control over is the best option. (Even better if there is a sign-up bonus!)
I chose to open a Capital One 360 savings account for my son. I made an initial deposit of $250 so I could take advantage of the bonus $25 they give you.
There are no fees associated with the Capital One 360 savings account, there is no minimum balance required, and the current interest rate is 0.75% which is well above the average of 0.06%
I have full access to the account, but there is a handy feature which allows you to set a “nickname” for your Capital One 360 Savings Account. Just set the nickname as your child’s name so there’s no confusion.
Here’s the link to get a $25 bonus when you open a Capital One 360 account with $250 or more.