Kids Savings Account: Should You Open One For Your Child?

Have you thought about opening a savings account for your child? This is the first step to your child’s financial security and fiscal responsibility. It may seem strange to start them young, but by doing so, you start their financial journey and set them up for future success.

How Do They Work?

A kid savings account operates much like an adult savings account. The purpose is to put money aside for bigger purchases and emergencies. The biggest difference is that an adult needs to open the account on behalf of the child, meaning you will likely need the identification documentation for both your child and yourself. This documentation usually includes IDs, birth certificates, proof of address, and social security numbers.

So, when should you take this documentation to your local financial institution and open an account for your little one? Any age would do, but if you really want to teach them financial basics, they will most likely start understanding the concepts in elementary school alongside their studies.

Common Features

When choosing a savings account for your child, you should look for one that has perks and features, such as:

  • Easy account accessibility – The younger they are, the more likely you will be the primary person who needs to check in on this account.
  • Low minimum balance – The point of this savings account is to teach systematic savings. Unless you are being generous, your child isn’t going to be able to open a savings account with an exorbitant minimum account balance.
  • Higher APY interest – All savings accounts accumulate interest, growing the money you have already deposited. Choosing one with a decent rate can show your kids how their money grows.
  • Financial literacy – Some financial institutions partner their kid savings accounts with other teaching tools to help the kids make smart financial decisions.

What Type Is Best For Me & My Child?

Savings Account via Local Financial Institution

Most local banks and credit unions have a kids savings account that follows traditional savings account rules and structures. By having a physical location to go to, your child can get excited to go to the bank to deposit their hard-earned money. Plus, some institutions have treats such as lollipops or stickers to reinforce a child’s good financial habits.

Online Savings Account

Everything about a traditional savings account except online – no branch visits. Some online savings accounts can offer higher interest rates, allowing your little one’s money to grow further. Plus, you can access their account with just a couple of clicks from your mobile device.

Education Savings Account (529)

This type of account isn’t for teaching your child money basics, but rather saving on their behalf for their future education. The Education Savings Account, or also referred to as 529, is something you can open for your child at birth, and starting then, you can build an education nest egg for the next 18+ years to help cover rising college costs.

Start Them Early

By opening a savings account for your child, you can start teaching them savings techniques and introduce them to other personal finance topics. By opening a savings account, you can teach them:

  • How to set savings goals
  • The importance of regularly monitoring the account
  • What is an emergency fund
  • Budgeting skills

Building a savings account becomes a stepping stone to future financial goals, such as spending and charitable giving.