Technically, you can open one as early as the day after their birth. While each child may be different, children typically start developing a basic understanding of money between the ages of 3 and 6. This makes it an ideal age to start with a savings account. While your child may not fully comprehend the functioning of bank accounts at this age, they will learn a lot by observing how you deal with a bank account while getting a head-start for their savings. This also builds on the fact that money habits are formed by the age of 7 years.
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Advantages of Opening a Bank Account for Your Child
Opening a bank account for your child should be as common as teaching them how to cycle. After all, having a bank account and learning how to manage it is one of the most basic financial literacy lessons. Here are some of the advantages of opening a bank account for your child:
Cultivate the habit of savings: Having a bank account will encourage your child to start saving money. Building this habit during their childhood will go a long way into their adulthood. The physical act of going to a bank and depositing money to later appear in your bank account can be a powerful exercise for them.
Learn and witness the power of compound interest: Operating a savings account can help your child learn and witness the power of compound interest first-hand.
Build financial literacy skills: Children learn a lot through observing and hands-on activities. As your child starts growing up, use their bank account to build their financial literacy skills. Have open conversations about money, their savings goals and their bank accounts.
Build digital and mathematical skills: Build on your child’s digital and mathematical skills by having them work with mobile apps, bank statements etc.
Finally, opening a bank account for your child may also help them get some bonus. Some banks, such as RBC, also offer a small joining bonus when you open a bank account for children. In addition, it also helps build your relationship with your child. Discussing money with your child while having fun during your regular bank visits will help build trust and transparency in your relationship with them. As an example, include an ice cream treat whenever your child deposits money. Doing this will help build your relationship while making learning about money fun for them.
What Account Should You Open for Your Child?
To begin with, open a Savings Account for your child. At a young age, having a savings account where they can park money and witness it grow will help them build a positive relationship with money. Doing this encourages them to save money rather than spending. In addition, savings accounts also help them leverage the power of compound interest. At the same time, they may not need to access money on a daily basis. This makes an interest-paying, no-fee, zero-balance savings account the perfect ally in your child’s financial literacy journey.
If your child starts a summer job, gets an allowance through side hustles or chores and use the money earned to pay for some of their expenses, then a checking account can be more suitable. Therefore for most children, 13-15 is an ideal age for opening a checking account. At this age, when they are getting ready to go to college or get their first job, having a checking account and understanding how it works will provide for a great foundation.
Based on where your child is on their financial literacy journey, open a custodial account for them. This means that both of you will have access to the account till the age of majority. Both you and the child can make deposits and withdraw money while monitoring account activity and transactions.
When appropriate, these accounts can be combined with debit or credit card to give your child the 360-degree experience of basic financial products. Having these products while they are still living with you gives them a runway to make mistakes and learn from them.
Important Considerations for Opening a Bank Account for Your Child
You have decided to open a bank account for your little one. Great! It’s now time to look at the fine print and decide the best product for them. Here are a few considerations that you need look at while deciding the bank account for your child:
No-fee account: Almost all financial institutions (banks, credit unions etc.) offer a no-fee account for children.
No minimum balance: Having a no minimum balance will help avoid any unwanted fees and charges in case your child makes a mistake.
Interest Rates: SInce the primary objective of a junior account is to encourage saving, choose a high-interest rate savings account. They can understand the importance of saving their allowance and gifts through interest.
Other Perks: Consider other perks that financial institutions have to appeal to young minds. While some banks have some merchandise, others offer a joining bonus as your little ones open a bank account. Online account access is another important perk that most banks offer today for free. The digitally native Gen-Alpha will be more than excited to jump on this bandwagon.
Privacy and Security: In addition to the exciting perks of opening a bank account for children, it’s equally important to teach them about privacy and security in today’s digital age. With the convenience of online banking and digital access, it’s essential for children to understand the risks of sharing sensitive details on the internet. Therefore, also consider and evaluate the privacy and security features such as two-factor authentication for your child’s bank account needs.
Conclusion
In conclusion, opening a bank account for children offers more than just a place to save money—it’s a gateway to valuable financial education and a range of enticing perks. From merchandise giveaways to joining bonuses and convenient online access, banks are catering to the needs and interests of young savers like never before. Share your thoughts on this topic in the comments below and spread the word by sharing this post with others who might benefit from it!
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