Among the many questions parents have about their children’s future and livelihood, the question of money and bank accounts are important conversations to have.
Is it worth it to open a savings account for a child? At what age should a child have a savings account? Does my child even need a bank account?
This quick guide will help you answer these questions about savings accounts for kids (and maybe put your mind a bit more at ease).
What is a child savings account?
There are many kinds of savings accounts that can benefit children. These types of accounts often involve more direct parental involvement and less child participation. While tax implications are common with certain youth savings accounts, they are not guaranteed and depend on the specific account type and circumstances.
A basic child savings account is like a regular savings account. It’s a stable place to store money. For minors, however, it requires parent or guardian oversight. These accounts are generally joint accounts, so both child and guardian are able to access the money. These savings accounts work the same way as any other savings account, generally having low interest rates and variable fees.
Child savings accounts can be set up to make transferring money from the parents account to the child’s account easier, so no more hauling cash for that weekly allowance.
Benefits of having a savings account for your child
“Education is the passport to the future,” as Malcolm X said. Having a savings account for your child gives them a jump start on financial literacy. Learning the basics of depositing, withdrawing and tracking account balances is an essential part of financial literacy. It builds a foundation for financial responsibility and encourages saving habits.
Having a savings account for your child allows them to set financial goals, which is an essential part of being financially healthy. Whatever that goal might be, it gives the child independence to pursue it and face the good or bad consequences of their spending habits.
It also has the simple benefits of being able to earn interest and giving your child a place for a financial cushion should they ever need it. It also gives them an opportunity to think seriously about money and what’s involved in personal finances to help them become financially healthy adults.
When should you open a savings account for your child?
The basic answer to this question is that it depends on the child and your own circumstances. However, your child should be able to understand basic financial concepts (usually between the ages of 6 and 11).
Teenagers will likely have a greater ability to understand more complex financial concepts, and they will understand the practical value of money. It could also be essential to open a savings account for a teenager since this is the stage of life where many people get their first job.
Here are a few more things to consider:
- Your own financial stability
- What you want your involvement to be
- What funds your child has access to (if they have a job, etc.)
How to choose the right child savings account
Banks that offer savings accounts for young savers will generally share many features including low to no fees and low required opening deposits. They may also have a limit on monthly transactions to help encourage saving rather than spending. Parents should also look for an account with access to online banking features to waive any paper statement fees.
The California Bank & Trust Young Savers Account has many of these features including:
- Only $5 minimum opening deposit
- A $0 monthly maintenance fee
- Variable interest rate, compounded daily and paid monthly
- Online banking access
Creating an account at a bank with physical branches can also have many benefits. If there are any questions or concerns, parents can have physical access to a banker and people to talk to directly.
CB&T also currently has promotional offers through the Coachella Valley Firebirds. If you’re looking to start a Young Savers account with California Bank & Trust contact a banker now or find a local branch near you.