Written by Charlotte Wood (last updated February 21, 2009)
The ability to save money is one of those traits that in invaluable and can be used all throughout your life and with most things in life, it's easier to develop habits when you're younger as opposed to when you're older. Having savings accounts for your children is a great way to help them develop a savings mindset and it helps them actually save money as well!
You should probably wait until your children are old enough to really understand what it means to save money before you open a savings account for them. They should be a part of the whole process: going to the bank, giving the financial representative the information they can (of course as a parent you'll have to fill in certain gaps), and handing over the first deposit. There is multiplicity of children savings accounts available from all banks now and those child-geared savings accounts are usually just the basic savings account. (The more complicated savings accounts are usually reserved for higher balances etc.!) Also, with many banks, savings accounts for minors are without charge!
Explain interest to your children so they can understand exactly what's happening with their money. With your basic, child's saving account, the interest rate will be minimal (the usual going rate for basic savings accounts is 0.5 percent and probably won't go higher than 2 or 3 percent) so the interest return won't be much; however the children will be able to see the interest payments, however miniscule, and that can be exciting!
When your children do open savings accounts, encourage and help them make periodic deposits so they can see their account balance grow. I've found through personal experience that it's easier to save when I see the money in my account grow. You don't want to make them save money, but talk to them about things to save for and why setting aside money is important, making it so they want to save. That's the best way to foster a saving mentality in your children.
Savings accounts for children are a useful tool for teaching and can help children feel more independent and in control of their money. With a savings account, children can begin to understand the principle of saving and its importance while actually setting aside money. The accounts are easy to set up and easy to maintain so go out there and start educating your kids on money and savings—it's so easy!
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