How to Open Your Child’s Bank Account

There comes a time in your child’s life when a piggy bank and Mason jars aren’t enough. Your child has outgrown saving quarters and dimes and is ready for more. That means it’s time for him to have a bank account. In fact, most experts agree that a child is ready for a bank account somewhere between the ages of seven and ten.

Let’s take a look at bank account tips and options for your elementary-aged child.

1. Savings only – When you go to the bank, you’ll have a few choices, one of which is a joint checking account for you and your child, where he would get a debit card and everything that goes along with it. Don’t do this. He’s not ready for that level of responsibility yet. Instead, open a savings account for him. Your child will have the opportunity to get a debit card later – for now, the goal is to save.

2. No fees – Make sure that the account doesn’t have any minimum requirements or monthly fees. You can generally find this type of account at local banks and credit unions. Many banks waive fees for children, especially if you bank there also.

3. Regular deposits – Work with your child to deposit money regularly into the account. This might include a portion of their allowance each month, income from extra chores or jobs, or a portion of any cash gifts that they receive.

4. Easy accessibility – You want to be able to quickly go to the bank with your child and easily check his balance online. This helps him stay focused on his savings goals and makes it easier to make regular deposits. So don’t choose a bank across town – unless your town is small enough that you can get there in less than 10 minutes.

There are many ways to teach your child to save. A bank account is something that they’ll inevitably need and it’s always a great idea to start early.

 

When It’s Time to Join the Workforce

There are many different approaches, thoughts, and opinions on the idea of an allowance. Some people believe that it’s a great way to teach children about money. Others disagree. At some point, however, you’re going to want your child to learn about earning money. They can do this at home with extra household chores or they can get a job in your neighborhood or town.

If you pay your children for work (or extra work) around the home or for your home business, it’s an opportunity to teach them about earning and saving from a young age.

Create a system in which they have chores that they don’t get paid for. These are what they’re expected to do every day or every week as a member of the family.

Then create a list of chores they can do for extra money… or chores that they have to do but get paid for. Make sure your children understand the difference. For example, they might wash and fold the towels, vacuum out the car, or wash the windows. Each chore should have a specific rate of payment. As your children get older, you can hire them to manage more complex chores.

Older children and teens can also start looking outside the home for money-making opportunities in your neighborhood or around town. Or they can start a simple service business, such as mowing lawns or running errands.

This helps create a strong work ethic. Children learn that they get rewarded for working hard and that if they don’t work, they don’t get paid, teaching them real-world lessons. They’re able to put together the concepts of working for money and then making decisions about what to do with that money.

They will make mistakes. These mistakes, things like spending all of their earnings and not having money when they want it later, are valuable lessons as well. And the ramifications are much smaller when those mistakes are made as a young person, without the responsibilities of home and family.

Children often have a difficult time finding opportunities to earn and even teenagers sometimes struggle to find jobs. By helping them uncover or develop these opportunities, you can teach them about money management.

 

Making Your Money Grow

Money is about more than just saving and spending, yet many people stop the childhood lessons there. Children rarely learn about investing and how to make their money grow. This means that most people grow up fearful and uneasy about investing.

The truth is that anyone can make their money work for them. If you don’t introduce your children to the concept of investing, they’re missing out. Investing teaches children some valuable financial concepts. They learn about risk and reward, the economy, and how businesses operate.

 

3 Tips for Teaching Your Child about Investing

1) Start with the concept of compound interest.

The idea of compound interest is crucial for understanding investing and how banks and businesses function. You can use a basic calculator or you can sit down with a pencil and paper. The numbers don’t have to be exact to show your child how it works. Here’s a basic example you can share.

If you saved $10 a week for 20 years at 8 percent interest (which is a good return today and a reasonable average historically), you’d end up with almost $23,000. Investor.gov has a simple compound interest calculator that you can use. Check it out here: http://www.investor.gov/tools/calculators/compound-interest-calculator.

 

2) Talk about various investments.

Teach your child the difference between various types of investments, such as stocks and bonds, real estate, etc. You don’t have to get too deep into it. Simply introducing them to the concepts so they understand the ideas is a great way to begin.

 

3) Make a mock investment.

Consider learning together by making theoretical investments and tracking your return. You might decide to invest in competing companies. For example, your child may choose Pepsi Cola and you choose Coke. Make a game out of it and learn as you go.

Investing doesn’t have to be complicated and overwhelming. Teaching your children the fundamental concepts of investing and earning interest on their money can help them become more comfortable with the idea. And who knows, you may learn a bit too!