How To Get the Most Out Of Your Child's Savings Account
One of the first experiences many children have with saving money comes in the form of a Piggy Bank. It's where your child stashes quarters from the Tooth Fairy, birthday money from grandparents, or money saved for a shopping spree at the toy store. Starting with a Piggy Bank is a manageable way for kids to learn about saving up for important goals.
But what the Piggy Bank offers in charm, it lacks in other important areas. Piggy Banks don't offer interest, FDIC protection, or other valuable measures that only real banks can provide.
Opening a savings account for your children is a crucial step in educating your child to help them develop a healthy, stable financial future. But in order to get the most out of it, we've pulled together some tips to help you and your child get the most out of their savings account.
Open a savings account, or educate your child about their existing account.
Even if your child is young, you can start an account in their name. This account will accrue interest over the years. If your child is old enough to understand some basic banking concepts, educate him or her about a savings account, how interest works, and why savings accounts are important. The following are basic terms to help build your child's financial vocabulary:
- Savings account - an account in which you save money for longer-term goals that earns interest
- Checking account - a bank account that you can take money from at any time, but which usually earns little or no interest
- Credit card - a small plastic card used as a method of payment; a payment is made on the balance periodically
- Debit card - a small plastic card used as a method of payment; the money is taken from a checking account immediately
- Interest - money that is earned by keeping money in a savings account
- Balance - the amount of money in a bank account
- Debt - money which is owed, or the state of owing money
- Deposit - to put money into an account
- Withdraw - to take money out of an account
Make sure your child understands interest when they are old enough.
Depositing money may seem like a lot less fun than a shopping spree. But if your child understand that they earn extra money, called interest, the task of saving money can be very rewarding. Show your child the statements so they know how much interest is earned year after year.
Discuss goals and expectations for the account.
Make sure your child understands what will happen to their deposited money. You may or may not permit your child to withdraw money from the account until he or she has reached a certain age; explain your reasoning. Help them understand the difference between short-term financial goals (like a trip to the toy store) and long-term goals (like purchasing a car or attending college). Establishing goals for the savings account will help your child understand its importance.
Help your child contribute to the account.
If your child gets an allowance, encourage him or her to invest a portion into a savings account. A portion of birthday and holiday money can also be deposited into a savings account. If your child is old enough to have a job, help them ask if they can get a portion of their paycheck direct-deposited into a savings account. Try to make this investment into a choice, not a chore, so your child feels empowered by their ability to save money.
Bring your child to visit.
At SSB Bank, our professionals are more than happy to help your family with all of their financial goals! We can help explain our processes to your child. This will help him or her understand where their money is held and who is helping them grow into financial success.
