When should you open a savings account for your child? When should you start teaching your child about money?
These are questions many parents ask themselves. The correct answers are not always easy to decipher and can vary, depending on the family dynamics and the personality and abilities of the child. There are some basic principles that may help.
Opening a savings account for your child
It is appropriate to open a savings account for your child as soon as someone has given the child a monetary gift. If great-grandma sends your young child a check for Christmas, open a savings account for the money. Chances are, Grandma will appreciate that you have chosen to save the money rather than spend it on a toy that your child will soon outgrow.
Things to consider before opening that savings account:
- Does your bank offer special accounts for children?
- Is there a minimum balance or a minimum deposit required for the savings account?
- Are there any fees that will be charged to the account?
Many banks offer special savings accounts for children that require a low or no minimum balance, and have low deposit requirements. Some banks partner with elementary schools to allow children to bring their money to school on certain days to be deposited in their savings account.
When to start teaching your child about money
The best teaching tool is for your children to see you modeling responsible behavior with your money. If they see you saving for a major purchase, chances are they will do the same.
Other teaching tips:
- When you take your child shopping with you, give them a small amount of cash and allow them to spend it on whatever they want or save it for another trip. This will teach them to pay attention to the cost of items. It will also teach them that they can’t buy everything they want. Even young children can grasp this concept, although you may have to hold the money for them and help them understand the prices.
- Have your children help you plan your vacation or other trips, including working with them to plan how much you will spend for the trip. You may even want to break down the expenses by day and category. Brainstorm with them to come up with ways to save money on food and entertainment. While you are on the trip, track your spending and, if you are spending less in one category, allow your children to choose what to do with the extra amount.
- If you are planning a big trip in the future, get the whole family involved in saving for the trip.
- Have a garage sale
- Put extra change in a jar
- Open a special vacation savings account and have the children keep track of how much is in the account