This article will treat both scenarios together, highlighting their benefits and challenges. Apart from helping the parent to save for the child’s future education, these accounts offer the beneficiary children an opportunity to learn about how banks work when they grow up and take charge of running the accounts. They also make it easy for children to save money. You may begin to save money for your children using these types of accounts.
It is possible to change or switch your child’s savings account for secondary school or university to another type of account as soon as you deem it fit to do so. Banks and insurance companies have various products on display in this regard.
Here are five reasons to open a child’s saving account, according to www.families.com:
-There is no minimum balance required
Many banks do not have a minimum balance that must be met before interest begins to accrue on the child’s savings accounts. This can be encouraging to both the parents and the child, because they begin to see money added to the account, simply because it is in the bank.
Helps kids to be familiar with how banking works
Many banks still offer passbook savings accounts. This means that your children will learn how to record deposits and withdrawals before graduating to opening current accounts.
Your children receive monthly or quarterly statements of account
This is an excellent opportunity for you to teach your children how to reconcile a statement to their accounts. It is fairly easy to reconcile a savings account.
Financial independence
Once your child has a job, she can begin making deposits and withdrawals on his/her own at the bank. This is one more step to financial independence.
Cultivation of a savings habit
You are teaching your children to save money at an early age. By depositing money in their accounts, they will learn to plan for future purchases (which may include a trip to the bank to access the money). This is one skill that will benefit them for the rest of their lives.
Things to know about child savings accounts
A study by the Commonwealth Bank in 2014 showed that fewer than one in 10 (eight per cent) parents feels their child fully understands the value of digital money and a further one in three (35 per cent) children don’t understand how digital purchases are paid for. Sadly, money is real and it has to be earned, since it pays for the roof over your head, food and clothing – and if you’re lucky, there should still be some left over to put towards savings.
According to www.canstar.com.au, one of the quickest ways to teach kids the value of money is to give them regular pocket money and help them open a junior banking account. Teaching them banking language is important because the terminology and their meanings – words like deposit, savings, balance, withdrawal, interest – are often a whole new world to them.
The CommBank study found that more than two in three (69 per cent) of today’s kids receive pocket money, and children typically begin receiving pocket money at age six and a half. Getting kids to open a bank account so they can manage that pocket money themselves is a great way to help build healthy financial habits.
Australian children who receive pocket money already appear to be savings-conscious, with almost half (47 per cent) saving all their pocket money each week. This is not the case in Nigeria.
But nearly one in three Aussie kids don’t receive any pocket money, according to CommBank’s 2016 Common Cents Quiz. This means one in three kids these days aren’t learning where money comes from, how to earn money, and how to save money to buy something they want or need.
Having the appropriate bank account underpins a child’s budgeting skills so they can watch their pocket money grow and allocate savings towards different goals. The eventual purchase of a toy or game or other treat acts as a great incentive for kids to keep going.