Guest blog post by Cherise Fantus, NerdWallet
When it comes time to plan for your child’s future, it’s important to consider getting him or her a savings account. Learning from the experience will help get your child on track to a stable financial base for years to come. Here are three good reasons to open a savings account for your child:
1. It teaches financial literacy.
Helping kids open a savings account is the perfect opportunity to teach them about money and banks. Early on, they can learn about counting money, making financial decisions and the relationship among earning, spending, and saving. As they get older, they can learn the ins and outs of banking. This includes learning about how the money added to the account earns interest, what it means to make deposits and withdrawals and tracking them over time.
Since 40% of U.S. adults admit to have little knowledge of personal finance and 33% of them say they learn about personal finance at home, according to the 2013 Consumer Financial Literacy Survey, it is important give your children the tools they need to manage their finances for the rest of their lives.
2. It provides security.
A savings account can help teach your child about keeping her money safe. If you have more than one child, she will learn very quickly that few things are safe from her siblings. Having it stashed away in a savings account rather than in her piggy bank can help assure her that what is hers will remain hers and won’t find its way into her brother’s piggy bank.
It can also help protect her against loss. A piggy bank or a dollar in a pocket can easily find its way to Never-Never Land, but a savings account is much more secure. Plus, an FDIC-insured bank account will keep her money protected even if the bank fails.
3. It teaches responsibility.
Kids have a tendency to spend whatever money they receive as quickly as possible. There’s always a toy or a piece of candy that they just need to have right now. But when they learn the value of saving and how they can get something even better down the line, they can see that maybe they don’t need that candy bar as badly right now. Not only does it teach them responsibility, but it could have a major impact on the rest of their lives. As the Stanford marshmallow experiment showed, children who had better self control and could forego the immediate reward for a later and bigger reward did better in school and had better overall life outcomes.
When you decide to go ahead and open a savings account for your child, you might want to open that account with your bank. However, it’s a good idea to look for a bank that caters to savings accounts for children. Some have programs to help teach your child about banking to supplement tips from parents. Some may also offer incentives for saving, which can make banking fun for your child.
A savings account is an important tool for preparing your child for adulthood. It’s up to you to decide when your child is ready for a savings account, but it’s never too early to start teaching them about money.