Once children start earning their own money, it’s time to teach them how to save. One useful way to teach about saving versus spending is by opening a savings account. But how do you know if your child is ready for one?
Start when they’re small
You can open a bank account to save for a child when they’re at any age. When your child is very young, you can save the money they receive as gifts. While this enables you to start setting aside money for your child’s future now, it doesn’t allow them to feel empowered by opening up their very own account. It’s up to you to decide if you should roll this account over to your child or if you should allow your child to open their own account.
Teach about saving
When your child starts to understand how money works, it’s time to open a bank account. This is typically around 8 years old, though you can start younger with simpler explanations. Explain to your child the difference between saving and spending, and describe how a bank works. Some banks will be willing to set an appointment with your child to explain how the bank works before they open an account. This is particularly useful if your child feels anxious about parting with their money.
Choosing the right account
Some banks have an age requirement — usually around 13 — to open a checking account, but most don’t have that same requirement for a savings account. Many banks offer a savings account designed specifically for young savers. These accounts typically require that a parent is present to make a withdrawal.
Saving for spending
It’s common for savings accounts to be split into two sub-accounts — one for saving and one for a spending goal. If you can set up your child’s account in this way, allow your child to choose a spending goal — say, a new video game — and determine what percentage of their money will go toward that goal versus the saving portion of the account.
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