How Savings Accounts Can Teach Your Children About Money

The Importance of Savings Accounts for Children

Savings accounts are a useful tool for teaching children about money. Children can use a savings account to understand the importance of setting financial goals and how to work towards achieving them by setting money aside regularly.

But how do you know when is the right time to introduce savings accounts to children? And how can you help them learn how to manage money responsibly? These questions are a good starting point for teaching children about money.

What Does It Mean to Save Money for a Specific Purpose

A savings account can teach children about money, but it is important for them to understand why they are making efforts to save.

“Savings accounts should be set up with specific goals in mind”, Peters said. This applies to both children and adults. So when you introduce savings accounts to your child, it is helpful to explain to them what it means to set a financial goal and how to do it, as well as how to stay committed to achieving that goal.

Setting a Good Example Using Saving

Perhaps one of the best ways to teach your children about money is to set a good example of managing money yourself. Children need to be able to connect the dots between earning money, spending it, and saving it to understand the skills being utilized. For example, Mantilla can explain that you can involve children when discussing the family saving goal, such as planning for a vacation. You can talk about the reasons you want to save money for the trip, how much needs to be saved, and what the money will be spent on as a family. This is a simple way to make the concept of saving money relevant from a child’s perspective.

Adapting Lessons as the Child Grows

The approach you use to teach your children about money when they are five is not the same approach you will use when they are fifteen. Therefore, it is important to keep your financial lessons relevant and applicable as they age. For example, a younger child can understand the idea of how to earn money and what saving means. You can also help them understand how the purchasing process works—make them watch you as you pay money at the store and receive something in return.

As children approach their teenage years, you can start talking about adult goals like retirement and different types of savings accounts they can use to achieve their goals. Here you can delve into more details about banks while discussing investments and retirement accounts.

How to Open a Savings Account for Children

There are different options for opening a savings account for children. This includes:

• Joint savings accounts (shared with your child)
• Children’s savings accounts
• Custodial accounts
• Education savings accounts

The type of account you choose may depend on the goal. If you want to introduce children to saving at a basic level, you might choose a children’s savings account or a joint savings account at a local bank. Mantilla mentioned that opening a savings account that provides online and mobile access is a good option since most children are already tech-savvy.

If you want to help them save money for college, for example, you might set up a 529 plan or a Coverdell education savings account instead. Regardless of the account you open, you will need to provide your name, date of birth, and Social Security number, along with the same information for your child. You will also need an initial deposit to open the account if required.

Conclusion

If you want to teach your children about money, a savings account can open the door to future financial discussions. As they grow older, you can add a checking account or a prepaid card for teenagers so they have a convenient way to spend while saving.

Questions

The Repetitive

When should you start teaching children about money?

The best time to start teaching children about money is when you think they have the ability to understand basic financial concepts. Even children under the age of 5 can learn how to save. Regardless of age, the most important thing is to start the money conversation.

How can children earn money?

Children can earn money by starting side businesses or small businesses, getting an allowance for performing household chores, or receiving cash rewards for getting good grades. Older children may earn money through a part-time or full-time job.

Source: https://www.thebalancemoney.com/how-savings-accounts-can-teach-your-kids-about-money-5220369

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