Opening Savings Accounts for Kids

Presented by Marc Aarons

I recently had a conversation with a parent who asked when they should start a savings account for their child. I thought I’d share with you what I told them, in case it’s helpful for you or someone in your network.

Bank on Financial Literacy

We all want our kids to grow into adults who have healthy finances and financial habits–and it’s important that you don’t wait until they’re fully grown to teach them these habits. In fact, the right time to open a savings account for your child might be earlier than you think.

I recommend that clients open an account once their child meets these three criteria:

1. They are old enough to have a basic understanding of how banks work.
2. They are mature enough to handle money thoughtfully (on an age-appropriate level).
3. They have or receive money.

Generally, an 8-year-old will be able to meet the above criteria to a satisfactory degree. But if 8-years-old feels too early for your child, it’s a good idea to at least get started before he or she becomes a teenager and begins to use money more seriously.

Lifelong Benefits of Starting Young

There are a number of benefits of starting a savings account when your child is young:

1. Opening a bank account for your child provides the perfect opportunity for them to learn how to handle money thoughtfully. It can teach them personal habits, like the satisfaction of saving up and the importance of carefully balancing cost versus value when they make a purchase.
2. It can also teach them the joys of saving. If your child gets any money for a birthday or Christmas, or if you give them an allowance, encourage them to save this money in their account. Let them check their account balance online, and they’ll feel pride as they watch the number grow higher and higher.
3. Having a bank account can also help your child understand the banking system, especially if you explain how it works or encourage them to read about it. If you make deposits or withdrawals in person at the bank, take your child with you to make the bank seem tangible and real.

Raising kids with financial literacy gives them the best opportunity to thrive long-term. It could reduce your stress later on, too.

With that in mind, let me know if you would like any advice or assistance in choosing or setting up a bank account for your child. I would be happy to help.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.