When To Get Your Children a Savings Account

Estimated read time: 5 minutes

As a parent, you want to teach your children all the important lessons in life — never wear socks with sandals, which heroes are Marvel's and which belong to DC, and how to handle their finances so they aren't your roommate in 30 years.

Most parents want to teach their children to be financially responsible and to save for the future. When those piggy banks start to get full, it can feel like a natural time to take that money to the bank to open your child's first savings account. But if you're looking for other signs as to when that savings account should be opened, here are some indications your child is ready.

They receive a lot of money

Do you have relatives who enjoy sending cold, hard cash for your child's birthday? We all love having relatives like that.

But instead of buying another toy they'll forget about because they'd rather play with the box and the wrapping paper, you could stick that money in a savings account. With some regular cash gifts for birthdays and Christmas, your child could have a nice nest egg stored up by the time they hit kindergarten.

This is easier to do when your child is little. Otherwise, you'll feel like the Grinch when you snatch that money out of your child's hand to bring to the bank to deposit. When your child is old enough to understand what money is and that you can buy stuff with it, you should give part of those cash gifts to them and deposit the other part.

Tell your son or daughter part of it will go in the bank and they can have it if they ever need money someday. Ask your child what they think a fair split is — as far as how much they get to spend and how much goes in the bank. When it comes time for money to be deposited, let them do it. They can hand the money to the teller and feel like a grown-up.

When they begin to understand money

If you aren't related to a Daddy Warbucks who enjoys giving cash gifts, you may decide to wait to open a savings account for your child until they are old enough to grasp the concept of money.

A rudimentary knowledge of money happens for preschoolers and kindergarteners — they know money is good and won't turn it down if you offer it to them. By their early elementary school years, they'll start to figure out which coins are more valuable. And they'll get more excited over getting a $10 bill than they will a $1 bill. That will be a sign they are ready for their own account.

Starting a college fund

Savings accounts aren't the best place to park the money you're saving for your child's college education. There are 529 plans for that, as well as money market accounts and even certificates of deposit accounts. They all pay more interest than most savings accounts do. If you search hard enough, you might find a high-interest savings account you're comfortable with, but it might not be at a bank near you.

Part of the money lesson you'll be teaching your child is what a bank is and what happens to your money while it's in there. If you want your child to have a savings account at the local bank so they can take their money in themselves, you might have to compromise on how much interest your child can earn.

One workaround to this is having your child save to a certain threshold, such as $500 or $1,000. Once you reach that level you can transfer the money to another type of account that will pay more interest.

What To Look For in a Savings Account For Your Child

Before marching into the nearest bank and signing up for a savings account, there are some things you should consider as part of your decision-making process.

  1. Location:

    It can really help a child visualize and understand the whole banking process if they have a brick-and-mortar bank to walk into to handle their money. As your child becomes more sophisticated regarding the world of money, you can add in online investing. But it's best to start with a bank you can easily travel to if your child is younger when they get their savings account.

  2. How much interest they'll earn:

    As we discussed, you're not going to make a killing on interest in a savings account. But since your child's balance won't likely be super high in the first couple of years of having the account, this might not be a big factor for the time being. But if they aren't earning much interest, you should have a secondary plan in mind for when that balance starts to accumulate.

  3. The attitude of the bank employees:

    Banks can be intimidating places, with their quiet, morgue-like atmospheres. You'll want a bank with friendly tellers who crack a smile once in a while. If everyone seems so serious and stern, your child might start to hate going there. Learning about money and investing should be fun, not seem like a punishment.

  4. Fees:

    Some banks charge fees if the balance gets under a certain amount. Your child could be losing more in fees each month than they are putting in. If your child doesn't have much to start with, look for a bank with no fees, or contribute enough of your own money to get them out of the danger zone.

  5. Online access:

    You'll want to be able to review your child's account whenever you see fit, or show an older child some of the online tools their account can access.

It's a big lesson

You have the ability to start a lifelong love affair with finances for your child. Teaching them about money will make them independent and give them all the building blocks they need for a secure future.

While some families like to keep quiet about money matters, it's best if kids get an early start so they recognize from the beginning that properly-handled finances can help them shape their futures into anything they want them to be.

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