Opening an account for your child can be a great way to teach them the basics of money management and encourage them to learn about saving and spending. There are several things you should consider when looking into opening an account for your kid. You’ll want to make sure your choice accounts offer good rates, fees, and protection against unauthorized withdrawals or fraud. Read on to learn how to open a bank account for a minor:
Start with a savings account
The first step to opening a bank account for your kid is to open a savings account. According to the experts at SoFi, “Savings accounts are crucial for helping children develop a good financial foundation, and the earlier you start, the better.”
Once you’ve opened your child’s savings account, make sure it has some money in it! Deposit $20 or $30 each month until they reach adulthood (age 18). This will help them understand the concept of saving money and provide them with an opportunity to practice making deposits themselves (if they’re old enough).
With a joint account, the child and parent are co-signers of the account. This means that both parties have the same responsibilities for managing the money in the account. If you decide to open a joint bank account with your kid, it’s important to set up some ground rules and guidelines so that they can keep track of their spending and save some cash for when they’re older.
If you choose to open an interest-bearing checking or savings account instead, make sure that your kid understands how compound interest works so they will be able to grow their wealth over time!
Start early with allowances
Allowances are a great way to teach your kid about the value of money and how to manage it. When you start giving your child an allowance, it’s a good idea to set up an account for them at the same bank as yours so that they can get used to seeing how accounts work. If you want them to learn how banks work and how deposit interest works, consider having them open their own savings account with the same bank. It will also help them learn about saving for big purchases later in life (like college tuition).
Have your child write deposit slips
As your child’s bank account grows, it will be important to teach them how to manage their money.
The most important thing you can do is set an example by making deposits and withdrawals yourself. If you don’t have much in the way of savings or income, it might be difficult for your kid to see the value in saving up for something big like a car or college tuition. If they’re going to learn about compound interest early on, they should also get some practice making deposits at an ATM machine—and having the money deducted from their balance in real-time.
It’s also important to think about the different types of interest that your child could earn, whether you want the interest to be paid monthly or yearly. If you want your child’s money to grow at a faster rate, look for a savings account that pays interest on a monthly basis.
There are many ways to teach your child about saving and spending money. The key takeaway is that the earlier you start, the better off they will be. You don’t have to do anything complicated or expensive—just some simple steps like having them learn how to write checks and deposit slips, pay an allowance or open their own bank account.