A Bank Account for Children

Having a bank account teaches children the importance of saving.

Most children are excited about opening up their first bank account. A personal bank account helps parents teach children responsibility and offers a lesson in spending and saving wisely.

Reasons

Bank accounts motivate kids to save money. Once they put it aside they usually aren't tempted to spend it right away. Saving teaches them they can use the money toward something they really want--a lesson that teaches them the importance of saving for college.

Incentives

Children will also learn about interest with a savings account, Family Education points out. As Investopedia says, many banks offer great incentives for children, such as high-interest accounts. This provides a good introduction to the concept of investing.

Types of Accounts

Savings accounts generally provide interest and so do some checking accounts. Some banks will create a structured savings account in which your child can allot money for saving and spending.

Management

Let your child decide when to withdraw and spend money, since she'll learn best from experience. However, sit down with her to create a savings and spending plan when you open the account.

Age

Parents differ on when children should open their first banking account. Some are concerned their child will become too focused on money. However, an account can have the reverse effect, helping children to manage money wisely and therefore not always be wanting more.

References

• Investopedia: Opening Your Child's First Bank Account
• Family Education: Savings Accounts for Kids

Resources

• CNN Money: Start Your Kids Saving Early