Monday, June 1, 2009

Tips To Set Up Children Savings Accounts

The savings rate in America is deplorable. Needless to say, it is difficult to teach children the importance of money management when adults themselves don't see the merit of saving money regularly.

Tips To Set Up Children Savings AccountsMy steadfast belief is that saving habits inculcated early makes a world of difference when it comes to managing money. Good money management (saving money regularly, balancing the budget, and not having excessive debts) don't come naturally to most people but practicing from a young age helps.

You can start a modest, old-fashioned piggy bank or a savings account for your kids to train their discipline in saving a portion of everything they “earn”, as well as show them the rewards of careful money management.

Children savings accounts do not differ much from adults. One popular savings option for children is easy access accounts which enable you to withdraw money instantly without penalty.

If you desire higher interest rates and have no immediate need for the money, you should choose fixed term or bond accounts where the money is locked up for a period of time, say for one to five years; or until the child reaches a certain age.

There is no minimum age restrictions for children savings accounts. Right from their birth, you can open a savings accounts in your child's name. In fact, some local banks view baby announcements in newspapers and send congratulatory messages with information on children savings accounts.

Most parents will manage the savings account until the child reaches a certain age. When your kid is 18 years old, the account will usually be converted to an adult savings account, or a student checking account.

Just as with adult accounts, banks will offer special gifts or incentives for opening a child savings with them. However, you should not open an account just because the gift is attractive. A child's savings account is a long term decision, so examine the interest rates and other benefits before making the decision.

My child is already well drilled in the importance of good money management. He enjoys saving a portion of his pocket money and seeing his piggy bank get heavier and his savings account "balloon" every month.

It makes our work so much easier when he doesn't find the idea of saving money repulsive. Instead he is motivated to track his own money.

I believe this money management skill will help him negotiate the financial pitfalls in life. Hopefully, he will be able to avoid many of the debts situations that people are facing in today's easy credit environment.


Jennifer said...

Very good points. I struggle a little in dealing with money with my children. I grew up in a family that was not frugal at all, and money was not really talked about. We were fairly well off and I never worried about money. My children are more exposed to my new frugal behaviors. I want them to learn to be smart with money but don't want them to worry.