A piggy bank often holds a child’s money at an early age. Eventually, most kids graduate to a savings account at a bank or credit union. The fine print regarding the terms and conditions of a savings account is best navigated by a parent before taking the child to set up the account and deposit his money.
Benefits of a Savings Account
A savings account holds a child’s money in a safe location while earning a small amount of interest. Getting your child involved in setting up the account gives them an introduction to banking and money management. An older child might be able to better understand interest with the firsthand experience.
Child’s Bank Account Location Options
A bank that is convenient for the child is often the best option for the savings account. This allows you and your child to deposit more money in person on a regular basis. The size of your city affects the number and type of options available, which might include both banks and credit unions.
Shopping Around for an Account
Shopping around at different banks and credit unions allows you to compare the available options. Start with your own bank to determine what type of specialty child savings accounts they have available. If possible, gather paperwork that outlines the terms and conditions of the account. Visiting other banks in the area gives you more options, allowing you to compare the terms and features available from each institution.
The interest rate is one variable for comparison between the different children’s savings account options. Most banks will probably offer similar rates, but there might be a slight difference to give one bank an edge. The fees are another concern. Look for a savings account without fees so your child does not lose any of her money. Determine if a minimum opening balance is required and if you need to keep the account at a certain level to earn interest. Another consideration is if there is a limit on the number of deposits allowed during a certain period.
Kids’ bank accounts might offer other incentives, such as birthday cards, special drawings or gifts for opening the account. While the extras are appealing to the child, make sure the overall account is the best deal when making your selection.
A spreadsheet allows you to compile all of the information about each savings account option for your child. If he is old enough, go through the spreadsheet with him to help him understand the differences in the accounts. When you settle on a specific account with the best interest rate and terms, take your child with you to set up the account so he can play a role in the process.