Savings Accounts for Children

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The best time to learn how to manage money is while you’re young. Children should earn money, spend money on things they want and find out for themselves that when the money is gone they can’t buy anything. They need to learn about credit, bargain hunting and debt. Kids should learn how to save up for something big that they really want and they should learn about banking.

Opening a bank account for your child is a good way to teach them about saving money and how to use banks, credit unions and savings and loan organizations. A savings account is probably the simplest type of bank account available, which makes it ideal for young learners.

Once you open a savings account, you can deposit money in it. The bank keeps track of your balance, sending you regular statements. If you make regular deposits, even if they’re small, the balance will grow and grow over time. This is a perfect way to show kids how saving works. It’s ideal to open up an account when your child is very young, which means they’ll probably be too young to understand at the beginning. That’s okay. Just keep one statement for each year to look at with your child periodically. As they grow, they’ll be able to understand it more and more. By the time they’re teenagers the number will look huge to them and they’ll be thrilled.

When they’re in middle school or high school you should also open a checking account for your child. They probably won’t write many checks. Who does it anymore? Instead they’ll deposit their earnings and use their debit card to make purchases. Just like with cash, when their money’s gone, they won’t be able to buy anything.

Don’t take this step too soon, though. Small children won’t be able to understand that a little plastic card represents money in the bank account. It’s better to learn with cash, which they can touch and see, then move on to a checking account.

One thing that too many young adults get into trouble with is debt. Because credit is so easily available, kids should learn how to handle it while parents are still close enough to offer guidance. Make it a point to loan your child money for something relatively large, charge them interest and have them make regular payments until the loan is paid off. Don’t hesitate to repossess the collateral if they fail to make payments. Better to learn that lesson with an iPod than a car!

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Source by Coleen Bennett

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