If a lot of parents of adult children could comment on something that they wish they had done better in preparing their children for the world, they might say that they regret not having better prepared them when it comes to the issue of finances. Sometimes, parents are so focused on a child’s physical safety, mental development and emotional stability that they overlook just how imperative it is for a child to be financially savvy as well; and how devastating it can be, long-term, if they are not.
So when it comes to the question of when you should open up your child’s first bank account, the short answer would be “As soon as possible.” But if you’re looking for some additional information as to how and why, keep reading.
Why Does a Child Need a Bank Account?
If there’s anyone who gets a consistent flow of money without doing a lot of hard work, it would be children. They get money for Christmas and birthdays. They get weekly allowances. And if they’re older, they get money from having part-time jobs. For a younger child, if a bank account is all that they have ever known, then they will grow up conditioned to understand that some money is available for immediate spending, while other amounts are reserved for saving and indeed, one of the best things a child can ever learn is the process and power of saving money. If they’re older, you might want to introduce them to the concept of having both a checking and savings account. This is an effective tool for teaching them how to budget by using money wisely. There’s nothing like bouncing a check and losing $35 due to carelessness. The sooner they feel the effects of that, the less likely they will be to fall into that kind of habit.
What Kind of Bank Account Do They Need?
Phrases like “checking account” and “savings account” are simply the general terms that are used to describe the kind of bank accounts that are available to individuals. When it comes to finding the specific ones to meet your child’s needs, you should check with your own bank first to see what kind of a accounts they have that are catered to children and teenagers. In reviewing your options, make sure to inquire about interest rates, savings incentives and any potential monthly fees. Once you have narrowed down a few options that you, as a parent, are comfortable with, if your child is around 12 or older, have them go with you to the bank so that it can be explained to them the kind of account they are opening and what comes with making deposits and withdrawals.
It’s a Day Worth Celebrating!
Any major milestone in a child’s life is worth celebrating and opening up a bank account definitely qualifies. Once they make their first deposit, whether it’s from allowance money, checks in the mail for special occasions or money from their part-time jobs, take them to lunch to commemorate the day and then be sure to stop by a store to get them a binder to help them to organize their bank statements. You might also want to pick them up a book about money. One Cent, Two Cents, Old Cent, New Cent is a Dr. Seuss classic for beginning readers, while The Everything Kids’ Money Book (Brette McWhorter Sember) and Raising Money Smart Kids (Janet Bodner) are books that you can go through with your older child.