Are You Ready to Open Your Child’s First Savings Account?

You’ve been talking to your child about money, hoping to start them on the path to a secure financial future. Are you ready to let them begin practicing the skills they have learned? Then it’s probably time to step up from a piggy bank to a brick and mortar one. Here’s how to prepare to open your child’s first savings account:

Explaining the Importance of Saving

Children are masters of interrogative sentences. Don't be surprised when your child asks you why anyone would save money. The ideal reply has two parts. One, you have to save money for the future. Two, you save money so you can meet your spending goals.

When your child decides how much to save, you need to ask how much of that will be for the future and how much for goals.

Very young children should be encouraged to choose one spending goal rather than many. A piece of sports equipment, a toy, or any other realistic goal will suffice. They are able to see how regular savings slowly accumulate to make a purchase possible. This may even encourage your child to increase his or her savings rate.

As children grow, their goals will change from a toy to a car or a laptop. That's fine—as long as they agree to tap into the spending goal part of the savings account rather than emptying the long-term account. The amount going to the future should remain constant. You can call it a house or college fund if you like, but nurturing the habit of saving is important. Once the plan is complete and you both agree on it, the next step is to go to the bank.

Opening a Bank Account

Visit your bank in advance to find out what type of accounts are offered for children. You may be surprised by the incentives on accounts for younger individuals, which some banks view as a smart way to create the next generation of loyal customers.

After settling on a particular account, make an appointment to return with your child. Explain that a bank is a place where you keep your money until you need it. Your child should be old enough to have an understanding of interest—the money your bank pays you for letting it keep your money for a while.¹ You can explain that the bank will use that money for investment purposes.

When you go together to the bank, let the bank associate sell your child on the account you have decided on. Your child will feel much more involved in the process. The account should be in your child's name, and the mail should be addressed to the child. Receiving bank statements like mom and dad is a source of excitement for most children…

For more advice on setting up your child’s first bank account and teaching them about finances, read the full article here.

Did you know First Federal Bank offers Student Saver accounts? With just $5, a Student Saver account is available for individuals from birth through age 24. Let us help you set your child on the path to financial success!