A child bank account is quite different than the traditional piggy bank. Though a piggy bank has a practical use in helping children learn how to save money, more importantly, they need to learn how to grow their savings. This is something that can only be accomplished with a savings account.
There is much debate about how old a child should be when they have their first account. As a general rule, so long as they are old enough to understand what money is, it is not too early to start teaching them how a bank works, and how to handle money responsibly.
The learning aspect of a child bank account is one of the biggest pros. This gives parents the opportunity to explain to the child through hands on methods, the importance of saving money. This is knowledge that will stay with them for the rest of their lives. It is a sad fact that many young adults leave home to start their lives without even being taught even the basics of handling money.
To get the most out of this type of account, deposits should be made on a regular basis, and you child should be taught how to monitor his or her account so that they can watch it grow. Most accounts now offer online access, so this can be easily done from home. You may even wish to print statements out, and go over what the entries mean. Before you know it, your child will fully understand what this information means, and how it applies to them personally.
If your child wishes to purchase something using the money in their account, and you approve of this purchase, this will be a great opportunity for them to learn the real value of money. It is far too easy for children to assume that money has no real value when things are purchased using only the parents money. When they see their own money being used, it will be quite the wake up call. This might also help reduce the amount of item that your child asks you for, as they will now realize that these things come at a price.
Many banks now offer perks for parents and children that open these type of accounts. These could be toys, or other physical items that are presented to children when they reach savings milestones. These extras are a great incentive for children that are still to young to fully understand how interest works. Steer clear of accounts that offer gifts instead of interest. While accounts that offer both are best, if given the choice between one or the other, always choose interest bearing accounts.
If there are any real cons to this type of account, it would only be either opening when your child is too young to understand, or not using it on a regular basis. Opening an account, and then not making regular deposits will offer no benefit to the child. There is also the slim chance that the bank will fail or close. The chance of this happening is quite small, however, and should not serve as a real reason to avoid using this learning tool.
A child bank account is a great learning tool. While it is vital for your child to learn about science, mathematics, and language, it is just as important for them to learn about finances. This is the one subject that is most overlooked in today’s society, and the bankruptcy rate among young adults is on the rise because of this fact. Preparing your child for life should most definitely include financial education.