Savings account for kids: Learn how to open one and practical usage tips

Opening a savings account for a child is a wise financial decision that helps develop good money habits from an early age.

With the growing focus on financial education, many parents are looking for ways to teach their children about saving, budgeting, and financial responsibility.

So, to learn more about savings accounts for kids, keep reading to discover some practical tips!

Why open a savings account for kids?

A children’s savings account offers several important advantages beyond just saving money. It provides an early opportunity to introduce children to the concept of managing finances responsibly.

By learning to save, they also understand the value of money, establishing a foundation for making smart financial decisions in the future.

Having a savings account helps children develop the habit of saving regularly, which leads to long-term financial stability.

For parents, a children’s savings account offers peace of mind knowing their child’s money is safe and earning interest over time.

It can also be a great teaching tool, showing children how interest accumulates and how small deposits can grow over time, thanks to the power of compound interest.

Financial institutions often offer resources that make the experience interactive, helping children visualize their savings progress and goals.

What features to look for in a children’s savings account?

When selecting a savings account for kids, not all accounts are the same. Certain features make the account more beneficial for both you and your child.

• No fees or low fees: Look for an account with minimal fees. Children’s savings accounts shouldn’t deplete your child’s savings with monthly maintenance fees or balance requirements. Many banks offer fee-free options for minors.
• Interest rates: While savings accounts generally offer lower interest rates compared to other investment vehicles, it’s still important to choose an account with a competitive rate. Even a small amount of interest can teach children the benefits of saving early and consistently.
• Online access: In today’s digital world, it’s essential to find a savings account that offers online or app access. This feature helps children track their balances and see their savings grow in real time, which can motivate them to save more.
• Parental Controls: Many accounts allow parents to monitor transactions and control withdrawals. This feature is especially helpful in ensuring that your child uses the account responsibly.
• Educational Tools: Some banks offer educational resources or financial literacy tools specifically designed for kids. These may include savings calculators, goal-setting tools, and interactive games to make learning about money more fun.

Step-by-Step guide to opening a savings account for kids

Opening a savings account for kids is a relatively simple process but requires some preparation. Here’s a step-by-step guide to follow:

• Step 1: Research banks and compare account options

Start by researching different banks to find one that offers a children’s savings account with favorable terms.

Compare interest rates, fees, and available features. Some banks offer special promotions or incentives for account opening.

• Step 2: Gather the necessary documentation

To open a savings account for a minor, you will need specific documents, including your child’s Social Security Number (SSN) and a government-issued ID for the child (such as a birth certificate or passport).

Just like your own government-issued ID (like a driver’s license or passport), and proof of address (such as a utility bill).

Make sure to have these documents ready before going to the bank or starting the online process.

• Step 3: Visit the bank or apply online

After gathering the required documentation, you can visit the bank in person or complete the application online, depending on the institution’s policies.

Many banks now offer the convenience of opening a savings account online with minimal paperwork.

• Step 4: Fund the account

Most banks will require an initial deposit to open the account. This amount can range from $1 to $100, depending on the institution.

Decide how much you want to deposit and complete the funding process.

• Step 5: Set up online access

If your bank offers online or mobile banking, be sure to set it up so that the child can monitor account activities.

This also allows you to track their savings and help them set goals.

Tips for using bank accounts with children

After opening the account, it’s time to teach your child how to use it effectively. Check out some tips to help them make the most of their new savings account:

Teach about saving money

It’s essential to help children understand the value of saving money. Start by explaining basic concepts like why it’s important to save for the future and how setting aside small amounts can grow over time.

Use simple language and examples that relate to their lives, such as saving for a toy or game they want.

The goal is to build a mindset of saving before spending, teaching them the difference between needs and wants. This lesson can begin with a savings account, where they can see their money grow with each deposit.

Be sure to involve them in regularly checking their balance, showing them how their savings increase over time. This hands-on approach reinforces the idea that saving money is a rewarding habit.

Make the financial experience fun

To keep a child engaged and interested in banking, it’s a good idea to make the experience fun. One way to do this is by incorporating games or challenges related to their savings goals.

For example, you can create a savings chart or progress bar where they can visually track how close they are to reaching a financial goal, like buying a new bike or video game.

You can also set small, achievable savings milestones and offer rewards or incentives when they meet these goals.

If they manage to save a certain amount in a month, you can give them a small bonus or special treat.

These rewards reinforce the idea that saving is beneficial and help build positive associations with money management.

Encourage the child

Consistency is key when teaching children about financial responsibility. Encourage your child to make regular deposits into their savings account.

Whether it’s from a weekly allowance, birthday money, or small earnings from chores, having a routine helps build good savings habits over time.

You can even help them create a simple system where they automatically set aside a portion of any money they receive.

This teaches that saving isn’t something you do only when you have extra money—it’s a regular part of managing finances.

Over time, this habit will become second nature, and they’ll start to see how saving regularly helps them reach their goals faster.

Adapt the experience as the child grows

As your child grows, their financial needs and understanding evolve. It’s important to adapt the lessons and tools you use to teach them about money as they mature.

In the beginning, the focus might be on simple savings and basic budgeting. But as they grow older, you can introduce more complex concepts like the power of compound interest, setting long-term financial goals, and budgeting for multiple expenses.

You might consider transitioning them to a checking account when they’re ready. A checking account introduces new responsibilities, such as tracking spending, managing a debit card, and learning to avoid overdraft fees.

With this step, they can begin managing larger sums of money and learn to balance spending with saving.

Explore other types of bank accounts for kids

While a savings account is a popular choice for introducing children to money management, there are other types of accounts worth considering as they grow:

Custodial account

Custodial accounts are created by an adult on behalf of a minor, who is typically a close relative.
They allow parents to manage their child’s money until the child is old enough to take control.

These accounts are often used for long-term savings, such as for college or other significant future expenses.

Joint account

Joint accounts allow both the child and a parent or guardian to have access to the funds. This type of account is useful when you want the child to have more involvement in managing money, but with adult supervision.

With a joint account, the adult can monitor and control deposits and withdrawals, ensuring that the money is managed responsibly.

As the child grows and shows more responsibility, they can gain more autonomy in managing their finances.

Educational account

Educational accounts are specifically designed to help families save for a child’s education expenses.

These accounts allow parents to make contributions that grow tax-free if used to pay for qualified educational expenses.

This encourages the habit of saving from an early age and ensures that the money is directed toward specific long-term goals, such as college or other educational programs.

Learned how to open savings account for kids? Take advantage of our tips to create a good relationship with your children when it comes to finances.

Want a suggestion? Also, read our article explaining the best budgeting app tips!