Childrens Savings Accounts - The Path To Lifelong Financial Responsibility
Most children will receive money at some point in their childhood. Whether it is a check from a grandparent or a prize from a contest, many kids will want to rush out and spend this money immediately. Many parents want to help their kids learn to save money. This is why it’s a good idea to set up a savings account for kids to keep some of their money in.
The primary reason to open a bank account in a child’s name is so that they will learn how to handle money responsibly. If children are handed money and are immediately allowed to spend it, he or she will get the instant gratification of something new but will not learn how to save for something bigger. If they have their own savings account, they’ll deposit money and watch their balance grow. As they get older and can understand better, parents can review their passbook with them and show them how the money accumulated over time.
Another upside to savings accounts for kids is being able to have the child handle their own money, even in the smallest way. This puts the actions in the child’s hands, which will help him learn. If the parent makes deposits without the child’s knowledge, they won’t be practicing saving themselves. They need to know that they’re giving up spending now to set the money aside.
Children also have an advantage to learning math skills when they have personal bank accounts. When money is invested into an account, it begins to accrue interest. Kids will be able to calculate the annual interest on their balance and do the math to see if their figure matches the bank’s. If they withdraw funds, they’ll see what that does to the balance as well as the interest earned after that point.
Another benefit to having their own account and managing their own money is that kids will have an awareness of money. Anyone who wants to give money to a child, whether it’s a grandparent, aunt or uncle or other friend or family member, will have to make a check out to the parent if the child doesn’t have a bank account of their own. To the child, who doesn’t realize that the money was his or hers in the first place, a parent giving them money makes the parent seem like the source, rather than the gift giver.
Personal accounts also allow children to have a broader realization of what is going on in the world. A child with their own savings account will be better able to relate to financial information they hear. They can be more empathetic to people in different financial situations if they know, from first hand experience, that it’s hard to save up a lot of money.
Children’s savings accounts can be a tool for a child to learn how to control their own financial future. With every deposit or withdrawal, a child can see how the saved money is affected. This will provide a better sense of reality when deciding whether or not to make a withdrawal to get the hot new toy or keep saving for something bigger.
Setting up savings accounts for kids is one of the most responsible things a parent can do. The practice that a child gains saving and managing money will serve him well when he becomes an adult. He’ll already know how to be responsible with money.
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