Many adults today live paycheck to paycheck with little to no savings set aside for a rainy day. Those adults that do have a savings average only $1000 in their accounts. This may be due in part to the troubled economy. However, those savings figures started slipping with the Baby Boomers and have reached all time lows with the adults of Generation X. Some speculate that the trend to spend, not save, has been taught rather than necessitated by a sour economy. That is why many responsible parents are using savings accounts for kids as a tool to teach good financial habits early.
Breaking the Impulse to Spend with Savings Accounts for Kids
The impulse to spend can be seen in some kids as soon as they get a dollar in their hand. They start talking about what they are going to spend that money on and may try to get parents to take them to the store immediately. Children rarely think on their own that they should save their money for a larger purchase, like a car, or for future needs, like college. Parents can break this impulse some children have to spend their money as soon as it is earned and instill good financial habits by opening up a savings account.
Though the novelty of having their own savings account may be enough to encourage some children to save a few dollars at first, most kids need more motivation to save. As encouragement, parents can show their children how their savings can earn money on interest if they leave their savings alone and continue to add to it. Parents might point out those big expenses that children need to be saving for and show them how they can meet their long term goals by putting back the pocket money they have earned from babysitting, doing chores or their regular allowance.
Opening Savings Accounts for Kids
Parents only need make a small initial deposit to open a savings account for their child. Some banks allow account holders to open savings accounts for their children with a minimum deposit of one dollar. Parents should read over the limitations and account holder obligations when openings an account for their child. Though an account may be opened for as little as a dollar, some banks charge a small fee if an account falls below a minimum balance amount or if no further cash is deposited into the account. These fees can more than offset any interest that might be earned in a month if the balance on the account is small.
An easy way to get kids in the savings habit is to let them open a bank account through the School Banking program.
In Northeast NY, many schools participate in the School Banking Program at First Niagara Bank with the help of parent volunteers. If your school doesn’t have one already, consider starting one. It’s easy!
David Spader is a freelance writer who normally provides savings accounts reviews over at SavingsAccount.Org. He recently wrote about the best savings account rates available right now.