Do you remember when you first discovered what money is and what it can do? If you’re like most folks, you probably collected money from the tooth fairy and started saving dimes in a bank shaped like a pig. That’s fine, but there are more realistic ways for kids to learn to manage money than pillows and piggies. Is your child old enough to handle a bank savings account? They will be, if you pay attention to the following information.
Savings habits are established early
A nonprofit community development group called Neighborhood Works recently completed a study that revealed a startling fact: Out of every three Americans, one of them has no emergency savings at all. This may be due to the fact that if people fail to establish good savings habits early in life, they tend to be forgetful about setting aside money as adults.
John Buerger is a financial expert in San Luis Obispo, California. He notes that money habits, whether they show a tendency toward saving or spending, are generally put into place between the ages of five to 12. Parents who set a good example by saving 10 to 20 percent of their income stand the best chance of raising kids who smartly manage money.
The first time kids open an account
For their first banking experience, help your kid open a savings account in lieu of a checking account. Once your child has been saving for several years, they may wish to have a more complicated account, but for starters, keep it simple. Shop around for a bank that offers low- or no-fee savings accounts for kids. Many local credit unions will do this. Be sure to open an account at a bank that has a secure website where kids can watch their savings grow. Don’t deposit money online, however. Making a deposit in person at a brick-and-mortar banking institution helps kids understand the magnitude of saving money.
Keep it simple
Long winded lectures about investments are not going to be of much interest to your child. Therefore, look for a bank with a website that provides kid-friendly features. Ask other parents what banking site their kids like the most. Some banks offer cool rewards such as bonuses for good grades in school and interactive savings clubs where kids can be inspired to save even more.
Adults who learned to manage money at a young age tend to be smarter about financial matters. When it comes to selecting a credit card for travellers and other credit products, they tend to be savvy shoppers. So you can see why teaching your kids to save now may bring big rewards to their futures.
Set a good example by showing your kids how to save. If you can’t afford to set aside 20 percent per paycheck, save what you can and explain why it’s an important habit for life.
Sam Bentley is a Father who is passionate about teaching his children some good to know life lessons when it comes to money.