A kids savings account is a great way to teach your children about money and saving right from the start, but in order for you both to save efficiently, they need to have their own account. With kids saving accounts offered by most banks, they're easy to sign up for and take your children through the process of saving money. Here are five reasons your kids should have a separate savings account:
1. Gives Them Freedom
When your children have their own savings account, they feel like it's their responsibility. This helps them feel freedom from the uncertainty of sharing an account with you. When children are learning to save, they want to know they have the freedom to do what they want with their account without you hovering over them.
2. Protects Their Savings
You want your children to succeed and when they have an account, it can feel like their money is your money. Even when times get tough, you need to leave their account alone. Set up the account so that their signature or presence is needed to withdrawal money. This will help you respect them more and keep you from "borrowing" their savings.
3. Teaches Them How to Process Bank Transactions
When they have their own accounts, they are responsible for deposits and withdrawals. When they money to deposit, whether it's from change, allowance or a job, you can take them and teach them how to fill out the appropriate slip and give it to the bank teller. This will also teach them better counting and adding skills while they itemize their deposit.
4. The 10% Rule
The basic rule for saving is to save 10% of your gross income. For adults, this means 10% of your gross on each paycheck. For kids, this can mean 10% of their allowance or other means of "income". This teaches them that saving has to come before bills otherwise it can be difficult to continue to save when they really want something. When they have their own account, they can easily see their 10% grow than if it's combined with your savings.
5. Teaches Them about Interest
Just as with your accounts, a kids savings account can be accessed online with a username and password. This allows your child to check on their account and see their progress as they save. This can be encouraging and help them see how their account grows when they deposit money into it. They will also be able to see how interest affects their account and calculate how more money in the account brings them higher interest payments each month.
A separate savings account for your kids is essential to help
them learn the real process and benefits of saving. When your accounts
are combine, it's all blurred together and you can easily end up
withdrawing or spending their money, even if unintentionally. You can
teach your kids the importance of saving and how to process bank
transactions, which makes them a saver from the start and therefore more
likely to continue saving throughout their life.