A kids savings account offers the opportunity to teach your kids about money, saving and puts the responsibility on them. By utilizing a savings account just for them, you're able to show them the relationship between income, saving and expenses. This will show them how to manage their money smart and live within their means.
Invite Them to the Table
Next time you sit down to do the budget or pay bills, invite them to the table with you. Customize their tasks to coincide with their age and development level. Small children can help you sort bills by color, while older children can help you calculate totals. When they see the importance of budgeting and sticking to a budget, they'll learn that you should only spend what you actually have.
Help Them Identify Income Sources
Regardless of your child's age, you can help them identify income sources. A teen or older child may have a part or full time job, while a small child may receive allowance. Once they've identified their source of income, you need to assign some (small) expenses to them. Income can be anything and even if you children receive an allowance, teach them work ethic by showing them how to make money with small jobs around the neighborhood.
For a teen, have them pay for their own clothing or entertainment expenses. For a younger child, have them pay for small toys or birthday gifts for friends. All expenses should be less than their income and purchasable with cash. Help them budget their savings into their income before other expenses.
Open an Account
Once they understand where to get and spend money, you need to give them a place to keep their savings. Kids savings account are available at almost any bank and gives them a place outside the home to save money without being in jeopardy of being spent. Take them to open the account so they can learn the application, approval and deposit processes.
Make It a Habit
Help them make budgeting and saving a habit by letting them see you do the same thing every month; have them sit down to do the same thing every month as well. Depending on their payment schedule, they can sit down and do their budget when you do theirs or schedule a set day each month when they do their budget. Follow their payday immediately with a trip to the bank to make a deposit into their savings account.
Helping your children learn good money management skills is essential to their short and long-term success. You can prepare them for the future of handling larger amounts of money as their paychecks grow. Consider working with the bank manager to offer different kinds of savings accounts once your children get older so they can see the options available. Let them switch if they find an account they feel is a smarter choice.