Parents have a responsibility to teach their children what they want them to know and help mold them into the adult
that they want them to become. The most important lessons that you can teach your kids is how to save money and grow your wealth over the long-term. When it comes to teaching your kids how to handle money, one way to help is to set up a kids savings account. When setting up a child’s savings account, you have the ability to show them how to save instead of just talking about it.
Custodial Account
When you want to help your kids get started saving money, you have the option to open a custodial account for them. With a custodial account, you are still in charge of the deposits and withdrawals but your child’s name is on the account. When your child reaches the age of becoming a legal adult in your state, then he will take over ownership of the account. This helps you stay in control of the money while your child is still a minor.
Online Accounts
One of the most convenient ways to set up a kids savings account is to work with an online bank. ING Direct is one of the most popular choices in this arena. With good customer service, flexible account options and a good reputation in the industry, ING Direct is one option for you to consider.
Ally is another online bank that makes it easy to set up a savings account for your child. They are a branch of GMAC and offer several different account options as well.
Discover Bank is an option to consider as they offer some of the best interest rates in the industry. They are also the same company behind the well-known Discover card.
Compound Interest
One of the most important lessons that you can teach your kids through this strategy is the power of compound interest. By setting up an online savings account, you can get some of the best interest rates that are available anywhere with savings accounts. If you make regular deposits to the account, you can compound your child’s money. If you start early on in your child’s life, they may have a sizable amount of money available to them when they hit adulthood. In some cases, they may leave the money alone and let it continue to compound once they have control of the account.
If you teach your kids about compound interest early on in life, it has the potential to completely change their finances later on in life. They may eventually see the value in starting retirement accounts and savings accounts of their own.
Having the Talk
Although setting up online savings accounts can significantly help your children, you also need to spend some time teaching them the basics of handling money. Your kids will be much more successful with money in long-term if you help them come up with a plan and develop the habit of saving money. Once a habit is developed, it can be very hard to break.
Teach your kids that a certain percentage of their income should be saved regularly. Many experts would recommend getting in the habit of saving at least 10 percent of your income for the future. This means that every time your kid earns money, teach him to set aside 10 percent or more towards his savings account. While you will most likely be dealing with small numbers initially, this will help show your child how to handle his money. When children are faithful in small matters, they will take that same approach with bigger amounts of money in the future.
Considerations
It’s easy to put off important things in today’s fast-paced society. While you may think that you have plenty of time to teach your kids important matters, they grow up very quickly. If you will instead take the initiative to teach them these concepts early on in life, they will have a much better chance at success. Starting an online savings account gives your kids a virtual piggy bank to work with over the long-term. Once they see how the balance in their piggy bank is growing, they will enjoy saving money in the future.