If you’re teaching your kids about the value of a dollar, you can take the old-fashioned route of putting coins and money in a piggy bank on the shelf. But nowadays, banks offer a better alternative that both parents and children can benefit from.
Savings accounts for children and teenagers allow them to park their savings in a safe place and enjoy several benefits. While this old-school approach can be fun, the right savings account can offer lessons in personal finance and may even come with interest to help your child earn more toward their savings goals.
Here’s an overview of the best savings accounts for kids and teens and how to choose the right one now.
What is a Children’s Savings Account?
The Children’s Savings Account is designed with young savers in mind. Here’s how it works: In most cases, a parent or guardian opens and co-owns the bank account for their child, although there are some exceptions for teenage accounts. Children can then transfer, deposit and withdraw money. The best kids savings accounts have minimal fees, no minimum balance requirement and a mobile app for parents and kids for convenient account management. Depending on the account, parents can usually set controls for their children to prevent them from overspending.
Some banks require parents to link their external bank account for transfers. Children’s savings accounts are usually for people under 18, but some banks have a requirement that children be at least 12 years old.
The best savings accounts for kids and teens
Pros and Cons of Savings Accounts for Kids and Teens
Should you open an account for your child or just hide some of their money in your own account? Since your child will be in the early stages of managing their money, this decision will involve some extra work on your part and how you want to teach your child about money. You may want to give your child more independence with their own savings account, but you also may not want to manage another account.
Here are a few pros and cons to consider before opening a new account.
They usually come with no fees and low minimum balance requirements
Some children may no longer qualify for accounts after a certain age
How to choose a savings account for your child or teenager
When choosing the best savings accounts for your child or teenager, here’s a rundown of some of the key tips to follow:
Look local: There are quite a few credit unions that offer additional benefits with their savings accounts, such as bonuses for good grades, such as Sky Federal Credit Union. They tend to be smaller, local financial institutions – so they don’t appear on our list. But if there is one in your city, it can be a great payoff: better academic performance and better personal financial habits.
Start with where you already bank: Many institutions require that the parent or guardian of the child’s savings account owner also have an account at the same bank or credit union. If you don’t want to open another account elsewhere, start where you already bank. Because senior accounts often come with fees and minimum balance requirements, be sure to consider your own financial situation, including your savings APY, minimum balance requirements and fees.
Ask about educational tools: A children’s savings account should offer more than a place to park their money. Evaluate the bank’s mobile app to see if it’s an easy way to talk to your child about money—some offer financial literacy courses and games, like PNC. If your child just sees the savings balance, they aren’t really learning much. Instead, money management guides and tutorials can help them make smart budgeting decisions.
How to open a savings account for your child
Requirements for opening a savings account for your child vary from bank to bank. In general, you will need to perform the following steps:
Find the bank and account that work for you: While some online-only banks may offer higher savings rates, credit unions also have several unique advantages. Consider what banking services and products you will need along with your child’s savings account, as some institutions may require that the co-owner of the account also have an account there.
Collect your information: Whether or not you need your own account, you’ll need to include your personal information — including you and your child’s Social Security number — as a co-owner. The bank will also need your child’s social security number or a current passport, but if your child is older, you may also want to include a school ID or driver’s license. In addition, the bank will need other personal information, such as your physical address, phone number and email.
Complete your application for your child: Many banks and credit unions will allow you to apply for a child savings account online. However, there are exceptions. Some require you and your child to visit a branch or schedule a virtual appointment to open the account.
Make an initial deposit: Although many children’s savings accounts do not require a minimum deposit, it is still wise to fund the account. Be sure to ask your bank about deposit requirements such as cash, check, or direct deposit. Also consider setting up an automatic monthly transfer. For example, if your child is old enough to understand the concept of an allowance, you can also transfer money after the chore is done to show them the value of work in exchange for money.