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When Should Your Child Start a Savings Account?
There is some controversy concerning whether or not children should save money. And, if they should, when should children start a savings account? The answer will be different for each family, but these tips might help you decide when, and if, starting a savings account for your child is right.
Many parents choose to begin a savings account for their children when they are just days old. The account, in the parent's name, can be earmarked for education, but it can also be a standard account drawing whatever interest the bank gives. Quite often, because the chances are greater the money will be left in the bank for a long time, they will earn a higher interest rate.
If you wait until your child is older and begins to receive money, either from an allowance or gifts, you can make a cash deposit at your local bank. Banks may open a child's savings account with as little as $10.00; however they would probably prefer the initial deposit to be more. Of course, the sooner you begin a savings account for your child, they more their money will grow along side them.
After you start an account, or allow your child to do so, plan to have them make regular deposits. The more regular they are with deposits, the quicker the amount will increase and the more they will have when they reach 21, the age that most banks have set as the maximum limit for children's accounts.
In recent years, different states have established 529 accounts to help defray the cost of a child's future education. Many experts believe that college costs for a child born today will be three to four times more than a student today pays. If this trend continues, the sooner you begin an education savings account for your child, the better off they will be when they head off to college.
Here's an example of the benefits of starting an educational savings account. If you save $100 a month from the time your child is born, and maintain that savings at 4% per year, your child will have nearly $30,000 available for their tuition. If you waited until your child was in high school to start saving, to reach that same amount of balance when they graduate from high school, you will have to save nearly $600 a month. It's easy to see how starting to save sooner rather than later will benefit you as well as your child.
Saving money, for whatever reason, is a good thing to teach a child. Unless you have already done so, allow them to go to the bank and open their account. It will give them a sense of pride and introduce them to the people and sections of the bank. It may also encourage them to continue to save.
When should children start a savings account? Really that's a question that you need to discuss with your spouse and your child. The facts show that the sooner you start, the more money they'll earn, but wait until your child is ready for the responsibility. Whenever they start saving, encourage them to continue, and watch their money grow.
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