Parents have started saving funds for their children from a very early age. Not only does it keeps the money secure for their future but opening a bank account for minors teaches them about money management and saving from a very early age. The bank account for kids that is considered to be the best provides a higher interest in saving account and does not charge a huge fee.
Before opting for children’s banking, the guardian must understand how it works, which bank is the best and what other benefits are associated with the account.
This article will talk about few tips that one should consider before opening a bank account for their kids and also suggest few banks they can opt for. But, before that, let’s address a million-dollar question common in every child’s mind.
How Do Banks Make Money? – A Business Perspective
Every child is very curious, and parents should never kill their curiosity. So, here is the answer to the question which not just the children want to know but even the parents should be aware of. Banks are diversified and they have different sources that make them help earn profit. But maximum of the bank is considered to be lenders. They usually make money by borrowing it from the depositor and compensate by charging interest and lending it to someone who needs a loan. Fees, capital markets, and interest are the three sources of profit for the banks. It is the difference between interest paid and interest received that is the main source of earning.
- Activities such as M&A advisory, underwriting services, trading, and sale services are another way to make money.
- Custodian fees, fees for investment management, revenue from the mutual fund, saving accounts fee, checking account fees, and fees for a credit card are charged by banks. These fees are another source of making for them.
Apart from the above, banks make money by providing wealth management services and charge for the same. Also, when a customer makes late payments or maintains a low balance, a penalty is charged which is again a source of income.
Children Banking Tips For Guardian
Due to the pandemic, the parents are spending most of their time with the kids. There cannot be a better time to teach the kids about finances habits that are good and saving account than now. Children start grasping things very soon and they are ready to understand about saving when they start sliding money in their piggy bank.
Here are few suggestions one should follow that would make your child excited about savings and banking.
The first step is to educate the child about the importance of saving money
One of the best ways to explain to kids about saving is by giving them an example of how standing in a queue in a bakery gives them the treatment they want. It is similar to a savings account. Explain to them that if they are patient and save money now, they can get what they want in the future.
Make sure that the process of opening a bank account is fun and a concrete experience
Parents always hurry to open an account for their children without them being aware. It is best to complete the process of opening an account in front of them. One can just make an appointment with the bank and take their child along to help them understand the important aspects. To make it exciting for the kids, ask the bank manager if they can give a tour of the bank to the children, showing them the treasure room aka vault.
Teach the children the value of money by adding bank stops to the shared routine
Take your child along to the bank when depositing earnings, allowance, or gifts for family. Even when not aware, the financial behavior continues to model. So, parents should talk aloud when deciding to deposit or save money, be it for buying something or going on a vacation. Doing so will make the children understand how beneficial can saving money be.
Last but not the least, giving incentives for them to do work, will let the kids know how difficult is it to earn money and they will value it.
Best Kids Bank Accounts
One can open a joint account for their children. Below is a list of few kids friendly bank, that lets one open account:
Chase First Banking
This chase kid savings account is for kids aged 6 to 17. This joint checking savings account is planned in a way that helps the kids and teenagers to understand the money management fundamentals. This account by the bank guides the children with an account in the right direction making sure that no mishap occurs. A minimum of USD 25 needs to be maintained throughout.
Alliant Credit Union Kids Savings Account
Any kid who is under 13, can get to open this saving account. This account demands an initial deposit of at least USD 5 and yields the APY of 0.55% on every balance. It is not allowed for a kid over 13 to open an account but the ones who opened it before they turned 13 can continue it forever.
Capital One 360 Kids Savings Account
There is no age limit for opening this saving account for kids by Capital One. The best thing about this account is that it is a zero balance maintenance account but still yields 0.30% on all balances.
Chase High School Checking
Another account for children by Chase is the Chase High School Checking. It is for kids in high school that is between the age of 13 to 17. Initially, the account needs a co-owner but when the child turns 19, they can be the independent holder of the account. A minimum of USD 25 needs to be maintained in this account.
Wells Fargo Clear Access Banking
This teen-friendly account is for children aged between 13 to 17. It is again a zero maintenance account but initially needs USD 25 while opening the account. Though, a co-owner is needed for children under 16. But, generally one does not prefer this account as there is no yield involved.
Bank of America Child Savings Account
Any child that is under 18 can open this account by having a parent as a co-owner. This account is turned into Rewards saving account, once the child turns 18. It yields 0.01% APY.
Here are few things that one must know about opening kids saving account in Bank of America.
Apart from the above 6 Saving accounts for kids, there are many others which one can explore. The best way to decide the bank where you want to open the account is by checking the rate of return, the fees involved, and whether one wants it for the long term or short term. No matter which bank, one opens their children saving account, the step to taking this step itself is huge. But, the parents should always involve their children while opening the account as said above.