Parents want to see their child succeed in all walks of life. Moreover, teaching them about financial matters at a young age by opening a savings account helps them mature and become financially-responsible individuals.
Opening a savings account can teach them to plan ahead, focus on their goals and priorities, and learn basic math skills. Financial responsibility takes time to learn so it is important for parents to give their kids more than what they can chew.
Survey On Saving and Other Financial Matters
Discover Savings, a credit card brand, surveyed 2,205 adults in 2017 and found that 81% of millennials are saving in some capacity compared to 74% of GenXers and 77% of baby boomers. 67% of millennials were also saving for something specific like a vacation unlike 56% of GenXers and 49% of baby boomers. The respondents had also been saving for an emergency/rainy day fund (25%), a vacation (20%), holiday shopping (16%), home purchase or repair (16%), and auto purchase or repair (13%).
Overall, 56% curbed their spending by preparing meals at home more regularly while 37% used coupons. The respondents also canceled subscription-based services/products (33%), incorporating at-home efficiencies (56%), taking public transportation, bike or carpool (37%), and canceling a gym membership (33%).
39% planned to save $4,000 or more, while a smaller percentage of respondents intended to save between $1,000-$1,999 (16%) and $2,000-$2,999 (14%). When asked why they are not saving, the respondents cited not making enough money to save (35%), having everyday bills that need to be paid (17%), having too many debts (10%), losing their job or had another unexpected financial setback (5%). 2% said they don’t know how to save properly while 1% believed there’s no value in saving.
In a 2018 survey by CIBC (Canadian Imperial Bank of Commerce), one of Canada’s “Big Five” banks, 73% of parents avoided talking about money regularly while 54% said they are not knowledgeable about financial matters. 82% said they don’t stick to a budget.
93% of respondents believed that parents need to do a better job in managing their own money to set a good example for their children. However, 67% stated that they only “somewhat” following a budget at best while 14% did not have a budget at all. A smaller proportion of parents said they are “very knowledgeable” about household budgeting (46%), saving (44%), and debt management (39%).
Confidence levels dropped with regard to education planning (26%) and investing (17%). The report also found that moms were likely than dads to be actively involved in helping older kids manage the money they earn (82% versus 76%), despite both groups worrying that the stakes are high and children can’t afford to make mistakes (71%). 80% of parents believed it is important to give about $91 each month on average, while only 13% gave allowances with no strings attached. 55% said their kids “need to earn it” or are compensated occasionally in exchange for doing household chores. 75% of parents hand over allowances in cash while 18% chose to deposit them into their child’s bank account.
How Will I Know If My Child Is Ready for A Savings Account?
The answer to this question varies between parents, noted Suncorp, an Australian finance, insurance, and banking corporation. Check your local bank if opening a savings account requires a parent or guardian to give consent if your child is at a certain age. It also depends on the amount of money they will be managing in their account and how you will assist them in managing their finances.
What Should I Consider When Opening A Savings Account?
Don’t open a checking account! Checking accounts are used for spending money. In this case, you are helping your child save money. Therefore, it is recommended to wait until your child is a teenager or has a job before opening a checking account. When opening a savings account, your child must be tech-savvy enough to do basic online banking functions. However, they should also know about banking etiquette when transacting at brick-and-mortar locations. Let your child have control over the money by allowing them to hand their money to the teller every week.
This also applies to instances when your child wants to withdraw money, making their banking experience more real, said TJ Ryan of Canstar, Australia’s biggest financial comparison site. A savings account will enable your child to save for different goals, differentiate between “needs” and “wants.”
Encourage them to safe-keep the deposit receipts and to track how their deposits are growing. Older kids can choose their preferred banking method, but for younger children, it is better to let the experience of visiting a brick-and-mortar bank to instill financial literacy. You can find a bank that promotes financial literacy and good money habits. Ask a banker or consult your preferred bank’s website to see if there are money tutorials for children. When opening a savings account, don’t forget to ask about monthly fees and minimum balance requirements, as well as benefits such as an ATM card.
Teaching Children Banking-Related Vocabulary
It is also important for parents to brief their kids about banking language. For example, a bank account refers to a record their bank keeps to track how much money you have given to them, said Bank SA, the largest bank in South Australia. Tell your child that they can deposit or withdraw money when they need it. Remind them that a deposit increases their bank balance while a withdrawal decreases their balance.
Any changes to their account balance — either through a deposit or withdrawal — is called a transaction. Once your child leaves money in their account, the bank will then pay them interest. Interest is defined as the money the bank pays to their client, akin to a reward for not spending money.
An ATM (Automated Teller Machine) contains money and lets customers withdraw cash and check their balance without going to the bank itself. Likewise, an ATM card is used to withdraw money from their account using an ATM. Inform your child that people have a PIN for transactions, which is a password composed of numbers that tell the bank that it okay to do a particular transaction. Warn your child not to tell their PIN to anyone or else malicious actors will take their money.
Opening a savings account is a great way to promote financial education. Having a bank account helps kids make a deposit or withdrawal and focus on their goals. Parents are obligated to inform their children about the risks of online banking or telling anyone their PIN and any sensitive information.