Teaching your children about money can be a challenging part of parenting, but one of the more convenient ways to do so is through a kids savings account.
Kids savings accounts are a helpful tool as they are simple to use and understand. They can teach little minds not only what savings are but also the importance of growing money through interest and having a rainy-day fund.
They differ from regular savings accounts in that the age eligibility will be for those aged under 18. They also can come with much higher interest rates than adult savings accounts as an incentive to encourage new customers to join. However, there may be conditions and restrictions around earning interest, or bonus interest, on these savings accounts.
If you’ve decided to teach your kids about money through a savings account, you’ll need to know not only how to do this, but which accounts may offer the best value for your little ones.
Tips to get your kids savings started
Financial literacy is a crucial life skill that can help to not only educate your kids on budgeting and spending but help establish valuable lessons that may prevent them from falling into debt as adults.
Here are some ways to use a savings account to teach your children about money:
If your children are earning pocket money or chore money, you may want to encourage them to deposit this in their new account. This can help to mentally set up the idea of earning an income in return for labour or services and depositing regular “wages” into an actual account, as opposed to a piggy bank.
You can also then take them through their bank statements and show how interest accrues on their savings. They can then see how to passively grow their pocket money just by making regular deposits, and the importance of meeting conditions – if any – to get the highest interest rate.
After they’ve deposited their pocket money or chore money, you can have your children decide whether to spend the money now or save up for something fun, like a new toy. Then you can help them to divide their savings between spend now money and save for later money – in other words, planning a budget.
- Saving for a goal
If your children do decide to save up for something bigger, you can use a savings account to show them how to plan and save for a goal. Talk to them about what their goal may be and show how the “income” they earn through pocket money/chores paired with a budget can help them achieve this goal. Having kids slowly see how their savings grow over a number of weeks, while encouraging patience and regular depositing, may help them to develop great life skills.
If you’re going to make money mistakes, you may as well make them at an age when this won’t have real-world consequences. If your kids fall behind on their budgeting and spend all their money in one go, it will teach them a valuable lesson early in life. It is a lot easier to learn this lesson as a kid, than when you’re an adult who has racked up an intimidating credit card debt.
Top kids savings accounts on the RateCity leaderboard
Choosing the right savings account for your little one can be a daunting prospect. It’s best to not only look at the interest rate, but to compare potential fees, as well as any conditions and regulations around earning said interest rate.
Thankfully, RateCity has done the research for you by ranking the most competitive kids savings accounts in the marketplace.
Here are the top-ranking kids savings accounts according to the RateCity leaderboard: