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Helping Your Child to Take Control of a Bank Account
Helping your child take control of a bank account, the latest post in the budgeting series is from Josh at Family Faith Finance. Josh recently got into the personal finance game when he decided to start up Family Faith Finance. His goal is to introduce a unique perspective while offering solid, unbiased advice.
Teaching kids about money
As parents, we want to do what is right for our children. This often includes helping them avoid many of the mistakes that we have made, particularly when it comes to finances. As someone who struggled with student loan and credit card debt and has worked hard to get out of debt, I want to teach my children the lessons that took me years to learn on my own. Perhaps in doing so, I can help them avoid debt successfully, saving them from credit card or student loan pitfalls. Well, that’s the goal! I decided to start with bank accounts and money.
Start with the Concept of Money
Since my kids are all relatively young at just 8, 6, and 3, there are plenty of lessons that I can teach them about finances before they get in trouble with debt. One of the first places I planned to start was money, just the simple concept of money.
Currently, I pay my kids for doing chores. With this, they are learning the value of hard work and its connection with money. It also teaches them that if they want something, they will have to work for it because it’s going to cost money. With that said, they have the opportunity to save for things that they want like a new toy or a trip to the arcade.
It could make them want to work harder too; for instance, they have the option to pick up extra chores for bigger ticket items. Much like their dad taking on side hustles to pay off debt, they are learning that they can take on extra work to achieve goals.
At any rate, the main point of this is to get them to understand the concept of saving money. They know that they have to work for it. That it’s used to buy items. They know that it can be saved. It’s the direct path towards learning about banks and bank account.
The Next Step: A Bank Account
With my sons Jackson (8) and Jordan (6), I have started to talk about more advanced things like a bank account in age appropriate ways. For example, if I get money from an ATM, I will explain that the machine is not magic. Cash from an ATM comes from our bank account, and I need to work to make money and deposit it into the bank. This is the next big step in our personal finance agenda. It stems directly from teaching the basic concept of money and savings. You need a bank account to do this as an adult, and my wife and I are starting to get the ball rolling.
When it comes to bank accounts, many parents are confused about how and when their children should be given control over his or her own bank account. Generally, banks offer savings accounts for children that offer joint ownership to parents, but there are also accounts that are open to teenagers.
Joint Account options
Under a joint account, your child doesn’t need to meet a minimum age requirement in order to open up the account. Having such an account lets your kid put in money from a piggy bank, birthday, or holiday. Your child will learn the value of saving with a bank; namely he or she can learn the value of compounding interest which is a good start to an even bigger financial lesson: interest in general.
For starters, a clear advantage of a joint account is that you can start the learning process early. Another big one is being able to guide them with their money as well as monitor spending. While I don’t think an 8-year-old can do too many crazy things with a bank account, having control eliminates that worry.
Teenagers and Young Adults
For teenagers and young adults, you can look into helping them start up their own bank account in their own name. It’s a judgment call for sure, but at that point, I hope to have already fully educated my kids on bank accounts. The main point here is to actually give them full independence which means having a debit card, too.
A teenager with a bank account in high school has the chance manage his or her finances in a relatively low stakes environment. You still have the ability to help them out if necessary. Either learning from their mistakes or getting positive feedback from making no mistakes can be a powerful, constructive lesson.
Don’t go signing up for whatever bank account you find; in fact, it may not even be worth banking with your current bank when getting your kids on boarded. You should still consider your finances when educating your kids with a bank account. This means you should look for an account that won’t cost you too much, so try to find an account that has no monthly service fees, no minimum balance requirements, and low fees in general.
Summing It Up
Opening a bank account for your child can help to teach valuable lifelong lessons. While there is no one right age to get started, teaching these concepts at a young age can help your child understand finances and make smart choices over a lifetime.
These smart choices should extend to other financial products which are basically unavoidable in today’s society. Learning bank accounts will give your kids a helpful base understanding when they are learning about credit cards, loans (especially student loans!), and more.
From Amy: I hope that you enjoyed this post and the rest of the budgeting series. Teaching kids about money is an important thing that all of us parents must do. Teaching your children to take control of bank accounts is a crucial step. If you have any tips for teaching kids about money, bank accounts, or any other budgeting advice, I’d love to hear about them in the comments! Thanks for reading, and make sure to share this with your friends!