1. Teaching Financial Literacy to Kids: Introduction
  2. Teaching Financial Literacy to Kids: What Is Money?
  3. Teaching Financial Literacy to Kids: Earning Money
  4. Teaching Financial Literacy to Kids: Goods And Services
  5. Teaching Financial Literacy to Kids: Needs And Wants
  6. Teaching Financial Literacy to Kids: Spending Choices
  7. Teaching Financial Literacy to Kids: Saving for Short-Term Goals
  8. Teaching Financial Literacy to Kids: Saving Accounts
  9. Teaching Financial Literacy to Kids: Conclusion

Many banks have savings accounts designed especially for kids, with no minimum deposit amounts and no fees if the account falls below a certain balance. Another bonus is that it will likely be easy to transfer money between your account and your child's account if you have an account at the same bank.

What Having a Bank Account Teaches

While the interest rates these days may not do much to encourage kids to save, most kids will nevertheless like the idea that their money can earn more money – even if it’s just a few cents. Younger children may not understand the math behind the interest or the idea of compounding just yet, but they are old enough to appreciate the fact that their money can earn a little bit of interest. (For related reading, see The Effect of Compounding.)
 
The monthly statements, passport book and any incentives the bank may offer can help get kids excited. Since most of today's kids are tech-savvy, reviewing account balances online or in the bank’s app can be fun as well. Watching their account grow over time can encourage even very young children to save and to make wise spending choices.
 
Introduce the idea of banks and savings account to kids: Explain to your child that a bank is a safe place to keep money, and that even if someone were to steal all the money in the bank, or if the bank were to go out of business, your child would not lose the money. You can add money to your savings account (called a deposit), and you can take money out when you need it (a withdrawal). The bank helps you keep track of your money by sending out statements that arrive in the mail or via email. Your child can use a folder or binder (or a file on your computer) to keep track of the statements.

Visiting the Bank

This is one time when you'll want to pick a brick-and-mortar bank with actual branches. That's because it’s helpful to take your child to the bank so they can see what it looks like and see the various people who work there. One of the bank associates may be able to sit down with you and your child to discuss the various types of accounts the bank offers, including ones specifically for children. As you open the account, the associate will probably show your child the special book where he or she can record deposits and withdrawals (assure your child that you will help with the math).  Most banks will allow you to open an account in your child's name under your account so you don’t need to provide your child's Social Security number – if you set up a completely separate account, you’ll have to provide it. (For more, see Opening Your Child’s First Bank Account.)
 
Be sure to talk about the different ways your child can earn money to deposit in the savings account. For young kids, this usually includes allowances and gifts (such as birthday money). Kids might also be able to do odd jobs around the house and yard or at a neighbor's or relative's house (with supervision, of course) to earn a little money. Finally, entrepreneurial endeavors – such as lemonade stands and arts-and-crafts sales – can help little ones learn valuable skills while earning some extra cash.


Teaching Financial Literacy to Kids: Conclusion
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