Opening a kids’ savings account is one of the first steps toward financial maturity. With one of these accounts, you can have complete control over your child’s financial actions while teaching them the importance of savings. Money management is an important part of any child’s development. It’s never too early to teach your kids healthy financial habits, giving them a strong foundation for a successful future.
Let’s take a closer look at what to consider when choosing the best savings to account for kids.
Investment Account for Kids
Why Open a Savings Account for Your Child?
Opening a savings account is an excellent way to educate your kids about finances. Besides being an educational tool, children’s regular savings account can serve as an emergency fund.
Other benefits of choosing the best money accounts for children’s saving include:
- Teaching children how to plan.
- Explaining financial goals and priorities to your kids.
- Showing how the money can grow with minimum involvement.
- Helping kids save for things they can’t afford immediately.
- Teaching children basic math skills.
While opening a savings account for your kid teaches them about financial responsibility, it also helps you gain important insight into your child’s abilities. As a bonus, you get to spend extra quality time together.
7 Things to Consider Before Opening a Savings Account for Your Child
When opening a savings account for your kids, keep the following factors in mind.
1. Age Limit
The majority of savings accounts for children are operated on joint (child/guardian) ownership. It means that the parent or guardian can manage the child’s finances until they are ready to do it independently. Accordingly, there isn’t usually a minimum age requirement to open an account for your kid. You can do it as soon as the baby is born.
When it comes to joint accounts, both the parent and the child have full access to the funds. This means that your child can withdraw money without you. However, you can set up an alert system, which notifies you about any transactions on the account.
When the child turns 18, most banks turn the kid’s savings account into a regular savings account. Check the child’s savings account policy to learn how it works and which additional fees come with the transfer.
2. Fund Transfer
Since you may want to regularly deposit funds to the child’s account, ask if the bank allows regular transfers of fixed amounts regularly. This can save time on manual transfers.
3. Online Banking
Having access to your kid’s savings account without going to the bank is highly convenient. Besides setting up alerts about transactions, you can monitor your child’s activities. Additionally, you can teach your child how online banking works, explain its benefits, talk about security, and much more.
Find out if you can set a limit on online transactions so you can give your child access to the banking app if necessary.
4. Spending Limit and Minimum Balance
When choosing the best children’s long-term savings account, it’s important to consider the spending limit. Make sure you can set this limit according to your preference to prevent the child from emptying the account or incurring overdraft fees.
Check what the minimum daily balance requirements for the savings account are. If the amount falls under a certain threshold, you could face unexpected fees.
5. A Tax-Advantaged College Savings Plan
One of the options to consider when opening a kids’ savings account is a tax-advantaged college savings plan. Since paying for college is becoming more expensive every year, it’s never too early to start saving. Helping your kids pay for college while teaching them financial responsibilities is an excellent way to manage finances.
A 529 college savings account is designed specifically for education savings while giving you substantial tax benefits. You can withdraw money from this account specifically for education needs without paying taxes. The plan also provides federal tax-free growth.
Investment Account for Kids
6. Monthly Maintenance Fees
Each bank sets its own monthly maintenance fees for child savings accounts. Many banks don’t charge monthly maintenance fees on these accounts to keep parents with their bank. Other banking fees can apply to these accounts.
Additionally, check the minimum amount you have to deposit to open an account.
As an incentive for opening an account, some banks offer a variety of benefits and rewards. For example:
- Good grades rewards program
- Financial education content
- Educational tools
- Monetary bonuses (paid when a child turns 18)
These rewards can significantly impact your child’s educational process, saving you money in the process.
Top 3 Savings Accounts for Your Kids: Pros and Cons
When opening a kids savings account, consider the following options:
1. Capital One’s Kids Savings Account
This savings account has no monthly maintenance fees.
- Easy-to-use banking app
- Possibility to link your account to the kid’s account for regular transfers
- No minimum opening balance (open now, deposit at any time)
- Parental control options
- View-only access for kids
- Limited branch footprint
- A limited number of monthly transactions
- Lack of financial education tools
Overall, Capital One offers a savings account with various benefits and low fees.
2. Alliant Credit Union’s Kids Savings Account
This savings account has numerous financial education tools and programs.
- High APY
- Contributes $5 to cover the minimum deposit
- Ability to connect the guardian’s Alliant account with this account for regular transfers.
- Easy-to-use mobile banking app
- No monthly fees (if you opt for electronic statements)
- Daily balance of $100 required to maintain a higher APY
- No savings bonus
- Fees for account inactivity
The high APY and “free” $5 for the deposit make this savings account attractive for children and parents.
3. Spectrum Credit Union’s MySavings Youth Account
This savings account makes a great option for parents looking for a high-yield investment account for kids if you can maintain a minimum monthly balance in the account.
- A higher APY
- Available to children under 21
- No monthly fee
- No minimum balance requirements
- Need to join the union and make a $15 donation to open an account (unless eligible through an employer or geographical location)
- Limited branch footprint
UNest: Online Investment Account For Kids
UNest offers a tax-advantaged investment account for your kids. You can use the funds from this account towards your children’s future financial goals, such as pay for education, a house, or a wedding. The UNest app is specifically designed to help you manage the investments in the account and control it until your child turns 18.
This highly flexible and easily modified account can help you teach children about finances while earning money and getting tax benefits. As a bonus, UNest account owners get various rewards, including rebates on purchases from multiple retail brands.