From their first piggy bank, purse or wallet to opening their first bank account, getting children into the habit of saving while they are young is a great way to teach them the value of money, according to www.onefamily.com.
Children’s bank accounts help them learn that the longer they save, the bigger the pot becomes. You can have fun encouraging your child to decide what they want to save for, and setting targets. Together, you can check the progress of their savings each week (or month), and talk about their priorities. This is a good way to teach them that they can’t have everything at once.
They will have a huge sense of achievement when they reach their savings target. And, of course, the excitement when they get to spend it on something special.
When is the right time to open an account?
You could open children’s bank account when you start to give your child pocket money. If you want them to understand that they can earn money through good behaviour or helping around the house, it makes sense to encourage them to save some of their hard-earned pocket money.
There are all sorts of accounts available. Some offer gifts when you open them, and with some, you have to save a minimum amount each month. If you are not sure which one is right for your child, it is worth speaking to an independent financial advisor.
Most banks won’t let a child open an account themselves until they are of certain age. If they are younger, they will usually let a parent or guardian act as signatory.
Which account to choose?
Choosing the right account depends on what you want your child to learn, and when. If you are looking for a simple account to help your child get into the savings habit, these are some of the things you could think about:
Is it easy to get the money out? If you set a savings target for your child, you probably don’t want an account that locks the money in for a year or more.
Is there a high street branch nearby? Walking into a bank to deposit money is a good habit to get used to.
Is there a minimum monthly deposit? If your child is just starting to learn about saving, you might not want to commit them to a minimum monthly amount.
Are there charges or fees on the account? If you are not ready to commit all of your child’s pocket money, make sure there are not any monthly account charges.
You might want to do a bit of research online before you involve your child in the decision.
Also, banks can change the account details quite often, so check with the bank before you do anything.
What about the interest?
It is easy to over-analyse children’s bank accounts, and set diary reminders to move an account to achieve the highest interest rate. If you just want your child to learn the basics of saving, keep things simple and don’t try to teach all the lessons at once.
However, as your child gets older, and they have learnt the basics, you can always switch to an account with a better interest rate. This way they will learn how banks make their money, and how saving over the long-term will often give better returns.
Your child is allowed to have an easy-access account for their pocket money savings, and another for saving larger amounts for their long-term future. But you will need to remember that the latter type generally ties the money in, often until the child reaches 18. It is worth noting that a child can’t open an adult account, but can have a junior account.
Children’s tax free allowance
Like adults, children have a tax-free allowance. The rules can be quite complicated. This will give you an idea of how to make the most of your child’s tax-free allowance.
Investing your child’s savings
Most parents want to give a nest egg to their children. Whether it is used to put down a deposit on a house, buy their first car or pay for university education, by starting early, parents can build up significant sums for their kids.
While saving for children often conjures images of piggy banks and loose change, investing could deliver much higher returns than cash savings over the long term. Investing does not mean you need in-depth knowledge of the stock market, you can invest in ‘funds’ which pool together investments in multiple companies and sectors.
This means you are not over exposed to one individual company or market. There are many types of fund, depending on how much risk you are willing to take on, and the company which runs the fund decides what it invests in.Read Full Story