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By Lois Sullivan
It’s never too early for kids to learn how to save money. Savings accounts teach kids responsibility while helping guarantee their future. Parents and grandparents understand the value of setting money aside for important milestones, such as buying a first car, going to college or purchasing a starter home. With a savings account, kids have a head start in preparing for life's achievements. Here are six compelling reasons to open savings accounts for kids.
Children have many opportunities to spend money, but it can be difficult for them to understand that spending money means having less of it to save. Parents can discuss the savings account's monthly balance with their kids and show them how it grows with time. Children can then make informed decisions about spending versus saving their money.
It's never too early for children to become financially literate. When children learn how to balance personal finances at a young age, they're less likely to develop unhealthy spending habits as college students or young adults. Financial literacy resources can teach children how to read bank statements, how to budget their money and how interest helps their savings accounts grow in value.
Cash from birthday presents, generous relatives and the tooth fairy can accumulate over time. Once the money gets deposited in a banking account, the child can't withdraw it without a parent or guardian's permission. Keeping money in a savings account prevents kids from spending their money unnecessarily and eliminates the possibility of theft. Kids savings accounts are federally insured, whether through the Federal Deposit Insurance Corporation or the National Credit Union Administration.
The earlier a parent, grandparent or guardian opens a savings account for a child, the more interest the account will generate from the principal. With interest, children can see for themselves how they can earn additional funds simply by keeping money in their savings account. Parents can create savings plans for their children and form reasonable expectations about how much money their children will have by the time they become adults.
With a parent's supervision, children can learn how to use their credit union or bank's online interface or mobile app to manage and monitor their savings accounts. This experience instills a sense of financial independence in children that can help them handle their finances confidently as adults.
Rather than buying expensive electronics or toys for your children when they ask, parents can use the savings account to explain what it would take for their children to save the money themselves. They can learn to set savings goals and envision their future. While compound interest might be a challenging concept for younger children to grasp, teenagers might soon calculate their future earnings themselves.
Credit unions are owned by their members, not by stockholders. When you open a savings account for your child at a credit union, your child becomes a member-owner at the credit union. This could be an important lesson for your family. You can share with your family that credit unions prioritize their owners’ needs. At Alliant, we offer kids savings accounts, value financial literacy and believe it's never too early to start saving and learning.
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