7 great financial benefits of opening a bank account for kids

Father and young daughter happily look at the interest she is earning on her kids savings account at Alliant.
June 22, 2023 | Lois Sullivan

One of the best ways to teach children the importance of money is by opening a bank account for kids. Kids bank accounts are designed for children, often with low or no fees. Allowing children to deposit allowances and birthday money into a bank account gives them a unique opportunity to learn crucial financial and budgeting skills. Here are a few of the top benefits of opening a bank account for kids.

Helps them understand the importance of savings

Opening a bank account in your child's name helps them learn about and understand the importance of savings. Making routine deposits can also help them develop the habit of saving. Encourage them to deposit at least a small percentage of any money they receive through allowances or gifts from family members.

A bank account also teaches children they don't have to spend money simply because they have it. By saving all or a portion of the money they receive, they can grow their savings and achieve even larger savings goals.

Encourages setting and achieving financial goals

A kids bank account can help children learn to set and achieve financial goals. Discuss with them a few things they might want to purchase in the future and create a plan to help them reach that goal. Let them calculate how much they'll need to save each month to achieve their goals by the intended timeline. 

Financial goals can be as small or large and as short- or long-term as your kid wants. Some children might want to save up for a video game or birthday present for a sibling, whereas others might want to work toward something more expensive, like a new bicycle or a used car. Some bank accounts even let users create multiple internal accounts, allowing them to manage separate savings goals.

Some families might also choose to use a bank account for kids as a tool for saving for college. Saving early can help you and your family cover the costs of college tuition, books and other school-related expenses. Encourage family members to contribute to the account for birthdays, holidays and celebrations, and you'll find the fund grows quickly.

Instills the value of money

One of the most important lessons you can teach children is the value of money. This life lesson will stick with them into their teenage, college, and young adult years and beyond. Children who are responsible for managing their own bank accounts are more likely to understand the value of money. They'll learn how to prioritize wants and needs. Access to their own money and bank accounts also encourages them to consider the price of an item compared to their current savings, helping them gauge value.

Encourages financial responsibility

Managing a bank account teaches children financial responsibility. They'll learn to deposit, transfer and track money. Let them choose Father's Day or Mother's Day gifts based on the funds available in their accounts. You can adjust financial lessons and responsibilities based on a child's age and financial comfort. 

Teaches lessons in budgeting and financial tracking

Bank accounts encourage children to learn how to budget and track their spending. While you can talk about the importance of budgeting and tracking expenses, a bank account gives children a hands-on opportunity to use these skills in person. Help your child get into the habit of checking their bank account frequently to calculate how much money they've spent versus deposited. Teach them to track account balances over time, which might affect their savings goals.

Many online banks today have online resources and tools that help children learn even more finance and budgeting lessons. Children and teens can use these resources to learn money management tips.

Gets them in the habit of banking

Banking is an important life lesson that will surely be useful when your child becomes an adult. A kids bank account teaches them how to check their balance, deposit checks, transfer funds and withdraw from their account starting at an early age. As they get the hang of banking, allow them to manage their own account.

Helping children learn about savings accounts and banks can also help them learn how to protect their money. Storing money under the mattress or in a piggy bank might allow kids to access their physical cash whenever they want, but it can easily get stolen or lost. This method also makes it difficult to track spending.

Introduces them to investing

Bank accounts can help children learn about the importance of investing. Compounding interest is an important lesson learned through investing. Opening a kid's bank account that pays interest can help them visualize and calculate returns. They'll learn how funding their savings account can help them earn even more. 

Once your child becomes more comfortable with interest-earning savings accounts, you can expand their education by introducing them to other investment account types. By funding a savings account early, your child will benefit from compounding interest longer. 

Consider taking the opportunity to set up an automatic savings plan. Encourage your kid to redirect a small portion of their weekly allowance into their savings account automatically. Many children will be surprised at how quickly their savings accounts grow with minimal effort.

Help your child learn the importance of saving and investing at an early age with a bank account for kids. Children can learn valuable financial lessons through online banking. Many of these lessons, including budgeting, tracking expenses, and investing, will be integral to meeting their financial goals as an adult.

Ready to open your child's first bank account? At Alliant, we understand the importance of financial education, even at a young age. That's why we offer a variety of bank accounts to meet a wide range of needs, including a kids savings account.*

Learn more about opening a bank account for kids:

* Insured by NCUA

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