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By Katie Levene
Believe it or not, your child may have some lofty savings goals. Whether it’s the latest gadget, a trip to the museum, a gift for a sibling (imagine!), an online kids savings account could be the perfect place for you and your child to save every penny. There are many savings accounts to choose from. Here are some tips on how to pick the best online kids savings account for your child.
There are a few key features you’ll want to see in a savings account for your child.
Teach a child that a bank will reward them for saving! Look for accounts that say “high-rate” or “interest” in the description. No, the interest rate on a savings account won’t make your child a millionaire, but it will teach them about interest.
It will also teach them that not every bank account is the same. Some accounts will pay them a little money on their balance, others will not. Show them that it’s important to shop and compare the annual percentage yield (APY) when choosing an online account.
According to a recent Bankrate survey, the average monthly fee for interest checking accounts is $16.35! Monthly service fees are common but it’s easy to find accounts that won’t charge your child a monthly service fee for using it.
When your child becomes a teen, they’ll want a teen checking account. It will be easier for your child to make transfers and manage their accounts if their savings and checking are at the same online bank or credit union. Teen checking accounts are a great way to introduce your kid to money management and spending.
Your child may want to save those birthday checks from their relatives once they have a great online savings account. Similar to a checking account with a debit card, a savings account with an ATM card will help your child deposit and withdraw cash with ease. You could also deposit checks at some ATMs if you don’t want to use your bank or credit union’s mobile app.
In online banking, you can create an automatic savings plan by adding automatic transfers of an allowance, set up alerts and manage the money in the account. Look for a financial institution that has a well-rated mobile banking app or an award-winning online banking platform. Nowadays we do most banking outside of the traditional bank building, so a great online banking experience is important.
Look closely at the terms and conditions on the account. The balance in your kids savings account may fluctuate. After saving for a few months, your kid might want to use their allowance money for something big. Check for minimum balance requirements to ensure you won’t get hit with a fee for having a small balance.
Your deposits at banks can be insured by the Federal Deposit Insurance Corporation (FDIC). At credit unions, your deposits can be insured by the National Credit Union Administration (NCUA).
Both the FDIC and NCUA insure your deposits up to $250,000. Make sure your online bank or credit union is insured by the FDIC or NCUA. That way, if the financial institution closes, your money won’t disappear.
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 financial institutions prioritize their owners’ needs. If you’re an owner, you could get great features like the ones listed above.
Good news! You can have a savings account at any age. Children younger than 13 can have a kids savings account with a parent or legal guardian as a joint owner. When the minor turns 13, the kids account will typically become a regular savings account automatically.
At Alliant, children 13-17-years-old will have an Alliant High-Rate Savings account but will still need to have a parent or legal guardian as a joint owner. Once the teen turns 18, they can remove the joint owner from the account.
At Alliant Credit Union, a kids savings account becomes our High-Rate Savings account when the child turns 13-years-old. The funds will remain in the account.
When shopping for an account for kids, consider the savings account your child will be transferred to. Pick a bank or credit union that gives your child the same great features, no matter their age or account balance.
More ways to teach kids about money:
Katie Levene is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.
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