I’m not sure why I took the road that led me to become a financial planner here at USAA, but I suspect it can be traced back to a passbook savings account I had as a child. I can still see the little blue book that was stamped with my new balance each time I made a deposit.
Of course, not everyone wants to become a financial planner. I certainly took the long road, courtesy of the U.S. Army, in getting here. But everyone wants the best for their kids, and part of equipping them for life may be setting them up with the modern version of my old passbook account. Whether you use a local bank or go online, all kids should have savings accounts.
Here are five reasons to open an account for your child:
It Gets Them In The Money Game
Explaining money to children is not necessarily easy, especially in today’s digital world. That’s one reason a piggy bank is still a valuable training tool. When I was a kid, I began learning about finances with weekly trips to the store when I could buy candy with what I’d saved. A savings account allows you to kick that lesson up a notch.
It Introduces The Saving Habit Early
Saving is central to financial security, and frankly, as a country, we’re not doing too well on this front. Start early with your kids and create positive habits by urging them to save part of their allowance, baby-sitting earnings or lawn-mowing income. You’ll help lay the foundation for their financial success.
It Helps You Encourage Them To Save
Not only can you teach your children what savings is all about, you can incentivize it. At our house, we matched any money the kids added to their savings accounts until they reached 18. That provided a larger payout on those fast food jobs our kids worked, at least for the portion of their earnings that made its way to their savings accounts.
It Gives Them Spending Options
I’m a big fan of 529 college savings plans, but education is not the only reason your kids may need money when they become young adults. They can use their savings for other financial needs that arise. But don’t forget that a student’s money is taken into consideration when he or she applies for financial aid for college.
It’s A Stepping Stone
First, opening a savings account gives your kids access to your bank or credit union’s communications, tools and apps designed to teach them about money. Second, as your children get older, money in the savings account can fund investment accounts that will help them understand stocks, bonds and the power of compound returns. Heck, for teenagers with jobs, it might even be an opportunity to get an early start on building for the future by funding a Roth IRA. From a more practical perspective, it could be the path to a car or deposit on an apartment. But in any case, it can all start with a savings account.
If you haven’t already, set your children up with savings accounts today. It may not turn them into financial planners, but it can help prepare them for the fiscal responsibility of adulthood.