The Best Savings Accounts for Your Kids
It’s a wise move to begin teaching your children how to save at an early age.
They can learn to set aside their money for specific goals, which will hopefully help to establish sound financial behavior that lasts a lifetime.
While the conventional approach is a piggy bank, an actual bank account could be the better option.
Your children will get the chance to interact with a bank and get the true experience of what it means to handle money like an adult.
Find out which savings accounts are the best for children and learn how you use them to foster good money management skills.
Capital One 360 Kids Savings Account
The Capital One 360 Kids Savings Account is simply a version of the popular Capital One 360 Performance Savings Account that was renamed to for child savers.
The interest rate, fees, and features are exactly the same. It is offered by the online banking division of banking giant Capital One.
Your children can actually create multiple savings accounts for free and nickname for specific goals.
Furthermore, Capital One 360 allows them to set a specific goal amount for each account and they’ll be able to track progress towards each goal.
With a strong interest rate and no monthly fee, it is the ideal savings account for children -- no minimum balances to worry about.
In fact, this account doesn’t charge any fees at all. Capital One offers well-designed mobile apps that your children can use to manage their money.
Alliant Kids Savings Account
As one of the top credit unions, Alliant offers the Kids Savings Account to children who are age 12 or younger. Free supplemental accounts can be set up for specific savings goals
The account offers a highly competitive interest rate and it has no monthly fee or minimum balance requirement.
Alliant will even give your child the first $5 in the account to get him or her started right away.
Also, get an ATM card so that you can access ATMs for deposits -- a good way for your child to experience the physical interactions of banking.
Various Big-Bank Savings Accounts
Some of the biggest banks in the country provide dedicated savings accounts for kids. They are all very much the same.
Generally, they offer standard savings accounts with no monthly fees as long as the child is under 18 years old. However, the interest rate is not impressive at all.
The biggest advantage of these accounts is that your child can visit a local branch and interact with bank employees and ATMs.
- Bank of America Minor Savings Account
- Wells Fargo Kids Savings Account
- PNC Bank S is for Savings Account
How We Picked
How did we decide what makes a great kids savings account? We researched around 25 kids savings accounts, credit unions and their accounts for this guide.
If our picks don’t fit you or you just want to double-check our criteria, check out the how we picked the accounts below:
Types of Savings Accounts Available
Fixed Rate Saving Account
If you plan to put away your child’s money for a prolonged period of time then fixed rate saving accounts are the best deal for you.
Offering higher and stable interest rates, these accounts are designed as long-term investments and provide “strategy” planning for the future.
Instant Access Saving Account
This account is the easiest to open and gives ready access to your child’s account.
The main drawback is that they offer the lowest interest rates.
It is also a good way to find a balance with access of your child’s account. It is important that you instill in him the discipline of only withdrawing money from his account only when needed.
Child Trust Funds
One of the most popular ways of saving for your child’s future, Trust funds offers the best interest rates and comes insured.
Considered as Long-Term Investments, Trust Funds usually mature when your child reaches 18 and ownership of the funds is then transferred to your child.
Children’s saving accounts are generally opened and maintained with parent supervision.
When children reach higher ages or until they reach 16 they can only open accounts in their names with parents as signatories.
Children’s saving accounts start at your child’s early years. It’s important that parents keep track of their child’s savings. Interest Rates are dynamic and shift with the economy.
Managing your child’s finances is the responsibility of parents. Having a savings account is not only good for your child’s future but can also help you ease future expenses such as sending your kid to college.
Uniform Transfers to Minor Act (UTMA)
There is another type of savings accounts for kids that involves less interaction by the children.
Some banks may offer a custodial savings accounts for children. This account is designed more as a way for a parent or guardian to put aside savings that will one day belong to the child.
The Uniform Transfers to Minor Act (UTMA) governs the rules on this type of account.
The minor is allowed to receive money, gifts, patents, royalties, and fine art without the aid of a guardian or trustee.
The parent or guardian has the power to manage the account for the benefit of the minor until he or she becomes 18 or 21 years of age (depending on state law).
Make sure that you understand that this type of kids savings account exists so that you know you’re opening the right one for your child.
What to Look for in a Child Savings Account
When it comes to choosing a savings account for your child, there can be many options available. Take these major factors into consideration when selecting an account:
No monthly fees
A typical savings account, especially from a major bank, may charge a monthly fee if the daily account balance falls below a certain amount -- usually around $200 - $300.
Children may not be able meet this fee-waiver requirement easily. Furthermore, any monthly fee could discourage them from saving regularly.
Most child savings accounts do not come with a monthly fee. But, it is still important to make sure that one doesn’t exist on the account that you’ve chosen.
A high interest rate helps to grow money faster. For a child, the interest earnings may not be significant as they begin building their savings.
However, over time, it will grow. This is a powerful source of motivation to encourage children to continue saving consistently.
A child savings account from a traditional bank won’t provide a much interest earnings at all, but an online bank will probably offer savings rates that make a big difference.
Ways to access the account
Some parents and their kids may prefer to have access to a physical branch. Others may be absolutely fine with well-designed and feature-packed online and mobile banking platforms.
Children may even be able to deposit gift checks from family members through mobile check deposit.
Also, think about whether your child would like the ability to withdraw money through an ATM.
Features that foster good money habits
Depending on the bank, kids savings accounts may come with some form of financial education program or tool that helps teach children about smarter saving.
For example, the bank could allow children to open multiple accounts free of charge.
Each account could have a nickname for a specific savings goal. Or, accounts could have goal amounts that children can use to track their progress.
Look for things such as money management tools, educational videos/games, and nifty features that enable your child to get a better grasp on their money.
Minors Cannot Open Bank Accounts Alone
Legally, anyone under the age of 18 or 21 (various depending on your state’s laws) cannot sign a legal contract.
Therefore, all child savings accounts will require a signature from a parent or legal guardian.
A child savings account always has more than one accountholder with the joint owners being the child and the parent or guardian.
How to Help Children Manage Their Accounts
Parents can play a major role in how well their children uses savings accounts. The more children interact with them, the more financially aware they may become.
More often than not, parents will be the middlemen to help children handle the money in their savings accounts.
These are some ways that parents can help children manage their accounts:
Make children pay for themselves
If your child wants to buy something, make them use their savings to pay for it. This reinforces that they’ll have to save for the things that they want.
You can withdraw the portion that they spend to a linked account, while you purchase the item for them.
Use personal payments
To piggyback on the above point, many banks offer free person-to-person payments. Use this feature to send small amounts of payments when the child spends their money.
Review accounts regularly
Because it is so easy to access a bank account online or through a mobile device, sit down with your child regularly to review his or her finances.
It’s always a good idea to supervise your child when they want to log into their online accounts.
Let Children Own Up to Their Money
In the end, a savings account for a child provides a sense of independence. The right savings account can make a difference.
A bad childhood experience with banks could negatively affect their feelings toward financial institutions when they grow up.
When used correctly, a child savings account could establish strong financial habits that last a lifetime.
Should You Demand Your Kids to Save Money?
Today kids as young as five are receiving money on a somewhat regular basis.
Between allowance money for chores and the gifts from friends and relatives for special occasions, kids often have a stockpile of cash burning a hole in their pockets.
As soon as a $5 or $10 falls out of their birthday cards, they think about all the toys and candy that can soon be theirs.
But as a parent, you have an obligation to teach children about money and the importance of saving if you want them to be financially wise later in life.
The earlier children start to understand what saving means and how to go about it, the more likely they will grow up to be more financially responsible.
Demanding your children save money may not go over well no matter what age they are, so it is important to do the ‘demanding’ in the right way and educate them on matters of money from day one.
While pre-schoolers may not care much about the economy or their college fund, they can start learning the value of saving if you offer consistent guidance and encouragement each and every time they receive some cash.
How Demanding Should You Be As a Parent?
You want the best for your kids and likely have a set of rules for your home and beyond that kids must follow.
With a subject as important as financial stability, you should also have expectations from children when it comes to money.
Your lessons and rules will need to be at age appropriate levels but consistency is a must-have if you expect your child to follow through.
Additionally, you must also be willing to back up your lessons by also doing what you are teaching your child when it comes to your own money issues.
Younger kids may not catch on like older ones when you harp about saving more money while at the same time bill collectors are calling your house day and night demanding payment or repossessing your car.
Shore up your own financial life as you take a proactive role in helping your child understand the importance of financial independence.
Your example will be the best lesson a child can learn.
Demands on Toddlers
Little children who can’t even decipher the difference between a nickel and a dime can still learn the importance of saving.
Young ones need to have fun incorporated into their learning experiences. Start with a piggy bank or a large jar decorated by you and your child.
Let them know that money is important, especially when it is saved in a safe place.
Make a game of helping them hunt down loose and lost change to add to their banks on a weekly basis.
As they grow, open the piggy bank and help them to identify the coins inside.
Count up the coins and let the child help you roll the money in wrappers.
A trip to the bank each month may reward them with a lollipop but will also help establish a pattern of saving.
Demands on Grade-Schoolers
Kids in elementary school are learning about money and math each day in school.
It is time to up the ante by introducing chores for allowance money and scheduling times in the week to talk about their bank account and the importance of saving.
As you go over your child’s homework concerning math and money, talk about why people need to save money and how banks add interest to their account.
Speak with your children about adding part of their allowance money to their own bank account on a regular basis.
A good rule of thumb is to help your elementary school-aged child figure out what 10% of their allowance is each week and put that money aside for deposit into their bank account.
Demand the same percentage or more is taken from cash gifts children receive.
If kids have been saving since their toddler years, the requirements will seem normal.
Schedule a set day to take your child to the bank with a deposit so they know when to expect the trip.
Work with them on their savings book register to do the math for each deposit.
Praise them for their hard work in savings as the account funds continue to grow.
Demands on Teens
If you have been requiring your child from a young age to save a portion of their money for deposit into a bank account, your child may seamless continue contributing their money into the bank without hesitation.
However, as kids get older and want more expensive things, they may give you a harder time in parting with their cash.
Parents need to continue to enforce the value of saving.
If a teen starts earning a paycheck, increase the percentage of money that needs to be banked but also help them to establish goals for savings.
While the majority of money should be allowed to grow in an account, teens should also understand the process of saving for what they want.
Help teen calculate the cost of what they want and help them figure out a savings plan to achieve the purchase rather than allowing them to buy something outright just because Grandma gave them birthday money.
Add an additional percentage to the normal percentage of deposit for their goals and help them calculate the amount of time they will need to save in order to make the purchase.
Goals for finances should be defined with the future in mind.
Not only should teens be saving for their next iPhone and their first car, they should also be learning about the expense of college and life after graduation.
The more guidance parents can offer their kids, the more likely those children will leave the nest appreciating the value of money and the importance of savings.
Parents should not rely on schools or even universities to teach the fundamentals of personal finance.
These topics are just not discussed on the level necessary to establish a good financial foundation.
Parents need to start children off on the right foot so they can travel forward to a financially-stable future.