Most parents understand the importance of teaching their kids smart money management skills. Several studies show that children’s financial habits are primarily shaped by their parents. Those households who take an active interest in helping their kids understand basic money concepts may be in a greater position to help children avoid the types of financial problems that many families face today.
The period following the recession shed greater light on Americans need to improve their financial literacy. However, many analysts also noted that to prevent the next generation from making the same mistakes, parents need to take more steps toward teaching their children about money. One of the first actions some adults take is opening a bank account for their child.
A checking and savings account can provide kids with a hands-on approach to both learning about and managing their finances. In addition, many of these accounts are low-cost and do not require minimum balances, which can be beneficial to parents who plan on funding the account with a child’s allowance. Many parents provide an allowance when their children are old enough to complete household chores in an effort to both teach them discipline and provide them with a foundation for how employment and compensation work. Teaching kids about how checking and savings accounts work and giving them the option to hold a portion or all of their allowance in a bank can teach kids the fundamentals of spending and saving.
Once children see their money start accruing, they may take on a more conservative view about their finances. This may prompt them to avoid instant gratification and instead become more excited about saving the money they earn.
In addition to teaching children about spending and saving, most bank accounts for kids are designed specifically with financial literacy in mind. For this reason, institutions may offer tutorials, web-based resources and pamphlets about the basics of checking and savings accounts, writing checks, balancing a checkbook, creating a budget and depositing money. As children get older, they may graduate to a more mature bank account that offers resources about bank-issued credit cards and debt management.
Lastly, most banks offer online banking for children's bank accounts, which allows parents to sit down with their kids and explain bank statements and monitor transactions and savings in real time.