A Bank Account for Your Child

by

cash stuffed into a piggy bank

I confess that my young-self would rather have spent the money; knowing I could not run out and buy the latest Barbie doll was a disappointment. My older-self, however, remembers those lessons of saving and compound interest.

We’ve left the days of passbooks far behind. Opening an account in-person or on-line can still be a terrific learning experience for a child, particularly with a high-yield savings account to really drive home the concept of compound interest. Look for accounts with low or no minimum deposits, and with low fees. (For a list of the best on-line accounts, check out Doughroller.net.)

There is, however, something to be said for taking your child to a brick and mortar bank to open an account. It’s interesting, especially for smaller children. Find out in advance about what types of accounts are geared towards children, and ask the bank rep to sell the benefits of the account directly to your child, to get your child involved in the process.

One question I often hear is whether the account should be set up in the name of the child or the parent? So I went down to my local community bank and asked Mona Soliman, Private Banker with Borel Bank and Trust in Burlingame, CA.

“The Uniform Act allows a parent to open an account as trustee for their child and the child can’t access the money until they’re 18,” Mona said. “The parent can access the money on behalf of the child. Then that account converts to the child’s name at 18, if the child elects to do so.”

This is the standard model of bank accounts for children, and it’s a good one. Not only does the child get to see his or her name on the account, which makes it more exciting, but the child’s social security number is used on the account, so there are “no taxes on the interest earned unless it’s a tremendous amount of money,” says Mona (as in all things, consult your tax advisor).

You must be able to prove you are a resident in order to open one of these accounts, and the child must have a social security number. Call the bank in advance before taking your child in to open the account to verify what you need, because in this fast-paced regulatory environment, rules can change.

Bank accounts may not always be the best ways to save for college, but they are great tools for teaching children how to save. “Most parents who come to our bank have their kids put some money from their allowance on the side,” Mona says, “and then they come in with the kids every two weeks, or every month, to put the money into the accounts. Birthday or special occasion money is likewise put into the accounts. Then, if the kid needs anything major (for example, sports equipment), they can use this money.” The parent needs to spend time with the child, discussing how much is being saved and why, and what sorts of uses the savings will go toward. Don’t just lecture; discuss the importance of what you’re saving for. And listen.

Most Americans are terrible savers, and it’s going to come back to haunt us. Teaching your children to save is an invaluable life skill and yes, when both parent and child are engaged, it can be fun!

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28 comments

  1. Avatar of mommy nhoj mommy nhoj says:

    she has, as a gift from godparents, a mutual fund under my name. but since the MF was opened abroad, we need to have another one here.

  2. Avatar of jami jami says:

    started a bank account for our kids first birthday. since then we bring in money that our kids get for birthdays or from usor the grandparents to saving s every year around their birthdays. our bank has kid saving programs.

  3. Avatar of Jessica Jessica says:

    I opened an account with a credit union they offer great saving interest.

  4. Avatar of mjegla12 mjegla12 says:

    I would love to start a bank account for my little one. This sounds like a great way to get started!!!

  5. Avatar of MissTK MissTK says:

    I hope to start a bank account as soon as I have a SSN for her. since we have been saving money to get her started.

  6. Avatar of Hipmom808 Hipmom808 says:

    We started a bank account when each child turned 1. For all special holidays we ask no gifts and instead a donation into their college fund. They are so young they don’t really "need" any more toys. They already have a lot.

  7. I already planned on starting this on her first birthday with all the money she will be getting over the years. i wished my parents did that for me. so in a few months we will get her her own bank account with her name on it along with mine and she will be thankful for it i know she will be :)

  8. Avatar of Brina Brina says:

    i’m so doing this!!

  9. Avatar of geneva geneva says:

    i do this with my child

  10. Avatar of Angela Angela says:

    Planning on doing this on her 1st birthday.

  11. Avatar of JadedMoss JadedMoss says:

    I’m actually doing that today. Also instead of buying bonds you can open an investment CD for your child’s education.

  12. Avatar of jessie jessie says:

    Very helpful. My daughter was born 12 days ago and one of the first things I wanted to do for her was open a bank account. Finally got her ss# so this will be getting done tomorrow!

  13. Avatar of Clo2 Clo2 says:

    Love the idea.

  14. I want to start with a piggy bank, savibng money is great!!

  15. I should start this ASAP~~

  16. Avatar of Pinkkrystal Pinkkrystal says:

    I should start this ASAP~~

  17. Avatar of Johnelle's Johnelle's says:

    it sound silly, but we put 2.50 a week in our daughters piggy bank, thats 10.00 a month and 120.00 a year. We also put birthday money in the bank as well. Ocasionally we will put an extra 20.00 in there, but it will all add up in the years to come. Which is drawing interest… she made .14 cents last month and it will grow as the amount grows.

  18. Avatar of Sasoo Sasoo says:

    One of the best things my folks did was to teach me to save, all abt interest, and helping me manage my own account.

  19. My mom started one for our daughter. My husband and I gave her a piggy bank to put money in for herself. She LOVES the piggy bank and takes my change out of my purse just so that she can put it in her piggy bank. :)

  20. Avatar of bo_lynn1506 bo_lynn1506 says:

    i will save up for mine’s college defiantly

  21. Avatar of BLE$$ED BLE$$ED says:

    As soon as we have our bundle we will start a saving for him or her as well

  22. Avatar of Jess1477 Jess1477 says:

    My baby girl already has her own account!

  23. Avatar of RubyRae RubyRae says:

    I am so happy I have a savings account for my boy! Every now and again we throw extra into it, and when his piggy bank fills up it goes in there!

  24. As soon as my baby is born my husband and I will be setting up an account.

  25. Avatar of shanita shanita says:

    i’m thinking about doing that for my lil girl so when she gets older she can have a credit early

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