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How to Set Up and Manage a Children’s Savings Account

Is it ever too early to set up a bank account for your kids? Find out how to open a children’s savings account, when to do it, which bank to choose and much more.

childrens savings accounts

Every childhood is marked by common milestones like learning to ride a bike, going to school for the first time and losing your first tooth. But while you have to learn to walk before you ride a bike, opening a children’s savings account can never be done too early.

Parents are encouraged to set up a bank account when their kids are born and get a head start on putting their children on a path to financial independence. As kids get older, helping them manage a bank account teaches essential money management skills that will enable them to be financially responsible adults. These habits, when formed early on, can be maintained throughout adulthood. Get started early and learn how to manage your child’s money with a children’s savings account.

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Setting up your children’s savings account

Now that you’ve decided to open a children’s savings account, where do you start? The answer depends on your objective and also the age of your child. Are you opening a children’s savings account to start a college fund? Will this account operate as a savings for gifts, allowances and other money your child receives? Or does your teen want an account to save his or her babysitting money? This is your first task: Decide why you’re opening the children’s savings account.

After you settle on an objective, you can browse the different accounts offered for minors. Since your child is under 18 years old he or she cannot open an account on their own. With a birth certificate, parents can co-sign and open an account for their child at birth.

What to remember

Consider opening a children’s savings account at a bank in close proximity to your home. Younger children may enjoy being able to physically visit the bank like mom and dad and make their own deposits. Using online banking can also be helpful for kids. Plus, parents can transfer and track allowances online. There’s always the option to open online bank accounts, which are known to have higher interest rates.

What is the best children’s savings account? It depends what’s best for you. Generally look for an account with high interest rates and low (or preferably zero) minimum balances and maintenance fees. While a piggy bank teaches kids how to store money, a bank account shows kids about getting their money to work for them through compound interest. Credit unions may provide higher interest rates for children’s savings accounts, but you may have to become a member to open an account. The bottom line is do your research and, when in doubt, ask your financial specialist or bank representative before opening an account.

The good news is many children’s saving accounts don’t charge monthly maintenance fees and they have low minimum balances, if any at all. As well as looking out for unnecessary banking fees, make sure to check if your children’s savings account has a minimum number deposits required per month. Are there fees associated with an inactive account? Some accounts are only free if you enroll in electronic statements.

These are important questions to get answered. Avoiding banking fees saves your child from an unpleasant lesson in money management. Get educated about your banking options so you and your child don’t have surprises later.

childrens savings account

Opening a savings account can teach a child a lot about budgeting.

Managing a kid’s savings account

Opening a children’s savings account teaches your kids about budgeting and managing their finances. To help them manage their money, ask about their short and long term goals. Are they saving money for a bike or phone? See if the bank provides budget tracking programs for kids. This is the perfect opportunity to teach your child how they can save money and make purchases independent of mom or dad.

Fun fact: Kids saving accounts often with kid-friendly perks. Some banks give prizes to kids when they meet certain savings goals. Other banks provide first-time customer gifts for kids like piggy banks. Banks often allow parents to customize controls of the children’s savings account. As children grow older, parents can let go of the reins. Eventually in your child’s teen years, you can help them open a checking account with a debit card. Check with your bank to see how, as your child grows older, you can provide them with more financial responsibility.

More and more cities are adopting programs to help increase the number of children’s savings accounts, a push specifically made to help children pay for college. Across 29 states, there were 313,000 kids with children’s savings accounts by the end of 2016, according to the Corporation for Enterprise Development.

Jump on the bandwagon! Remember this is a learning experience. And all journeys, especially financial ones, come with learning curves. So take comfort in knowing that as a parent you can monitor you child’s savings account activity to hold their hand when needed and let them fly free when it’s time to open a teen savings account.

Do you have any advice to add to this article? Let us know about your experiences with childrens savings accounts in the comments section below.

For help paying for college, visit AAA.com/StudentLending

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