4 Best Financial Accounts for Kids
Back-to-school time can get expensive in a hurry. Whether it's new clothes, new gear or a new round of school supplies, the cost of sending your kid (or kids) back to the classroom can add up quickly.
This time of year also serves as a good reminder, however, that there are plenty of life lessons that can be taught at home. Perhaps one of the most important things you can teach your children about is how to handle money.
If you have a child in school, you may even want to take the hands-on approach of teaching them financial responsibility by opening a bank account. Just like there are many subjects in school, though, there are multiple choices when it comes to bank accounts. Here are the ABCs on a few options.
Financial Accounts for Kids
- INTEREST BEARING SAVINGS ACCOUNT:
If you have younger children, this may be your best bet. A parent or guardian will need to co-sign on the application, but once the account is open, many great lessons can be learned. For starters, you may want to teach your child about finding an account with the best interest rate and fewest fees.
"These accounts are also a good way to teach the concept of saving some, giving some and spending some, if your child has an allowance or part-time job," said Lori Winesburg, sales manager for Arvest Bank in Siloam Springs. "Or even if all you're doing is bringing in your child with their piggy bank change, a savings account is a great way to teach him or her about the basics of banking. It's also a great way for a kid to establish a relationship with a banker, and you're never too young to do that."
- CHECKING ACCOUNT:
Minors (Generally, those under the age of 18) can't open an account in their name alone, but in many instances they can be a joint owner of an account with a parent or guardian. Both the adult and the minor have access to the money in the account.
"The main thing to remember with this kind of account is that the parent is ultimately responsible for the account and account activity," Winesburg said. "It can be a little scary to think of giving your teenager a checkbook or debit card, so parents need to be sure their child is ready for this level of responsibility."
- FAMILY CARD:
An option outside the arena of checking and savings accounts is what some issuers call a family credit card. Many of these accounts let the adult set limits in advance, which is a great way to teach kinds financial responsibility while also allowing them to have some spending money each month.
"My family uses this kind of account, and it's been a good way for us to balance giving our daughter some financial freedom while also taking away the risk that could come with a checkbook or debit card," Winesburg said. "One of the best things about it is that I can control the limit and shut down the card immediately if she misplaces it."
- 529 PLANS:
These education savings plans are really about saving for your child's education. Their main benefit is that the investments grow tax-free and are never taxed for federal purposes as long as the money is used for eligible educational expenses. You'll want to consult a tax advisor for more details, and these kinds of accounts are more about the future than the present. Still, one of these plans can be very helpful if your child plans to keep hitting the classroom after high school.