Kids Bank Accounts
Bank Accounts are something we usually think about for adults. But how are kids to learn about spending, saving and managing money? They should be allowed to do the same things adults do, including making mistakes, just on a smaller scale. That means they need to learn that money is finite. If they spend it, it's gone. If they don't have enough to buy what they want, they have to save up. Start with a cash allowance. Cash is tangible, so it's easier to learn these things.
When kids are ready, it's time to add bank accounts. Many people start savings accounts for kids before they're old enough to understand it, and that's fine. When kids are old enough, it's time to bring them into the loop. Show them the statements over time so they can see that their balance is growing. Talk about what kinds of things they're saving for - a video game, a car, college, emergency funds. Show them how putting a little money into their bank account over time really adds up.
Bank Accounts for Kids
As kids enter their tweens or teens, it's time for a checking account. Of course, they won't actually write checks. Instead they'll use plastic. This is critical because they're seeing plastic used every day, and they need to learn to use it resposibly. Find a bank account where they can use their debit card up to the amount in their account, but no more. Kids can use their card to get toys, candy, sodas, anything. They'll even be able to order things online without borrowing your credit card. This will open the door for you to teach them about protecting their personal information online.
Show them how to balance their bank accounts every month. They'll be able to see where they spent their money and review their choices. If they make mistakes, they'll learn while the dollars are still relatively small.
The minute kids turn 18, banks and credit card companies will be looking for their business, enticing them with offers of credit. If they don't learn how to handle money while they're still under your supervision, they could get themselves into big trouble.
So open a savings account for your child, and when they're ready, get them a checking account and have them use it for their spending money. You'll be glad you did.