In today’s complex financial world, teaching children about money is an important responsibility for parents. One effective way to initiate this education is by opening a bank account for your kids. Not only does this instil good financial habits early on, but it also fosters a sense of responsibility and independence.
In this blog, we’ll explore the importance of teaching children about money through bank accounts, the mechanics of setting up these accounts, and how to guide your children in managing their funds wisely.
Financial Education from an Early Age
Financial literacy is a skill that can significantly impact a person’s life – but it’s often overlooked in traditional education. Parents play a significant role in filling this gap by teaching their children about money management. Here’s why it’s essential:
Life-Long Skills
The financial habits children develop at a young age often persist into adulthood. By teaching them early, you set them up for a lifetime of financial responsibility.
Independence and Responsibility
Managing money encourages independence and responsibility. Children learn to make choices, set goals, and understand the consequences of their financial decisions.
Avoiding Financial Pitfalls
Financial education helps children recognise and avoid common financial pitfalls, such as excessive debt and impulsive spending.
Building a Strong Parent-Child Relationship
Teaching your child about money is an opportunity to bond and build trust. It fosters open communication and reinforces the parent-child relationship.
Opening the Bank Account for Your Kids
Now that we’ve established the importance of financial education, let’s dive into the practical steps of opening a bank account for your child:
Choose the Right Bank
Research different banks to find one that offers suitable accounts for children. Look for low or no fees and consider proximity to your home or work for convenience.
Gather Necessary Documents
Typically, you’ll need your child’s birth certificate and your identification like a driver’s licence. Some banks may have additional requirements, so check in advance.
Visit the Bank
Schedule an appointment or visit your chosen bank branch with your child. Explain the purpose of the visit to help ease any anxiety they may have.
Select the Type of Account
Most banks offer special accounts designed for children or teenagers. These often come with features like no minimum balance requirements and parental controls. If you have ample cash to spare, you can consider a savings account in the child’s name with you as co-signer, and a special time deposit with higher interest.
Complete the Application
Fill out the account application form, providing all necessary information and documentation. Be prepared to sign as the legal guardian or parent, as current banking rules in Australia do not allow depositors to sign the document until they are at least 18 years old at the time the account will be opened.
Deposit Funds
To activate the account, you’ll need to make an initial deposit. This can be a small amount, but it’s an excellent opportunity to involve your child in the process. Explain that this money will grow over time through interest. At this point, if the bank has a required minimum balance, you can teach your child to make sure the money in the account is higher.
Set Up Online Access
Many banks offer online account management tools. Set up online access to monitor the account, and teach your child how to check their balance and transaction history.
Explain Security Measures
Teach your child about the importance of keeping their account information, including their PIN and online banking credentials, confidential. As bank accounts can be compromised via cybercrime, take the time to discuss not sharing your emails or phone numbers with anybody outside the family, even people claiming to know your loved ones.
Make It a Learning Experience
Use the account-opening process as a teaching moment. Explain concepts like interest, deposits, withdrawals, and the importance of saving.
Guiding Your Kids in Properly Managing Funds
Once the bank account is activated, the real learning begins. Here’s how to guide your child in managing their funds effectively:
Set Financial Goals
Help your child set achievable financial goals. This could be saving for a special toy, a school trip, or even college. Encourage them to save a portion of any money they receive as gifts or allowances.
Track Expenses
Teach your child how to record their spending. This can be as simple as keeping a ledger book or using budgeting apps designed for kids.
Budgeting Basics
Introduce the concept of budgeting. Help your child create a simple budget that allocates money for different purposes, like saving, spending, and giving.
Earning Opportunities
Encourage your child to explore ways to earn money, such as doing chores, starting a small business (like a lemonade stand), or helping with household tasks.
Teach Delayed Gratification
Many children nowadays want things right that instant, but adults can tamp that Explain the value of waiting and saving for something they want. When they express a desire for a new toy, for example, suggest that they save a portion of their allowance for it.
Discuss Wants vs. Needs
Help your child differentiate between wants (things they desire) and needs (essentials like food and clothing). This understanding will guide their spending choices.
Explore Compound Interest
As your child’s savings grow, explain the concept of compound interest. Show them how their money can earn more money over time. Some finance experts claim that helping a bank account gain compound interest often lies in seldom withdrawing from the account while depositing more money.
Regular Money Talks
Make discussing money a regular part of your family conversations. Share your own financial experiences and decisions to provide real-world examples.
Encourage Giving
Teach the importance of giving to others. Suggest setting aside a portion of their savings for donations to charities or helping those in need.
Conclusion
Opening a bank account for your child is one of the first steps toward providing them with a solid foundation in financial literacy. It equips them with the tools they need to manage money responsibly and make informed decisions throughout their lives. By teaching your child about money from an early age and guiding them in the proper management of their funds, you empower them to build a secure financial future. The lessons they learn today will serve them well as they navigate the complex landscape of adulthood.
DISCLAIMER: This article is for informational purposes only and is not meant as financial or parental advice. 2 Ezi has no relationships with any bank.
