Teaching Money Skills to Children: When's the right time to open their first bank account?

When it comes to teaching money skills to children, one of the most common things parents think about is opening a bank account for their child. This not only introduces them to the idea of digital money but also helps them understand the basics of managing finances from a young age. But what is the right age to start a bank account for children, and what should parents look for in a child-friendly bank account? There are a few things to think about when answering this question.

The Right Age to Start a Bank Account

Rather than focussing on a set age, think about what financial skills your child has. They need to understand what money is, be able to equate physical and digital money and understand saving and spending. Without these skills they may struggle to use a bank account effectively. You also need to think about where their money is coming from - do they get pocket money, or is it money from gifts?

Starting early helps build a strong foundation for financial literacy, instilling essential money management skills that will benefit them in adulthood. However, the right age can vary depending on the child’s maturity level and understanding of money.

Benefits of Having a Bank Account for Children

Opening a bank account for children offers some advantages that go beyond just saving money. Here are some of the key benefits:

1. Financial Literacy

A bank account serves as a real-world tool for financial education. Children learn how to deposit money, understand the concept of interest, and track their spending. Managing their own account, even with parental guidance, provides hands-on experience real life experience.

2. Understanding Digital Money

Whether we like it or not, cash is far less common. A child-friendly bank account, often paired with a debit card, helps children solidify their understanding of digital transactions, online banking, and the concept of money existing in digital form rather than just physical cash.

3. Saving and Goal Setting

Having a personal bank account encourages children to save. Parents can use this opportunity to teach them about setting savings goals, whether for a toy, a video game, or even long-term expenses like driving lessons. Some bank accounts offer tools to help with saving, or you can use a visual saving tracker.

4. Learning Responsibility and Independence

Managing a bank account gives children a sense of responsibility and independence. They can learn to make smart financial choices and understand the importance of budgeting, all of which is great practice for when they're grown-ups.

5. Security of Funds

Unlike keeping money in a piggy bank, a savings account can provide more safety. There is no risk of losing cash, and children can access their money through safe and convenient banking channels. You can talk to your children about the safety measures that banks put in place.

6. Interest

Having their money in a bank account offers the opportunity to earn interest - which can open up a whole other learning opportunities about interest rates, how they work and how to look for good deals.

What to Look for in a Child-Friendly Bank Account

Not all bank accounts are created equal, especially when it comes to accounts designed for young savers. Here are features to consider when choosing the right account for your child:

1. Fees and Minimum Balance

Look for accounts that have no monthly maintenance fees and low or no minimum balance requirements. This ensures that children can keep their account active without the risk of incurring unnecessary charges.

2. Parental Controls and Oversight

A child-friendly bank account should offer parental controls, allowing parents to monitor transactions, set spending limits, and receive alerts for any activity on the account. This helps parents guide their children’s financial decisions and ensures that they use the account responsibly.

4. Interest on Savings

Look for an account that offers interest on savings. Even a small interest rate can teach children about the benefits of saving money over time and introduce them to the concept of compound interest.

5. Online and Mobile Banking

Think about what suits your family and child in terms of mobile banking and access. How will your child access and look at their account?

6. Debit Card Options

Some child-friendly bank accounts come with debit cards that allow for small transactions. Parents should look for options with spending limits and security features such as transaction alerts and the ability to lock/unlock the card instantly.

Final Thoughts

Opening a bank account for your child is a step toward preparing them for a financially responsible future as an adult. By starting early and choosing the right account, you can provide their children with the necessary tools and knowledge to manage their finances wisely. The key is to make banking an interactive and educational experience, at an appropriate level that guides them through the process while allowing them to take ownership of their financial journey.

With the right guidance, children can develop lifelong money management skills that will serve them well into adulthood. So, why not take the first step today and set your child on the path to financial success?