The greatest gift you can give your child isn’t an iPad or a new bike – it’s a savings account. That gift could set them up for life. Just don’t expect your child to be too thrilled about the idea!
Opening that first account is an important milestone for children and should be treated as such. They need to know that their savings account is more than just another piggy bank – it’s an introduction to a system that manages their money and answers their questions. And they need to be comfortable in that system. Why start early? Because you’re setting the stage for your child’s financial future.
How to start saving early
Most banks offer great savings options for children and students. When opening an account for your child, make the same considerations as you would for yourself. For example, if you’re opening an account to put money away for post-secondary education, a traditional savings account might not be the way to go. An RESP is likely a better option for this type of financial goal. For more information, read Choosing the right account. Once you know what type of account you want to open, here’s what to do:
1. Make their first account a savings account
Part of the lesson here is to emphasize the importance of saving. Divide your child’s allowance into spending and saving money. The message here is that their savings are not for spending and are not to be touched under any circumstances.
2. Make an appointment
Making an appointment will give the occasion a sense of purpose and emphasize its importance. If your child is comfortable, have them call and make the appointment themselves. Since banks are often busy, an appointment will guarantee that you’re not rushed. Your child can ask questions and have them answered thoroughly.
3. Count up the deposit together
Most children start out with a piggy bank. Empty the bank, roll up the change and count up the total together. Watch how excited your child gets when they see how much money they’ve saved. This might be a good time to introduce the idea of interest – or you can ask the banker to explain it.
4. Prepare for your appointment
The bank will require some sort of identification. Call ahead of time to make sure you gather everything you need. Explain the importance of identification and how it allows the bank to keep their money safe.
5. Let your child be in charge
If you allow your child to take charge the occasion will be that much more powerful. This is, after all, their moment, not yours. Allow them to hand over their money and sign their own card.
6. Discuss the importance of privacy
Your child is going to be asked to come up with a PIN number for their account. Discuss the importance of secrecy and what could happen if someone knew their PIN.
7. Set up a banking file at home
Just as it’s important to teach your child the value of saving, it’s equally important to teach them how to stay organized. The lessons you teach them now will carry over into adolescence and adulthood, making for a more financially responsible future.
Set up a file to hold their receipts, deposit slips, monthly statements and bankcard. Once the account has been set up, make sure to return to the bank each month to check up on their account and make a deposit. If they didn’t understand how interest works, they will when they see more money in their account than they had originally deposited. Although checking the account online is quicker and more convenient, it doesn’t carry the same sense of importance.
Schedule a trip to the bank and make an occasion of it.