October 01, 2019 Setting up a kids’ bank account
Have young kids?
Well, now’s the time to introduce them to the concept of saving, and there’s no better way to do that than opening up a bank account for them.
As parents, we play a critical role in educating our kids around money and, within that, establishing positive habits around spending and, more importantly, saving.
To this end, if you’re good with money, chances are, vicariously, your children will be, too.
If, hand on heart, you’re not as good with money as you could be, reinforcing positive habits around money can be a great way to establish some positive financial habits yourself.
Setting up a kids’ bank account
You’ve got a swathe of options when it comes to opening a kids’ bank account.
For me, opening a bank account with the bank you bank with makes the most sense. But that’s just me.
Now, setting up a bank account for your child is super straightforward. As you’d expect, you’re typically limited to a transaction and/or savings account.
Depending on how old your child is, kids between the ages of 14-18 can usually hold a Visa or MasterCard Debit Card. Actual credit cards are off limits, for obvious reasons.
Taking your child into an actual branch to open a bank account is a great idea. It’s an empowering experience for them to open their own bank account.
Just remember that they’ll need to meet the banks’ 100 points of ID, which is pretty standard fare with opening an account.
We’re talking birth certificate, your Medicare card with their name on it and the like.
Creating good savings habits
Opening a kids’ bank account is the easy part. The hard part is instilling healthy savings habits.
Here are a few considerations and tips to help you do exactly that…
Get them to set a savings goal
A great place to start is getting your child to set a savings goal. Let’s say they’ve been pestering you for a new scooter over the past few months and that they get regular pocket money for doing a set chores week in, week out.
Assuming you’ve helped them open both a transaction and savings account, get them to name their savings account after their savings goal. Trust me – they’ll love that.
Help them work out a budget
Next, based on the amount of pocket money they get, sit down with them and work out a weekly or fortnightly budget (the simpler the better, obviously), allocating a dedicated percentage of their pocket money to save for their, say, scooter and money to ‘spend’ over that period.
That way, they’ll start to gain a distinct understanding of staying within the parameters of their budget to meet their savings goal.
Make sense? Okay, cool.
Make it as real as possible
Now, depending on how close you live to a branch, I’d suggest going old school and taking them in each week and getting them to deposit their pocket money into their transaction account physically.
In my mind, there’s no better way of making it all the more real.
Failing that, you could transfer it directly into their transaction account, then sit down with them and, initially, help them set up a direct debit for their dedicated savings to into their savings each week.
Checking in on a regular basis
This one’s important. Sit down with them once or twice a month to look at their spending, just to help reinforce that what they’re spending has a tangible impact on the balance of their transaction account.
Looking at their growing savings account is a great motivator for them, too.
The key is to reinforce that money consistently doesn’t materialise out of thin air, and make them accountable.
Set milestones, maintain their savings focus
Another great idea is to set savings milestones and, potentially, tip in some bonus savings from mum and dad when they reach those milestones. The benefit here is twofold.
It rewards and reinforces healthy savings habits.
Plus, it helps bring their savings goal that little bit closer to reality – if it’s going to take them two years to save for a scooter based on their weekly pocket money, the horizon might be too far away and they may lose focus.
As always, I’m always around if you need to chat and bounce around ideas on how to best educate your kids around money.
Health and education aside, I’d argue it’s one of the most important and influential things you can do for them.
Disclaimer: All information contained within this article is of a general nature. It does not take into consideration your personal financial circumstances. Please consult a professional financial adviser (just like us ) when making a financial decision.