Money and Children
As adults, whether we have money in the bank or not, we understand
fully the concept of saving and how important it can be to our wellbeing
and security, and chances are that many of us, given the opportunity,
would love to go back in time and put a bit more money away for the
rainy days that always invariably come.
For children, this concept needs to be learned and, preferably, entrenched
as a life long habit and one of the best ways that they can achieve
this is by operating and managing their own savings account. If you’re
a parent who gives their child an allowance, then you could make a condition
of that allowance that 20% or so of the amount must be set aside for
savings. There are no set formulas, but remember that it’s not
just about how much money your child puts in the bank each week, but
rather their learning about managing their own accounts and taking responsibility
for their spending.
Many banks realise that if they can snare a youngster as a customer,
then chances are they’ll be a customer for life. Thus many banks
offer child-friendly savings accounts with a variety of sweeteners such
as free gifts or even money to start the account. This is where you
as a parent need to be particularly vigilant and to look past the gimmicks.
Many children’s savings accounts come with extremely low interest
rates or other limitations, so take your time and weigh up the alternatives.
You might also be tempted to choose an account that limits the withdrawals
in order to help your child ‘grow’ their money, for example,
with a compound interest account. Remember that the idea is not to primarily
grow the balance of the account, but rather to help the child learn
about savings and withdrawals. To that end, the child will learn much
more about money by having the ability to withdraw their money –
even if they take it all out.
Many parents, if they have the means, start a savings account for their
children when they are born, and deposit a small monthly amount into
the account as their children are growing up. Financially, this is a
wonderful gift that they give their children, but it can also distance
the child from the value of money if they grow up expecting to inherit
a windfall at some point in the future. It would be far better to have
the child contribute to their own savings plan over the years, even
if the parents decide to continue adding to the account also.
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