When you’re busy changing diapers or chasing a toddler around the park, setting up your child’s first bank account keeps getting pushed down on your to-do list. You may even find yourself wondering “Does my little one even need a bank account?” Well, the answer is yes. Because if you have a child, it’s important to get them an early start in life and save for their future while they’re still young.
The good news is that opening your child’s bank account is easier than you may think. Whether they’re one, five, or fifteen; this article offers a step-by-step guide to help you set up your kid’s first account. Because, with the right type of account and your guidance, you can get your child started on the path to financial freedom.
Choose the Best Type of Account for Your Child
The type of account that you open for your child depends on their age and the objective of the account. Parents of babies and toddlers often begin their financial journey with a savings account. At this age, children are still very young and don’t need access to their money—which makes it a great opportunity for you to set funds aside for future needs.
Other parents choose to start with a custodial investment account, as a way to take advantage of compound interest and begin growing their kid’s nest egg. This is more of a long-term outlook that’s focused on setting a little money aside now while your child is still young. Once they turn 18 or 21, depending on your state, they will gain access to the money and be able to use them as they see fit. For many young adults, this offers an opportunity to buy a home, get a car, or start a business.
Many parents open a college savings account for their children, even before they start pre-school. These accounts offer tax benefits for parents and can help your child graduate college debt-free. Depending on the type of college savings account that you open, your child may be able to use the funds for other purposes if they don’t need the money to fund their higher education.
For those with older kids who use money on a regular basis, checking or prepaid debit cards can be a good choice. Most traditional checking accounts are only available for teens, while prepaid debit cards are a convenient choice for younger children whose parents want to provide with spending money. Both, checking and debit cards, give your child the opportunity to manage an appropriate amount of money and become more familiar with financial transactions.
Find the Right Financial Institution
Not all kids’ bank accounts are made the same and no two financial institutions offer the same products. That’s why it’s important for parents to do the research and identify the financial institution that offers the right product for you and your family. By reading up on credit unions, banks, and fintech alternatives you can determine which option best suits your needs.
It’s also important for parents to keep fees and security in mind when choosing the best financial institution for their child. Take your time to review parental controls, branch locations, and ATM access. Other important details to keep in mind include balance requirements, interest rates, and
In some cases, you may want to open more than one account for your child. This is especially true if you have multiple goals. For example, if your priority is to grow their college savings but your child is also reaching the age where they need spending money, you may want to consider a 529 and a prepaid debit card.
Gather the Necessary Information
Once you’re ready to move forward with your child’s account, it’s time to prepare the necessary documents. These could vary depending on the financial institution, but may include:
- Your Driver’s License
- Your Social Security number
- Your child’s birth certificate
- Your child’s Social Security number
- Proof of address
Complete the Application Process
Thanks to modern technology, it’s now easy to open your child’s bank account online. This is especially convenient for parents who still have babies or don’t have the time to visit a branch.
But if your child is in elementary school or older, they may enjoy the process of visiting the bank with you and opening their account in person. They may also find it exciting to sit next to you as you open the account online. Either way, the application process is quick and can usually be done within 15 minutes.
Once you’ve opened your child’s account, the next step is to add funds. In most cases, you can simply transfer money from your own account, write a check, or deposit cash. Once the account is funded, it’ll be ready for you and your child to use as needed.
Tips for Parents
Congratulations on opening your child’s first bank account! This is a very important step in their financial future and in your journey as a parent. The following are some tips to help you make the most of this account and continue building your child’s wealth:
- Download the bank app to keep track of your child’s money
- If your child has a device, help them set up their own login and teach them how to monitor their account balance
- Think about opening multiple accounts for different financial goals
- Set up automatic transfers to continue growing your child’s savings
- Create an allowance plan that lets your child know how much they will receive on a regular basis
- Get your child involved in reviewing monthly statements and creating a budget
- Consider setting spending limits for your child
- Learn about other parental controls that may be available to you
- Work with a financial planner to help manage your child’s money
- Encourage family members to contribute to your child’s college savings account in lieu of birthday or holiday gifts
What’s the Next Step?
As your little one gets older, it’s important for them to become more involved with their personal finances. With the proper accounts in place, you can help your child set age-appropriate goals and come up with plans to reach them.
You may begin with a savings account for your baby today, give them a prepaid debit card when they get older, and eventually put money in an investment account to help fund their retirement. And, along the way, there will be many money lessons for you and your child to learn together. By using your child’s first bank account to build smart habits, you can provide them with the necessary tools to achieve financial freedom once they become adults.