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Teach your kids good money habits with these bank accounts
Every parent wants to teach their kids the value of saving, spending and giving. Thankfully there are banking products out there that let you monitor and control your kids’ progress as they develop good money habits.
What is a kids bank account?
A kids bank account is designed to help kids build their savings, learn about money and encourage them to save. One major perk of a kids bank account is that it typically has low to no monthly maintenance fees and no opening deposit minimums.
There are five different types of kids bank accounts you could open for your little one:
1. Education savings accounts
Also known as 529 plans, these types of accounts are set up to save for your child’s future education. The funds from these accounts are to be used solely for educational purposes, be it to cover elementary or secondary school expenses or college tuition. The number one perk of these savings accounts is that the earnings from the investment as well as any withdrawals from the account are not taxable for federal income tax purposes.
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2. Custodial accounts
The two most common custodial accounts are Uniform Gifts to Minors Act (UGMA) accounts and Uniform Transfers to Minors Act (UTMA) accounts. Since individuals under the age of 18 are not allowed to open savings accounts under federal law, custodial accounts were created. Basically, these are accounts that are the property of the minor but are managed by an adult, the custodian, until they reach the age of maturity. Custodians are not allowed to make withdrawals from these types of accounts for their own benefit, since the account is considered the minor’s property. Once the minor reaches the age of 18, the account is usually converted into a regular savings account.
3. Trust funds
Contrary to popular belief, trust funds aren’t just for the ultra-wealthy. They’re also a great way for average families to ensure their kids make wise financial decisions after they’re gone. There are many different types of trusts, but they usually work like this: the person who sets up the trust is called the grantor. They decide what assets go into the trust, such as stocks, bonds, cash and property. They also decide when and how the beneficiaries get to use the money. When the grantor dies, the appointed trustee makes sure the trust is managed according to plan. Then, when the beneficiary reaches a certain age or milestone, the trustee gives them the money.
4. Joint checking accounts
This is a checking account that is opened up jointly by a minor and an adult — or parent and child. They both have access to the funds in the account, and the money is owned jointly until otherwise specified. With many of these accounts, banks allow parents to put withdrawal limits on the account and track their child’s spending habits to teach them responsible money habits.
5. Interest-earning savings accounts
These accounts allow kids to learn the importance of saving money and financial responsibility from an early age. Many don’t have minimum opening deposits, and even more have zero monthly maintenance fees, which means your children’s money will earn interest even faster.
Best kids savings accounts
Justice Federal Credit Union Grow With Me account
This account has an ultra-high APY and grows with your child as they enter into adulthood.
Alliant Credit Union Kids Savings account
If you’re looking for an account that teaches children how to manage and establish savings goals, try the Alliant Kids Savings Account.
Capital One Kids Savings Account
Kids can set goals, deposit cash and checks and watch their savings stack up with the Capital One Kids Savings Account.
Best kids debit cards
If you’re looking for a prepaid debit card that gives you the power to easily manage your family’s money, try Akimbo. Parents receive up to five debit cards, which they control from the main account.
Consider FamZoo if you’re looking for a prepaid card that teaches your kids good money habits. It includes chore tracking, allowance payments, parent-paid interest, subaccounts and more.
The Greenlight Card teaches your kids the value of saving. It has a comprehensive range of features, including a mobile app, allowance payments, chore tracking and more.
For kids debit cards, we considered five popular options: Akimbo, BusyKid, FamZoo, Gohenry and Greenlight. From there, we compared fees, features and minimum deposits and balances for each account to find which three offered the best features for the best price.
We considered these five distinct factors when calculating the best savings accounts for kids: interest, fees, features, customer support and minimum deposits and balances. We gave more weight to accounts that had high interest rates, low to no minimum fees or deposits and parental controls.
From opening an account for your newborn baby to saving for college, explore various kids banking topics below.
Before you head to the bank and open an account for your kid, learn about the documentation you need to have and how this account could affect you come tax time.
Opening a bank account in your child’s name can be a great way to save for future educational expenses and teach your child good money habits. But not all banks and credit unions allow you to open an account for a baby. Find out which ones you qualify for here.
Education savings accounts, also known as 529 plans, are set up to save for your child’s future education. The funds from these accounts are used to cover educational expenses, such as elementary or secondary school expenses or college tuition. The number one perk of these savings accounts is that the earnings from the investment as well as any withdrawals from the account are not taxable for federal income tax purposes.
Teens can open savings accounts at most banks and credit unions, which can come in handy when they get their first job. Compare top-rated accounts for teens and find out how they compare to prepaid cards and traditional bank accounts.
College gets more expensive every year. The earlier you save, the greater the chance you have to combat student debt in the future. Uncover the average cost of tuition, fees and room and board. Then learn how to create a savings plan that helps your money go further.
Children’s banking programs in the US
There are a host of banking programs available for children in the United States. These programs are designed to educate and engage your child in money-related topics such as saving and budgeting. In addition, each bank offers different rewards and incentives that may be worth considering when looking for a bank account to open for your child.
|Program name||Best for||Features|
|School Savings™ program||K–12||This program, approved by the US Department of Education, allows kids to make savings deposits at school through Websaver and features:|
|Fifth Third Bank Young Bankers Club||Fifth graders||This is a 5- or 10-week program taught inside the classroom. Kids learn how to:|
|TD Bank WOW!Zone||K–12||This program provides financial literacy lesson plans to teachers:|
|Teach Children to Save Day||K–8||This annual event is put on every April by bank volunteers who teach kids how to:|
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