Kids Guide to Understanding Banking

Kids begin to learn the value of money at an early age. For some children, their parents reward them with money for good grades, while other kids are given a weekly or monthly allowance. Often kids will use this money to buy themselves small things that they want, such as a video game for example. As kids are learning to value earning money it is a good time for parents to begin teaching them about banking. A kid who establishes the importance of managing his or her bank account will learn what is needed to handle money in a responsible fashion.

Ways to Teach Kids the Importance of Saving and Banking

As a parent, the first step is to lead by example and establish good banking and money management habits. One step in that direction is to set up a savings account for your child’s future from the time that he or she is an infant. A college savings account is one of the ways that parents may choose to save for the future of their kids. This account may also be used as an example when illustrating the importance of saving and having a bank account. When teaching kids the importance of saving it is wise to first explain the benefits associated with it. Parents may also teach kids the importance of saving money by setting up a jar or piggy bank and having the child set a certain amount of his or her allowance inside for a set period. At the end of that period have the child count out their money that can now be spent on something that they have wanted. Explain the longer the money is saved the greater the amount of money will be when it is needed.

Eventually, however, a piggy bank is no longer a safe way for kids to hold onto their money. When talking to kids about the importance of money, safety is the most important issue. Let kids know how risky it is to keep money, particularly if it is over one hundred dollars, at home. At this time parents will want to take their kids to open a basic savings account if they do not already have one.

Savings Account

A savings account is one of the first accounts that a child will open. Some parents may choose to open an account for their children from the time that they are born. When opening a savings account for kids who can understand money, it is important for parents to explain what it is and how it benefits them. Parents should explain that a savings account is an account at a bank or credit union in which a person stores their money. It is also important to explain that while money is in the account it earns interest. Interest should be described as money that the financial institution adds to the amount of money that is kept in the bank.

Explaining a Checking Account

Checking accounts are another type of account that parents will want to explain to their kids. This type of account allows people to withdraw money and make payments by writing out a check or by using an Automatic Transaction Machine (ATM) card. Often this type of account allows the account holder to make an unlimited amount of deposits and withdrawals up to a certain amount. The amount depends on the type of checking account that the person holds; however, it is often higher than the amount that a person is able to withdraw from savings. Also depending on the type of checking account and the institution, a fee may be assessed. A checking account is more suitable for older kids such as teenagers or kids headed to college. Student checking accounts are available. In teaching kids about checking accounts, parents will want to show them how to write out a check and how to handle their ATM cards responsibly.

Online Banking

In today’s highly mobile world Internet banking may be an ideal choice for responsible teens. These banks may or may not have a brick and mortar location, so in many cases kids may be conducting their business entirely online or via a mobile application like a cell phone. There is no need for bank statements and kids can view their accounts at any time. Online banking often has higher interest rates, no requirements in terms of minimum balance, and no fees. Because kids are often computer savvy they may express a greater interest in this type of account.

Kid Friendly Info

For kids learning about banking may not seem like the most interesting or enjoyable thing to do. Fortunately, there are many online applications and games that can make it fun for kids to learn about banking as they grow older. Learning about banking will help them to save the money to buy the things that they want, such as a toy for example.

About the Author:

Chloe is a freelance writer that focuses on luxury asset trends for Borro Private Finance.