How & When to Establish a Savings Account for Your Child


How & When to Establish a Savings Account for Your Child

by Amy Lignor

Many people still wonder when they should open a savings account for their child. The real answer has not changed: For nearly all accounts, they should be established as soon as the child is born. There are some accounts that will come with time, such as the retirement account, but the sooner you can start that foundation and open the savings account, the longer it will have to grow and compound interest.

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Before you have kids, you think about how you will open their college account, teach them how to save their money, and perhaps even imagine how they will be financially independent by the time they’re sixteen. Of course, after your bundle of joy arrives on the scene and you start buying those diapers, formula, car seats, and so much more, the budget and the original plan you had in place usually go out the proverbial window. So let us look at the variety of savings accounts that can begin as soon as possible. And remember, the child cannot start one up by themselves until they’ve reached the age of eighteen, which means the parent will be the partner.


College Savings accounts most often fall under the 529 College Savings Plan. You want to begin this as fast as possible so it can compound interest over time. Therefore, the ideal moment to begin is as soon as the baby is born. Of course, in that ideal world you would dump $50,000 in the account and not worry about it for the next 18 years. Seeing as that scenario is unlikely to happen, the account should be opened at birth and systematic deposits made into it over time.


Two accounts – one held at a bank and one at home – come in the form of Emergency and Opportunity Savings accounts. An “emergency fund savings” is usually placed at the local bank or credit union, whereas “opportunity” funds are held in the piggy bank. When to open these accounts and take out some money will depend on the developmental levels of the child and what life is handing out. For kids, a good foundation to go by is that these funds can be “withdrawn” when the child fully understands the value of money and likes the idea of storing money up in order to one day buy something necessary. (By the time they’re in the first grade, most children will have a grasp of this concept.)


Most popular is the Long-Term Savings account. With these, you’re helping your child in a variety of ways. You’ll be teaching them life lessons and getting them used to contributing money into their account. Other long-term savings ideas come from purchasing your child a whole life insurance policy. Most companies will issue these any time after the child has reached 30 days old. Choosing a financially strong company with a well-known name and brand will ensure maximum growth for the policy and be a big help to your child in the future.


For those who wish to use the stock market, a UGMA or UTMA account can be opened. This will teach the child the benefits of saving for retirement, because having an IRA for your minor child can get them a jump-start on their retirement later in life. As soon as they have a taxable income, one way to help is to match their contributions to their retirement accounts.


So…what should you make sure to look for in order to get the best child savings account? Research is a top priority. Before you open any account, take some time to find the best bank, credit union or online-only bank for both you and your child, and keep an eye out for perks like, no minimum balance requirement or monthly maintenance fees so children don’t have to witness fees diminishing what they’ve contributed.


Look for a good interest rate; credit unions and online-only banks typically offer better rates than regular banks. Research how you would and could access the account. A local bank establishment is better for your child because they can walk right in with you and become familiar with the transactions and the routine. If you choose an online-only establishment this, too, will help your child as they grow because they’ll learn by viewing transactions, statements, etc.


In the end, opening that savings account is highly important for your child’s future. You will be able to teach them money management skills long before they spread their wings and fly.


For more information, research the internet, read up on various “best” accounts out there (i.e., and head to your local bank to see what perks they offer.




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