7 important facts when opening a bank account for your child

Teaching children the importance of money can and should be done while they are still young. You have probably started this process by showing them how you handle the family’s finances. Once he/she is mature enough to understand money matters, you may also want to consider opening a bank account for your child.

Things to note when opening a bank account for your child

Here, we give you some vital information to consider when opening a bank account for your child.

1. It is important to be pro-active in teaching your child about money

Children start understanding the concept of money as early as 3 years old. They learn how money is used by watching you go about your daily activities.

You can involve them too — try allowing them to buy small items at the supermarket or paying for a toy they want.

2. You need to teach children to save money from a young age

At around 3 years old, you can also introduce your child to the concept of saving. Give them a piggy bank and show them how to collect money in it.

Once the piggy bank is full they can opt to buy something they want with the money they saved, or even place it in a bank account (more on this later).

Once they are more mature; around the age of 6, they would have a general understanding about how money works.

This is when they can get either a weekly or monthly allowance, which can in turn teach them to be responsible and manage their finances. Teach them the concept of budgeting by putting aside money from their allowance to eventually get something they really want.

3. Your child needs to be ready for a bank account

It is important to ask yourself if your child is ready for a bank account. Once you have inculcated the value of money in your child and shown him how to manage it, and you see how well he is responding, you could discuss the possibility of opening a bank account.

4. It’s important to explain what a bank does

Your child needs to understand the concepts of ‘saving’ and ‘interest’ before opening a bank account. As they are probably already familiar with the term ‘saving’, explain that ‘interest’ is the money the bank gives you for keeping or saving your money.

5. There are different ways to choose the right bank and account type

When opening a bank account for your child, the many options available could easily confuse you. Therefore, it is best to do some research before you settle with one. Here are some points to consider when picking a bank:

• Eligibility and requirements of the bank. Some banks have age limits.
• Location of the bank. It helps to have a bank that has an accessible branch close to you. Knowing that their money is somewhere safe and tangible, will help your child better deal with parting with their precious savings.
• Interest rates.
• Account fees and deposits.
• Benefits such as online banking and free insurance.

Here are links to some of the banking options available for children. POSB, Standard Chartered Bank, Citibank, Maybank, CIMB Bank, UOB Bank, OCBC Bank.

 6. It’s best to involve your child in setting up the account

Even if it’s as easy as clicking a button, it might be more exciting and educational to take your child with you when you set up her account.

Make an appointment prior to visiting the bank and, together with your child, check if you have all the required documents.

Once at the bank, get your child involved in the process by asking the representative to talk directly to her.

7. Your child will learn a lot from monitoring her account

You can add to your child’s excitement of having her very own bank account by requesting for statements to be sent home.

Until your child is old enough to handle her account by herself, help her with depositing money, calculating interest rates, planning finances and monitoring her account balance.

Opening a bank account for your child will enable you to teach them the importance of saving and financial management early in life. This will no doubt help them grow into adults who are more financially savvy.

Sources: MSN, Nerdwallet, Investopedia