Opening a youth savings account is one of the most important financial literacy decisions you can make to support the children in your life. Youth savings accounts carry many benefits for kids that go beyond saving money, making them a wise investment for many reasons.
Introduction to Youth Savings Accounts
Before you can take advantage of the many benefits of youth savings accounts, it’s important to learn the basics about this financial product. Though similar, youth-specific accounts function differently than their adult counterparts, making it important to take time to learn about them first.
What Is a Youth Savings Account?
Simply put, a youth savings account is an account specifically designed for children, generally children who are under 15 years of age. Most youth savings accounts have very low balance requirements for opening them — often as little as $1 — making them the ideal way to teach children about the importance and process of saving in a secure and reliable manner. Youth savings accounts may also come with a modest interest rate to further encourage kids to keep up saving money as a habit.
Importance of Early Financial Education
Aside from the obvious benefits of helping kids put their money away in a secure spot, youth savings accounts help to promote financial education and financial literacy in a tangible way. When parents and other adults talk to and encourage kids to save, they help them establish healthy habits surrounding money, making it easier to build funds at a young age that they can maintain as they grow.
Most youth savings accounts also easily translate into traditional savings accounts once they age out, allowing kids to continue to save even once they are teens and beyond.
Key Benefits of Youth Savings Accounts
Establishing a youth savings account and talking to your kids about it can make a huge difference in their financial future. Indeed, there are several tangible benefits of opening youth savings accounts that go far beyond the money they save.
Encouraging Early Saving Habits
It’s hard to argue about the benefits of saving money. However, many people struggle to save for one simple reason — they just don’t think to do it. Like brushing your teeth or making your bed, saving is a habit1 that can have cascading positive effects when established early. Teaching children about the benefits of saving and having them start young can help them develop saving as a habit that converts into an aspect of financial management that becomes an unconscious fact of life once they are adults.
Teaching Financial Responsibility
When children learn to reliably save their money, they also learn about financial responsibility – especially when savings are attached to financial goals. By opening a youth savings account, children can easily keep track of their money and watch it grow in a clear way that helps illustrate the importance of savings.
Interest Earnings and Financial Growth
One of the most notable features of a youth savings account is that it frequently offers a modest interest rate that can help to further reinforce the benefits of saving (and eventually investing) for children. As children see their money grow through both additional deposits as well as interest payments, they also register the long-term benefits of keeping money in an earning account.
Setting Up a Youth Savings Account
Opening a youth savings account is a simple process that has many benefits. Before you can get started with the child in your life, however, make sure you do your research and gather all the required documents.
Choosing the Right Bank or Credit Union
Like any financial product, many different youth savings account options are available at various banks and credit unions. As an adult, it’s your job to research the type of institution that is best for the child as well as you because an adult will need to be attached to the youth savings account. For this reason, many people choose to open a youth savings account at the same financial institution where they do their own banking; however, others shop around looking for the best institution for this type of account.
One factor to consider is that for most children, their youth savings accounts represent their first real encounter with structured financial management. Therefore, it’s often a good idea to find a financial institution with a physical branch where the child can visit and learn how to manage their money. For this reason, community-based credit unions are often a top choice.
What to Look for in a Youth Account
In addition to the experience of opening the account, it’s important to consider the terms that come with it. Look for an account with a low minimum deposit requirement and the ability for them to access their account to spend the money they already have. At Hudson River Community Credit Union (HRCCU), we open youth savings accounts with only a $1 deposit and provide easy access to the funds at all times.
Another key feature of a youth savings account is the interest rate. Look for financial institutions that provide interest earnings and offer a modest (at least 0.5%) rate for youth savings accounts.
Required Documents
Opening a youth savings account should be easy and only require minimal paperwork, especially if you already work with the bank or credit union. At a minimum, plan to bring your own identification, such as a driver’s license, as well as identification for the youth, such as a birth certificate or passport.
Depending on the type of institution, you may also need to provide a proof of residence or place of work. This is especially relevant for credit unions, such as HRCCU, where members must live, work, worship, or go to school within a certain geographical area. Finally, make sure you have the initial deposit required to open the account, either in cash or in the form of a personal check from one of your accounts.
Tips for Parents to Enhance the Experience
The real benefits of a youth savings account do not stem from the simple existence of the account itself. Rather, it is the lessons that parents and other adults reinforce regarding savings and responsible financial management that really make a difference. Here are some tips to follow in order to make sure your child gets the most out of their youth savings account.
Regular Discussions About Money and Savings
When you have a youth savings account, it naturally opens up the opportunity to talk about money and savings with your child. Each time the child makes a deposit or withdrawal, talk to them about it. You might also take time each month to review statements together as a means to illustrate the way that money can grow over time.
Setting Savings Goals and Rewards
While saving for the sake of saving money is always a good idea, the real benefit of making saving a habit is that it makes meeting future financial goals easier. When you open a youth savings account for a child, be sure to discuss the goals they have for that money. Maybe they want to buy a new video game or use the money for other purposes. Use the account and its tools, including online monitoring and monthly statements, to help the child see and plan for when they can make desired purchases.
Involving Children in Financial Decision-Making
When children have their own money and some control over that money, they will naturally have opinions about what to do with it. Youth savings accounts allow children to see and understand the growth and movement of their money as well as make decisions about spending it. Use this account as a platform to discuss which financial decisions make sense for them based on their goals to ensure they can continue to learn and grow in their financial literacy.
Choose HRCCU to Help Open a Youth Savings Account
At HRCCU, we understand the incredible value and benefits of youth savings accounts, which is why we have created a dedicated account that is designed for members under age 15. HRCCU’s youth savings accounts have a $1 minimum deposit and offer a modest interest rate that is designed to help them learn about the value and rewards that come from saving.
Contact us today to learn more and open a youth savings account for the child in your life.
