Responsible Banking Begins with a Kid’s Savings Account
Every parent wants to raise financially-independent kids. In order to achieve the same, money matters should not wait until they are18. Most children learn by simply observing how parents deal with money. If they see their parents spending generously, they pick up the same habit and if they see parents saving and investing, they learn the trick from them.
It is important to teach kids about the value of money and they should be comfortable talking about the same. Discussing money matters should be engaging. Some kids start at 12 while some do at 16; there is no age limit when it comes to handling money.
Kids tend to receive pocket money, holiday money, birthday money, and if they are working part-time, they receive a salary too. It is ideal to open a savings accountfor them to deposit their money. It will bring financial awareness and discipline in them, inculcate a habit of savings, and make them want to save money to deposit in the account. A formal bank account will introduce kids to the real world and prepare them for financial independence.
A savings account is the ideal step towards responsible banking for kids since it is for the long term and will help build assets. Most banks have a minimum balance requirement of INR 2,500 that needs to be maintained. It will be a great opportunity to teach the children about the safety of their funds and the usage of plastic money. They should be taught about the precautions when transacting online and the importance of keeping personal information,such as their bank account numbers and passwords, secure.
The savings accountsfor children have a quick opening procedure and are easy to maintain. A savings accountmay be opened for kids below the age of 10 to be operated by the parent or guardian. On the contrary, kids above the age of 10 may operate their account themselves. Such accounts accrue interest and since the child does not have monthly expenses, it is easier to build a fund through regular deposits. Kids should also be taught about the interpretation and understanding of financial statements. This will enable them to plan their deposits and manage their expenses accordingly.
With a bank account, kids will feel responsible and are better able to put their financial lessons into real life. Eventually, kids actively learn to make financial decisions independently and plan their financial goals. As they grow up, they should be given complete independence to operate their account and manage their funds. However, parents need to be alert on certain aspects such as the amount spent by children against their credit card, the monthly withdrawal of cash, or the areas in which expenses are incurred.