Teaching your children fiduciary responsibility is an extremely important life lesson to pass on. Those who lack the proper skills often find themselves in a financial bind later on in life due to lack of preparation. The result can be a future bad credit score that can influence the field your child works in, limit their choice of living accommodations and increase the cost of their overall living expenses. However, by opening a savings account at the youngest age possible for your child to use as a learning tool and a financial safe haven, you can help ensure their future financial success.
Parents can open a custodial savings account for their child on the day that their child is born. The opening balance tends to be low but the amount is decided upon at the discretion of the bank. Both you and your child can accept the financial responsibility for maintaining this account. Depending on the state in which you live, the child can gain independent control over the account between the ages of 18-21.
When opening a savings account for your child, it is important to teach them the right techniques for handling money. For example, parents can set a pay-per-chore allowance system. By encouraging your children to put half of every allowance “paycheck” into the savings account and letting them use the money however they see fit, they will learn several valuable lessons that will translate into practical life experiences later on down the road.
When opening a custodial account for your child, you most likely need to an existing member at that branch. Like regular savings accounts, the FDIC will insure the account for the maximum limit. Additionally, the interest is reported on your child’s social security number, paving their future relationship with the IRS.
