Children are rarely too young to be taught financial education. A study conducted at the University of Michigan Center for Human Growth and Development indicated that children as young as five have already developed emotional reactions to saving and spending money.
One of the roles of parents/guardians in their kids’ lives is to protect and nurture them into independent and responsible members of society. While living with the young ones may be fun, one day they will inevitably have to leave home to fend for themselves. Often, financial independence is an indicator of whether they are ready to sustain themselves. Opening a youth account is a great way to kick-start your kids on the path to financial success.
WHAT IS A YOUTH ACCOUNT?
The US law prohibits minors from opening a bank account. However, this should not prevent them from having a savings account. A youth account is a savings account that is under the minor’s name with a custodian as joint on the account. In most cases, the adult manages the account until the minor turns eighteen, although the age may vary depending on the financial institution. The adult plays a supervisory role and may impose certain controls such as setting a withdrawal limit to ensure it is well-managed.
BENEFITS OF A YOUTH ACCOUNT
Besides the obvious reason which is to gain interest in their savings, here is why you should encourage your kids to open a youth account and develop healthy financial habits.
1. THEY LEARN FINANCIAL LITERACY
Financial management is an essential life skill that is not taught conventionally in a classroom. Since not everyone grows up in a family where money matters are taught, when teens have their own money in their accounts, they are likely to learn a lot about managing their finances. From the basics of how to set financial goals and budgeting to the more complex issues of how to manage debt. Having a youth account goes a long way in enabling kids, teens, and young adults to take full control of their financial future and possibly pass on the acquired knowledge to friends or family in the future.
2. CULTIVATES RESPONSIBILITY
A savings account enables kids to keep track of their contributions, savings as well as withdrawals. This teaches them, from a tender age, the correlation between choices and consequences. The more they save, the faster they can achieve their financial goal. This is not attainable without regularly contributing to the account and resisting the urge to spend.
3. TEACHES THEM THE VALUE OF INVESTING
As a kid, grasping the concept of interest may be difficult. However, a youth account simplifies it by practically showing kids how their savings increase over time. It teaches them practically how saving not only safeguards their money but can also earn them more money. As their savings increase, so does the interest earned. Since most accounts can be accessed digitally, they can notice any interest earned on their savings, however small it may be.
4. DEVELOPS THEIR BANKING RELATIONSHIP
Developing a relationship with financial professionals is another great bonus. For starters, your kids can better utilize the services offered in financial institutions. Credit unions offer many other services besides savings and checking accounts. They offer services like budgeting basics, debt consolidation services, and ultimately the best stock picking services for the long term.
Having a financial specialist could go a long way in ensuring children achieve their financial goals. In developing a one-on-one relationship with the credit union, they may appropriately analyze your child’s spending and saving habits and offer advice. They can assist the child beyond verifying his/her deposit and in this way, he/she becomes more than just an account number.
5. TEACHES COMPASSION AND PERSPECTIVE
In some ways, a youth account can help kids understand how financial resources are tied to what people have and don’t have. Through this, they can start to form a bigger picture about life and how some people are more or less fortunate than others.
Additionally, the simple act of saving, watching their money grow, and using their money to buy what they need teaches them that to purchase things in the future, one needs to budget and save. It also enables them to understand that as a family, certain sacrifices need to be made to meet certain financial obligations.
6. PREPARES THEM TO BE FINANCIALLY INDEPENDENT
As kids grow up, they often express a desire to handle bigger responsibilities. What better way to ensure they do this by helping them open a youth account? In opening one, they are entrusted with the responsibility of managing their funds. There is no more begging or pleading for money, what they save is what they get. Having the ability to budget, reference previous spending, and curb their enthusiasm to overspend their money prepares them to be financially independent adults.
There is no right time for kids to open an account, but given life’s unpredictable nature, having a youth account would secure your child’s financial future and teach them at the same time.
If you’re ready to open a youth account, visit Freedom’s Youth Account Webpage to learn about their tiered options and other youth financial products. Depending on your employer, you may also qualify for a $25 youth match. Ask by calling 800-440-4120 or email [email protected].
About Freedom Federal Credit Union
Freedom Federal Credit Union is proud to be your financial partner. Freedom serves and is open to anyone who lives, works, worships, attends school, volunteers, or has family in Harford or Baltimore County, MD. As a credit union, we are committed to putting you first, not shareholders, and helping you achieve your financial goals.
Learn more at freedomfcu.org/personal/youth-accounts or call us 800-440-4120 to see how we can help.
“Ellie is passionate about millennial financial planning and uses her website to help educate her generation on making smart decisions with their money.”