Master Your Children's Banking Like a Pro

Ever get confused about the types of accounts you should be opening for your children and not know where to start? If so, no worries, we've got you covered! We will provide a comprehensive walk through on selecting the right bank accounts for your children, tailored by age and savings goals, to cultivate their money management skills from the start. This essential read is your roadmap to fostering financial literacy within your family.

 

Age Group 0-5 Years Old 

For your young savers, it will be important to lay the foundation for a lifetime of smart money management. This group is not too young, habits form very early in life, and you should consider opening a kid's savings account to help solidify the concept of saving money. As a parent, this is also a key time to invest in their future. The earlier you start, the smaller the amounts you set aside to start building for long-term savings goals like education.

Short-Term Objectives for Child:

1. Youth savings Account: Most people are unaware that they can open up accounts for their children as soon as they are born. As your children begin to talk and learn words, their watchful eyes are seeing your every move. At this stage you can introduce them to trips to your financial institution. You can further your child's exposure to the idea of setting aside small amounts for a need in the future.
   • Examples of goals: A favorite special treat, small toy or stuffed animal, slime or putty

Long-Term Objectives Parent Driven:

1. Share Certificates: While most require a minimum initial deposit of $500, it is a great account to open for funds that are sitting in a savings account if you are not going to use them any time in the near future. Share certificate accounts typically earn more than a traditional savings account.
2. Money Market accounts: While a higher minimum initial deposit is required, these accounts earn a bit more than a traditional savings account, but unlike share certificates, the funds remain easily accessible at any point. If you do not want to commit to a term of a share certificate, this is the next best account.
3. 529 Plan: 529 plans are flexible, tax-advantaged accounts to be used for education savings. These funds can be used for tuition at K-12 schools, some apprenticeship programs, college expenses, and student loan payments. Each state has their own plan, and we encourage you to take a closer look at these powerful accounts. As of March 2024, the NC 529 Plan initial minimum contribution can be as little as $25.
   • Did you know: Family and friends can often contribute to a 529 account? Talk about a shared family goal! 

Age Group 6-12 Years Old 

As your kid grows, so will their savings goals. At this point they will be ready to engage in setting up separate short-term and long-term goals that are age appropriate. A youth savings account can be used for their short-term savings, and you can open a secondary savings account for long-term savings.

Short-Term Objectives for Child:

1. Youth savings account: If you have not set up a savings account for your child, this is a perfect time to do so. If you already have one, it's time to transition this account as a short-term savings account.
   • Examples of goals: A specific toy or video game, a movie ticket or outing event with friends, shoes, clothes, inexpensive school supplies, a gift for a friend

Long-Term Objectives for Child:

1. Secondary savings account: A secondary savings is a great introduction to budgeting and balancing multiple savings goals, specifically longer-term savings goals.
   • Examples of goals: school trip costs, a portion of the cost of an extracurricular activity, apparel, spending money for purchases on family trips, or a future smartphone purchase.

Long-Term Objectives Parent-Driven:

1. Share Certificates: Please see details above on Age Group 0-5. 
2. Money Market accounts: Please see details above on Age Group 0-5.
3. 529 Plan: Please see details above on Age Group 0-5. If you have not started one yet, this a great vehicle for you to save for your child's education, it's not too late to start one.

Age Group 13-17 Years Old 

As kids transition into their teens, they undergo rapid growth emotionally, mentally and physically. And as a parent, you can gauge your teen's maturity level and then proceed to help them open a student checking account when you feel the time is right. Some may start a part-time job and need a place to set up direct deposit or deposit their cash earnings. While mistakes are bound to happen at this stage, these can all occur under your watchful eye, and you can use these situations as a learning opportunity for your teen. By teaching them active money management with a checking account early on, you are setting them up for financial success for their future adult life. It's significantly better to make mistakes with $10-$100 than to make it with hundreds to thousands of dollars later in life.

Short-Term Objectives for Teen:

1. Youth savings account: Use this account for short-term savings goals.
   • Examples of goals: A concert or sporting event ticket, shopping spree, extracurricular activity expenses
2. Student checking account: Checking accounts are meant for expenses. Help your teen learn to identify and contribute to their short-term and long-term goals first before spending any of their funds.

Long-Term Objectives for Teen:

1. Secondary savings account: A secondary savings is a great introduction to budgeting and balancing multiple savings goals, specifically longer-term savings goals.
   • Examples of goals: A smartphone, a car fund, education expenses like applications and exam tests, senior beach week trip or another type of trip.
2. Tertiary savings account: Most adults struggle with this one, but your teen doesn't have to. Help them start a savings account for financial security in the future and begin an emergency savings fund. Your teen will be well prepared if they establish a rainy-day fund of at least $500 by the time they graduate high school that is accessible in the event of the unexpected.
   • Example of goals: For Emergency Savings only, period. While it is easier said than done, below is an example of monthly goals you can set for your child as a guide for $500 saved. 
     • 13 Years Old: $10/month
     • 14 years Old: $14/month
     • 15 Years Old: $21/month
     • 16 Years Old: $42/month
     • 17 Years Old: Place a priority to have $500 set aside for emergencies with a monthly contribution that is doable for your teen at this point. 

Long-Term Objectives Parent-Driven:

1. Share Certificates: Please see details above on Age Group 0-5.
2. Money Market accounts: Please see details above on Age Group 0-5.
3. 529 Plan: Please see details above on Age Group 0-5. If you have not started one yet, this a great vehicle for you to save for your teen's education, it's not too late to start one and can still be beneficial for college expenses and future student loan payments.

We hope this guide helps establish clarity on some possible accounts that you can use to help instill good financial habits and lessons for your children.