Eventually, you’ll want your child to move away from a basic piggy bank and explore working with a regular bank. These are the key points you’ll want to touch on as your child gets ready to open his first account, according to www.bankaroo.com.
*You don’t lose your money when you deposit it: Very young kids tend to think very concretely, developing their ability to reason and think abstractly over time. At first, it can be difficult for them to understand that they keep ownership of the money they put in the bank. You’ll need to explain to your child that the bank is like a piggy bank on a much bigger scale, and that bank tellers and related workers will look after the money for him. If needed, take a little money out of your own account so he can tangibly see that you always can ask for the money back.
- Banks offer multiple ways to work with money: Kids can work with their money in lots of different ways at a bank. Probably, the most common options are savings and current accounts. Savings accounts are ideal even for the youngest children, but they’re exceptional for teaching long-term financial planning. If your child wants to have an account where he can work with spending money, current accounts are better, as they allow for frequent outflow of funds with low or no fees. Many parents also put money aside for their children in fixed deposit accounts. Your kids also should know that education and other loans are available, although they likely won’t need them until their teen years.
- Banking doesn’t mean you have to go to a bank: In the past, people had to go to a physical location to complete most of transactions. Now, your child can perform the bulk of banking tasks electronically through the Internet. For example, most brick-and-mortar banks at least allow customers to review their bank statements and other account information by logging in to the bank’s website. An increasing number of banks are completely online. They can be advantageous because they don’t have to charge your child and other customers fees to cover the overhead costs of maintaining their buildings.
- Banks can (and often do) charge fees: Many banks offer great accounts for kids that are completely free, particularly in savings accounts. Depending on which institution your child works with, however, fees quickly can add up, ranging from Automated Teller Machines, overdraft, wire transfer, monthly maintenance and even balance inquiry fees. It’s well worth it to shop around when looking for a good account to avoid paying too much, especially since your child likely won’t have a lot of income to cover these kinds of costs in the first place.
- Keeping money in the bank is generally safer than keeping it at home: Even though it can be advisable to keep a little extra cash on hand at home, most people consider banks to be a much safer way to store money. They usually have security guards on staff, and governments also typically insure customer funds up to a specific amount. Many people have growing concerns about keeping data confidential as electronic transactions are processed, but banks work hard to keep data heavily encrypted and secure, using sophisticated software and hardware to fight cybercriminals.
- Banks are businesses: Although they might not look like a department store or online retailer, banks are businesses that want to make a profit like anyone else. Make sure your child knows that a portion of the fees his bank charges go entirely for the benefit of the bank. Something else to talk about here is interest. When your child deposits money, the bank uses those funds – and money from other customers – to handle a huge range of transactions through the day, essentially treating deposits like loans. The bank recognises that this poses some risk to customers, so they pay interest as an incentive for customers to have accounts.
When kids are just getting started with financial management, banking can be confusing, if not overwhelming. Addressing these major points can clear up a lot of questions your kid might have.