Here’s Why You Should Open a Savings Account for Your Child

Jun 22, 2022

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Financial literacy is crucial to enhance the knowledge and skills needed to manage our finances and achieve financial growth. The basic way to be financially literate is to understand saving, investing, managing debts, and budgeting. For most people, Savings Account is the first Interaction with the financial system. Being familiar with their finances through operating a Savings Bank Account from childhood can make your child a financially responsible adult in the future. Hence, the best way to ensure your child becomes financially literate and accountable is to open their own Savings Account at an early age.

Most banks offer exclusive Saving Accounts tailored for minors with added benefits. Different banks may have different names for these accounts, such as minor account, junior account, kid's savings account, etc. Banks typically offer two types of minor accounts - for kids below the age of 10 years and for kids aged between 10 years to 18 years. If your child has completed 18 years of age, they can open an independent regular Savings Account.

If you are wondering is it really helpful to open a Savings Account for your child or how it will benefit them, here are the top 5 reasons why you should open a Savings account for your child at an early age:

1. Helps them learn the basics of money:

We all are aware of the fact that no matter how beautifully explained the theory is, practical knowledge always surpasses it. It could be possible to give your child an experience of managing a Savings Account by taking them with you whenever you visit the bank. However, nowadays, most of us prefer online banking due to the speed and convenience that it offers. Right from checking the account balance to getting the loan disbursed, we do everything through internet banking or mobile apps, which is why it can be difficult for children to grasp the basics. However, having their own Savings Account will make them do banking transactions on their own or with the help of a guardian, which will help them learn the basics with an actual experience of managing their money. The child can start using offline as well as online banking platforms right from an early age.

Here’s Why You Should Open a Savings Account for Your Child
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2. Builds the habit of saving:

Savings Accounts, as the name suggests, are mainly used for saving money and performing day-to-day transactions. Remember how we used to save money received from relatives as a gift in a piggy bank? A Savings Account works the exact same way to cultivate the saving habit. As your child sees the growing balance in their Savings Account, they will get motivated to increase it further by saving more and more. It will teach them that they do not necessarily splurge the money just because they have it. This habit of saving money will help them avoid creating huge debts and meet their investment objectives as they grow old.

3. Helps them learn the value of money:

Nowadays, both the parents work in most households, and they try to fulfil all the demands of their child/children. It makes the child feel that they can have anything they wish for, without realising the efforts their parents have put in to earn the money. However, making a child deposit a fixed amount of money every month or the money they receive as a gift from their family members on special occasions like birthday, Diwali, Eid, etc., and using the same money when they wish to buy something special for themselves will help them realise that the money doesn't grow on trees and whenever they spend it, it gets deducted from their bank account. A Saving Account will teach the child to respect money and appreciate your hard work.

 

4. Early investment and returns lessons:

Although Savings Account might not offer a high rate of interest, it is your child's first step towards their investment journey. The little interest they earn on their savings can help them understand the importance of investment. Over time as they increase their savings account balance, you can introduce them to other investment avenues, such as fixed deposits, recurring deposits, mutual fund SIPs, etc. Through a recurring deposit and SIP, the child will be able to understand the power of compounding, which will encourage them to invest as they start working.

5. Make them realise the importance of investment goals:

When you make your child actively deposit money into their Savings Account and use that money for their special requirements, they slowly learn to save to achieve their investment goals. Kids may have small goals like a Father's Day gift to their father, a birthday gift for their friend, a bicycle, a sports kit, etc. But, achieving such small investment goals will teach them the importance of having investment objectives. Besides, it will stop them from spending money as soon as they receive it as they realise saving for a longer period of time have bigger rewards awaiting.

To Conclude:

While Savings Account is a crucial step toward the child's financial literacy, it is necessary as parents to monitor the activity in the account and guide them to manage their money and achieve their investment goals. To ensure you earn high interest and get maximum benefits, it is advisable to compare minor accounts offered by different banks and choose the one that offers maximum benefits and best suits your requirements. Remember, it is never too late or too early to start the journey of financial literacy. If you are wondering whether or not to open a Savings Account for your child, go ahead, it could be the best gift you offer them!

 

Warm Regards,
Ketki Jadhav
Content Writer



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