3 Conditions for Opening a Youth Account for Your Child

When is the best time to begin teaching your child about financial planning and decision-making? And what’s the best way to do so? The answer to the first question is that it’s never too early.

Children mature at different rates and it’s up to parents to decide how to effectively communicate complex information to their kids. But early on, children should be taught that money doesn’t “grow on trees,” as many a perturbed parent has uttered at one point or another, and that careful stewardship of finances must be observed throughout their lives. As for the question of how such lessons can be taught, I would recommend that opening your child a youth account with a credit union is a good way to introduce some important concepts and good practices.

So, when is the right time to take the leap and give your child the (supervised) levers to control his or her own money through an account? Many financial institutions have an age limit for individual checking accounts of around 12 or 13, but no such limitation typically exists for savings accounts so age is not usually a disqualifier. Generally, you should consider opening an account for your child when 3 conditions are met:

Your child understands what money is – and where it comes from. Children might have a vague notion that green pieces of paper can get them candy and toys, and that those pieces of paper often come out of their parents’ wallets. But they have to reach a certain level of maturity to understand that money is earned by their parents and that they can earn money as well. Before opening a youth account for your child, make sure that he or she understands the link between you having to go off to work every morning and the amount of green paper you have in your wallet or purse.

Your child can earn his or her own money. You may want to get your child’s account started with a financial gift or match their own contributions. But don’t open an account for your child until he or she is earning money through chores, odd jobs for neighbors or running a lemonade stand (or some other juvenile venture). The goal of opening a youth account is not to save your own money for your child’s future – that’s something you need to do on your own, observing your own ongoing adult financial education. It should be primarily their own money going into and leaving the account, at their own discretion. That way, they learn the valuable lessons of independent stewardship, whereas an account in which you merely deposit money for them can result in either irresponsible behavior (on your dime!) or a need for you to exert control, negating the entire point of opening the account.

You can find a credit union or financial institution that has special youth accounts. It’s important that the account you open for your child is specifically designed for savers-in-training, who likely won’t be depositing enough to make fees worth the effort. As a Forbes article¹ on youth accounts noted, “Any monthly account fee would quickly eat away at any attempts to save. Similarly, a minimal initial deposit amount is equally essential.” It’s important to shop around for options. Affinity offers a Savy Savers club for children ages 12 and under. It includes the ability to earn dividends and cash rewards based on how much kids increase their savings balance. The teen checking and savings accounts allows older kids (ages 13-16) to open accounts with no fees or minimum deposit requirements. These accounts also enable teens to be eligible for Affinity’s scholarship program, helping you to reinforce the notion that positive spending and savings habits are linked to rewards later in life. But regardless of where you decide to go, you shouldn’t proceed without first finding youth accounts tailored to your own child’s age, understanding of money and ability to recognize that “a dollar saved is a dollar earned.”

Youth accounts are a great way to instill financial life lessons early on, while educating your children on the basics of financial management. Just make sure you open one for your child at the right time, and on the right terms.

¹ Forbes: Kids and Money: Get Them Saving Early With Starter Bank Accounts

This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.