Smart About Money: Opening the First Bank Account

Smart About Money: Opening the First Bank Account

 

Your child’s first bank account is your opportunity to teach her vital financial skills. The first thing to make sure your child understands is that money gives her power. With money comes the power to make the decision as to what to do with that money – every single dime. There’s no amount too small to be worthy of your child’s attention.

Starting the Habit at a Young Age

When your child is little, she can keep her money in jars labeled Give, Invest, Save and Spend. Putting cash into each jar gives her a visual about where her money is going.  When she gets older and you think she’s responsible enough to appreciate the ceremony of it, it’s time to go with her so she can open a bank account in her name.

Opening a savings account is the first step in teaching your child banking skills. Depositing money she’s received from celebrations and holidays as well as money she’s earned is a way to teach her the benefits of having a bank account and how to manage it.  She can earn interest and her money can work for her if she doesn’t spend it.  This is the foundation of the abstract concept of investing.

Teaching Good Banking Habits

In the technology age, we do so much of our banking online and with ATMs that many kids don’t understand how to manage their money in a bank account.  With your help, they can learn to track their spending with a passbook.  Having your child write down deposits and withdrawals, reconcile the account when the bank statement comes, and add any interest earned teaches her good banking habits.

Before your child writes her first check or gets an ATM or debit card, she needs to learn to monitor and maintain a positive balance in her account.  She should understand how a negative balance can happen from writing a check, making an ATM withdrawal or using the debit card (or all three) and what penalties result.

Learning how to read a monthly bank statement and growing and monitoring a savings account are great building blocks to teach these important financial skills.

 

Any opinions are those of Traci Richmond and not necessarily those of RJFS or Raymond James.