As a parent, it can be confusing to know what the best way is to invest money received by your child, and how to protect it. A popular choice for many is to put the money into a savings account, so it can gain some interest, and so they don’t have to worry about major risks.
A savings account is used to hold money that you don’t plan on using right away, so you won’t have daily or regular transactions like you would with a checking account. Some banks will have charges and fees if you move money too frequently out of the checking account, or if there are too many transactions.
You will have to evaluate the pros and cons of a savings account before placing your child’s money into an account. Here are some of the things you should be ready to talk with each financial institution about, and what to factor when making your decision.
The Money is Safe
Leaving money around the house can be problematic. Your child may lose the money, but they may be eager to spend it because they have access to it, or there is a chance that is gets misplaced or stolen. When you put the money in a savings account you know the money is safe, and you can easily monitor it online.
Earning Interest is Easy
Savings accounts can be used as passive forms of income over time. Your child’s money will earn interest for sitting in the account untouched, and over time this can accumulate into a lot of money. You will have to look at the different types of savings accounts your financial institution offers, and look at their regulations, to see what the interest rate is, and what type of savings account is the best option for the amount you’re depositing.
Access the Money Easily
One of the greatest advantages of a savings account, as opposed to another type of investment option, is that you are easily able to access the money if needed. You can move it online to a checking account, withdraw it from an ATM, or go into the bank if needed when you need to get cash or access the funds. Getting money from a CD or Bond can be more difficult.
Once you have decided that you want to start with a savings account, you have to decide what type of savings account is going to be the best for your child’s current and future deposits. There are different types based on your savings goals, bank of choice, and even age or education status. Ask each bank you’re considering using about these choices.
Standard Savings Account
Basic savings options and account access. This will have a low annual percentage yield, but it will be consistent, and you aren’t at any risk of losing the money you have in the account. You may be required to keep a minimum balance in this type of savings account.
Market Accounts
A money market account has the highlights of a savings account, but also can work as a checking account. You can write checks out of this account if needed for your child, while still gaining interest on the money that is sitting in the account. If you need the money in the account to be easily accessible, this would be for you.
High-Yield Savings
This type of savings account will have a higher annual percentage yield than other savings options, for you to earn the maximum amount of interest on the money you have sitting in the account. If this is what you are interested in, be sure to read the penalties that there will be for taking the money out of the savings account multiple times in a month or year.
When you are looking at different banks there are things to take into consideration. Many credit units offer higher interest rates on savings accounts in comparison to brick and motor banks. This is why there are specific qualifications for a credit union membership.
Online savings accounts are often also offering higher interest rates. This is because they don’t have offices for people to walk in and out of, so they don’t have to pay as much overhead, along with commercial property expenses and more. If you are trying to earn the most amount of money possible on what will be deposited, a credit union or online bank may be the way to go.
If you are trying to teach your kid about money, there are special accounts for kids and students that have special rates and advantages. Talk with the bank about these potential programs and what the perks are for enrolling your child. Benefits can include things like overdraft protection, and higher interest rates.
Be sure that any bank you are considering using is backed by the FDIC. You want to know that the bank is insured and that it’s safe for you to deposit your child’s money. If you are looking to save for things like college, talk with the bank about opening a 529 account, in addition to a traditional savings account.
You will be charged taxes on the interest that is earned from the money sitting in the savings account, so be sure to remember this when it’s time to file your taxes at the end of the year. The bank will send you all the necessary documents.
Teaching your kids to save and invest money and setting them up for a lifetime of financial security and knowledge is priceless. If your child has money and they are ready to start earning on what they have, it’s time to find a provider and deposit all the money right away.
As a parent, it can be confusing to know what the best way is to invest money received by your child, and how to protect it. A popular choice for many is to put the money into a savings account, so it can gain some interest, and so they don’t have to worry about major risks.
A savings account is used to hold money that you don’t plan on using right away, so you won’t have daily or regular transactions like you would with a checking account. Some banks will have charges and fees if you move money too frequently out of the checking account, or if there are too many transactions.
You will have to evaluate the pros and cons of a savings account before placing your child’s money into an account. Here are some of the things you should be ready to talk with each financial institution about, and what to factor when making your decision.
The Money is Safe
Leaving money around the house can be problematic. Your child may lose the money, but they may be eager to spend it because they have access to it, or there is a chance that is gets misplaced or stolen. When you put the money in a savings account you know the money is safe, and you can easily monitor it online.
Earning Interest is Easy
Savings accounts can be used as passive forms of income over time. Your child’s money will earn interest for sitting in the account untouched, and over time this can accumulate into a lot of money. You will have to look at the different types of savings accounts your financial institution offers, and look at their regulations, to see what the interest rate is, and what type of savings account is the best option for the amount you’re depositing.
Access the Money Easily
One of the greatest advantages of a savings account, as opposed to another type of investment option, is that you are easily able to access the money if needed. You can move it online to a checking account, withdraw it from an ATM, or go into the bank if needed when you need to get cash or access the funds. Getting money from a CD or Bond can be more difficult.
Once you have decided that you want to start with a savings account, you have to decide what type of savings account is going to be the best for your child’s current and future deposits. There are different types based on your savings goals, bank of choice, and even age or education status. Ask each bank you’re considering using about these choices.
Standard Savings Account
Basic savings options and account access. This will have a low annual percentage yield, but it will be consistent, and you aren’t at any risk of losing the money you have in the account. You may be required to keep a minimum balance in this type of savings account.
Market Accounts
A money market account has the highlights of a savings account, but also can work as a checking account. You can write checks out of this account if needed for your child, while still gaining interest on the money that is sitting in the account. If you need the money in the account to be easily accessible, this would be for you.
High-Yield Savings
This type of savings account will have a higher annual percentage yield than other savings options, for you to earn the maximum amount of interest on the money you have sitting in the account. If this is what you are interested in, be sure to read the penalties that there will be for taking the money out of the savings account multiple times in a month or year.
When you are looking at different banks there are things to take into consideration. Many credit units offer higher interest rates on savings accounts in comparison to brick and motor banks. This is why there are specific qualifications for a credit union membership.
Online savings accounts are often also offering higher interest rates. This is because they don’t have offices for people to walk in and out of, so they don’t have to pay as much overhead, along with commercial property expenses and more. If you are trying to earn the most amount of money possible on what will be deposited, a credit union or online bank may be the way to go.
If you are trying to teach your kid about money, there are special accounts for kids and students that have special rates and advantages. Talk with the bank about these potential programs and what the perks are for enrolling your child. Benefits can include things like overdraft protection, and higher interest rates.
Be sure that any bank you are considering using is backed by the FDIC. You want to know that the bank is insured and that it’s safe for you to deposit your child’s money. If you are looking to save for things like college, talk with the bank about opening a 529 account, in addition to a traditional savings account.
You will be charged taxes on the interest that is earned from the money sitting in the savings account, so be sure to remember this when it’s time to file your taxes at the end of the year. The bank will send you all the necessary documents.
Teaching your kids to save and invest money and setting them up for a lifetime of financial security and knowledge is priceless. If your child has money and they are ready to start earning on what they have, it’s time to find a provider and deposit all the money right away.
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