Teaching kids about money from an early age could help them from overspending or maxing out credit cards as adults. Financial education is not just explaining about credit scores or making change; it should be centered on discussing the power of savings. Opening a certificate of deposit (CD) for your child is one way to help kids understand what it means to save.
Plus, a CD generally earns higher interest than a regular savings account and is far more secure than the stock market: So there is less risk involved. CDs can be part of any plan for teaching kids about money, which could also include:
- Attending financial classes for kids - Many financial organizations and libraries hold classes or workshops for children to teach them smart ways to handle their money, led by trained staff who know how to make the subject fun for young savers. Ally has a financial literacy program online at www.allywalletwise.com.
- Giving your child a "commission" instead of an allowance - You can help your child gain a better sense of what money is worth when they have to work for it instead of just giving it to them. Create a chart with age-appropriate jobs and assign each one a value, then promptly pay when a job is complete. This also builds a sense of accomplishment and puts the child in charge of his or her own personal economy.
- Set savings goals - saving money always has more meaning when you can see some kind of reward along the way. Saving up for a special toy or some other special treat further solidifies important ideas when teaching kids about money.
- Matching their savings efforts - by adding your money to what the child saves, you create a "home version" of the 401(k) and show him or her how valuable their participation is. More importantly, you demonstrate just how proud you are of your child's efforts to save for the future.
Finally, using a CD to teach children personal finance skills is a win-win situation. You spend quality time together now and help them make smarter financial decisions in the future. To get started, visit Ally Bank online for side-by-side comparisons of CD products and easy steps for opening an account today. Learn more at allybank.com or call live, 24/7 customer service at 877-247-ALLY (2559) today.