To a child, the workings of a savings account may seem complicated. And when children ask, "How does a savings account work?" there are two ways to address their interest and curiosity. Yes, you can take a moment to explain it. But it may make a stronger, lasting impression to let them learn by doing—with their own savings account.
Learning by Doing.
When is the best time to start talking to your kids about money? "Start early," suggests Andy Tilp, president of Trillium Valley Financial Planning in Sherwood, Oregon. Tilp also suggests having your child regularly put away money for a relatively “big-ticket” item that he or she wants. "Have them save a portion of their allowance toward purchasing the item out of their own money," he offered. "It gives them a sense of how much things cost, how long it takes to save for something you really want, and it gives them a sense of priorities."
Little Budgets. Big Benefits.
More specifically, parents may want to help their children set aside part of their allowances, putting a certain percentage of their weekly funds into different categories—perhaps 20 percent for savings, 20 percent for charity and the rest to spend as they like. Children will likely be encouraged by their growing savings.
While Ally Bank does not offer accounts to minors, you can open a trust or custodial account with us for the benefit of the minor. It will involve an extra step beyond what's required to open an account in your own name, but it also may lead to the kind of real-world savings experience for your child that proves valuable for years to come. It's also a safe way to teach financial responsibility; your children see their names on the monthly statements, but the account also carries the reassurance of formal adult supervision.
Interest Rates Are Just the Beginning.
Of course, comparing interest rates is a smart way to begin. But that's just the first step to finding an account that meets your needs. Teach your child to look at the fine print as well—things like minimum deposit requirements and monthly maintenance fees can take a chunk out of the interest earnings.
You can open and fund an Ally Bank Online Savings Account today, and start earning interest at a variable rate that's among the most competitive in the country. Learn more at Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.