Unbeknownst to some parents, the practice of depositing money into a savings account for a child can deliver a positive financial message they carry with them into adulthood.
A 2013 study by Professor William Elliott at the University of Kansas found that having a savings account established in a child’s name is associated with higher rates of both college enrollment and achievement.
Establish a Solid Financial Foundation
If your child is starting college in the fall – the knowledge, experience and skills they’ll gain will be instrumental to their future success. In addition to a college education, providing your student with the tools to effectively manage their money is a smart investment.
College is one of the first times young adults learn to manage their money on their own. From basic budgeting to saving and investing – acquiring personal finance know-how is essential in building healthy money habits.
“The financially formative years are critical for establishing good habits that lead to a solid financial foundation. Building savings is one of the fundamental building blocks in this financial foundation,” says Greg McBride, chief financial analyst with Bankrate.com.
In addition to laying a solid fiscal foundation, a savings account also helps to prepare you for those “extras” that inevitably come along:
Emergencies: Financial experts recommend consumers build emergency savings that can cover at least six months of normal expenses.
Unexpected Expenses: Life’s twists and turns are never predictable and therefore you need to have some cash stashed to cover expenses that never quite made it into your budget.
Wants/Wishes: Additional items beyond needs that you “want” but can’t truly afford on a regular basis can be occasionally covered by a percentage of your savings.
A savings account is a great way to build wealth. Even small deposits into a savings account can add up over time. You’re never too young to tap the power of compound interest!
Tips on Picking a Savings Account
“Every penny counts, so it’s important to pick your savings account wisely,” says McBride.
There are several factors when considering a savings account for a college student:
- No minimum deposit requirements
- No monthly maintenance fees
- Convenient online banking
- Competitive interest rates
- Easy transfers from parent to student savings account
Money is tight for college students; income is limited and often irregular, with the student oftentimes hundreds or thousands of miles from home. This is why college students in particular should seek out accounts that are free of minimum deposit requirements and fees, but still deliver competitive interest rates and the convenience of online access and transfers.
Investing in your future and achieving your financials goals begins with the right savings account. To learn more about an Ally Bank Online Savings Account and other deposit products, visit Ally.com. To build and better manage your financial knowledge, visit Ally Wallet Wise.
At what age did you or your parents start a savings account? Do you make savings automatic in order to build your wealth?