Bank accounts for kids go beyond piggy banks
A child's bank account may not earn high interest but will pay off big in developing a lifelong appreciation for the value of setting money aside.
Many banks try to make the process fun for youngsters by offering various incentives. A big draw for their parents is the usually minimal balance required. Fees often are waived, as well.
"You can really start them at any time, as soon as they're born," said Michele Simms, retail branch manager of Old Second Bancorp's east Batavia location. "We have what we call a Junior Savers account. It's a very basic account designed for the kids."
A copy of the child's Social Security card is the basic documentation required to establish the account.
The minimum deposit is $10, she said, noting that the interest rate stands at .45 percent. Under Illinois statute, the account is under the child's name and Social Security number, but because the child is a minor, the parent or guardian is custodian of the account and handles all deposits and withdrawals.
She said many children put part of their allowance into an account.
"It really helps to get the kids started on learning to save and watching that balance grow," she said.
Old Second's Junior Savers program provides children a passbook, which is the size of a checkbook and includes withdrawal and deposit slips. And here's where a practical mathematics education component kicks in.
"There is a savings register so they can list their deposits and see how much money they're getting," she said. "They get quarterly statements. Parents can sit down with them and show them what they've earned and how much more money they have."
She said parents also can set them up with online banking, and teach their kids about banking and computers at the same time.
"They can see the balance grow and don't have to wait for the quarterly statement," she said of the online program's instant gratification.
When children turn 18, their parents can turn signing authority over to them through a formal process.
Simms said the account automatically switches to a regular savings account when they come of age.
To cater to the youngest of customers, the creation of formal children's accounts is on the drawing board at Community Bank-Wheaton/Glen Ellyn.
"We're looking to roll one out first quarter next year," said Scott Hamer, president and chief executive officer.
He believes it's a good way to cultivate a fresh generation of customers and to educate children on the banking system in general.
Hamer said there's a need for children to learn how to save.
"Obviously, parents would appreciate if the kids could contribute to their own education and be self-sufficient," he said. "And there's always a lot of talk about the current generation not being concerned about not saving for the future. You've seen all the stories. (Older) people are now concerned about retirement because they didn't start saving early enough, (with) Social Security uncertain in the future, and the lack of pensions available in the workforce today. It's important that people learn to save for their own retirement.
"It's early to think about it when you're a child, but if you develop habits early on, it should be carried on in later life," Hamer said.
-- Batavia Republican
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Rewarding good habits
In 2006, the U.S. personal savings rate hit its lowest level since the Great Depression, reports www.webcpa.com.
Instilling a savings mindset in young children can steer them to a more secure financial future in which frugality and responsible spending come back into fashion.
Consult a financial professional when dealing with significant amounts.
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<td> Concepts for kids
Account: The word derives from the Old French word for "to tell." The multi-purpose word as applied to banking refers, in part, to: a reckoning; computation; calculation. A bank account is money deposited in a bank and subject to withdrawal (removal) by the depositor, the person who has put the money in the financial institution for safekeeping or to earn interest.
Bank balance: The amount of money in an account.
Savings account: A bank account that earns interest.
Passbook savings account: A passbook (the size of a checkbook or small booklet) is issued by a bank to record deposits, withdrawals and interest earned in a savings account, explains www.allbusiness.com. Passbook savings accounts, though usually offering low interest, are safe because deposits in them are insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC).
Interest: Interest is the price that someone pays for the temporary use of someone else's funds, states the Federal Reserve Bank of NY (www.ny.frb.org.) Interest is the compensation that someone receives for temporarily giving up the ability to spend money. Without interest, lenders wouldn't be willing to lend, or to temporarily give up the ability to spend, and savers would be less willing to postpone spending. Interest rates are expressed as percents per year.
Bank statement: A written review of the account, which a bank gives the depositor on a quarterly or monthly schedule.
Online banking: The performance of banking activities via the Internet.</td>
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