By Cheryl Lock for LearnVest
Read more about kids and money at LearnVest.com.
With all the begging for things that kids tend to do, introducing the concept of saving money may seem like a tough sell.
You already know how important it is to start getting your child used to the idea of saving at a young age, of course, but aside from the obvious—the goal of raising financially responsible children—there may be some hidden benefits to starting them early.
According to new research from the Center for Social Development at Washington University, kids whose parents opened a savings account in their name were actually six times more likely to go to college than those who had no savings account. Although there may be a number of reasons for this correlation, it’s heartening that the habits we teach our kids now have a real impact on their lives in the future.
“It was literally just having the account that mattered, not necessarily how much was in it,” said William Elliot III, the study’s lead author and assistant professor at the University of Kansas School of Social Welfare.
While there are plenty of other factors that could have played a part in why kids with savings accounts were more likely to go to college (although the study did account for things like income, parent’s education level and children’s academic achievement), the study found that having an account to call their own taught the kids good savings patterns, which is a habit that would make a difference in any child’s financial future, whether that means going to college or not .
So while your first step is to open the account, don’t stop there: Try these tips from Laura Fisher, executive director of the American Bankers Association Education Foundation, to get your kids hooked on saving.
Pick the Best Bank
When your kid is around eight or nine, find a bank that is invested in helping children start saving—whether or not that’s the bank you already use. We recommend finding one that is actively engaged in financial education for children (more on that below) and has a kid’s account program that offers incentives (such as points that are redeemable for prizes) and that has no minimum balance and no fees (click here for a list of over 1,500 banks with kids’ programs). At this age, you’ll be opening a custodial savings account with your child, which you can learn the ins and outs of here.
Get the School Involved
Some banks can set up lessons at local schools (which usually start in second or third grade) or help you start an in-school savings club. “More and more research is showing that even once kids start saving, they still need a nudge to keep doing it,” says Fisher. “So peer pressure in this situation is a positive thing—if your kid’s friends are saving through these programs, she’ll be more likely to hop onboard.”
For example, kids might bring in portions of their allowance to deposit into their savings accounts, and the bank would dispatch someone to collect it (check out answers to any allowance questions you might have here). If your bank doesn’t have experience with these programs, you can point a manager to the ABA Teach Children to Save program for help in implementing one.