The holidays are fast approaching! Before buying another toy for your child, consider the gift of savings. If your kids are old enough to ask to buy things, take the opportunity to start teaching them about saving and spending. As a bonus, First Fed is including a $9.90 credit for new First Savings accounts through the end of the year.
A Gift of Saving
Positive financial habits can be established early by setting up bank accounts for kids at appropriate ages and stages in their life. According to a PBS article on money habits, “By age 3, your kids can grasp basic money concepts. By age 7, many of their money habits are already set.”
Paying a child for chores is a way to get them excited about earning and saving money. Deposit their earnings in a “piggy bank” or clear jar so they can see the progress as they add coins. When their piggy bank is full, they can deposit their savings into their bank account.
Nearly 39% of all children aged 8-14 have a personal savings account, according to a 2022 survey by Statista.
You can start a savings account when they are even younger, so it has more time to grow. Kids' savings accounts typically offer interest with no monthly maintenance fee. Kids can review their account balances in regular statements. Encourage your child to create a wish list for “nice-to-haves” like trendy sneakers, video games, or a trip to Great Wolf Lodge.
Offer to match their savings towards their top goals. Suggest that your family members contribute towards the child’s savings account instead of more toys if your house is already stocked for fun. Family members can give each kid up to $16,000 annually tax-free!
First Savings accounts were designed by First Fed for kids from birth through age 12. Through December 31, 2022, new First Savings accounts come with a special welcome gift of a $9.90 credit to get a jump start on your kid’s savings. Celebrate with your kids when they reach their financial goals!
A Gift of Independence
Many teenagers and even pre-teens go shopping with friends during lunchtime, before or after school, or on weekends. Some businesses have gone cashless during the pandemic, so teens may require a debit card to buy lunch or snacks.
A teen checking account with a debit card is a great way to teach money management skills through budgeting, spending, and saving. These accounts typically offer no monthly fee, online access, and a complementary debit card. As a parent or guardian is required for set up when the primary account holder is under 18, the adult can provide guidance while giving teens some financial independence.
A first debit card may feel like freedom, but it also reinforces financial responsibility. A debit card gives teens access to cash when needed and is particularly handy in case of emergencies. Using a debit card instead of cash, while being aware of account balances, is excellent training before opening a credit card as an adult.
“A debit card can make life easier for both the teen and their parents,” explains Dawnya Scarano, director of customer experience at First Fed. “Our First Checking account with contactless debit card is designed to give teens secure and easy access to funds while providing parental oversight.”
If your teen has a part-time or summer job, the checking account provides direct deposit options for receiving their wages. They can also connect their account to Apple Cash or Square’s Cash App for easy payments among friends and small businesses.
A study by TD Ameritrade showed that 50% of teenagers have held a job outside their home and 40% have started following a budget. Whether they are saving for college, retail therapy, or a night out with friends, giving teens access to banking tools is an important step toward financial empowerment.
A Gift for the Future
Beyond savings accounts, consider setting up goal-oriented accounts for your kids that have long-term benefits.
An education savings account (ESA) can be established to save for education expenses. The contributions are not tax-deductible, but the distributions are tax-free if used to pay for qualified education expenses. WA Guaranteed Education Tuition (GET) is a prepaid college tuition plan where you can buy college credits at the current unit price to use in the future when your child is ready for college. The unit price stays pace with current college tuition costs, so buying them sooner is better. The money you withdraw is tax-free when used towards qualified higher education expenses.
Wages from their first jobs can be placed into a Roth IRA retirement account. Money contributed is taxed in the current year, but earnings grow tax-free if they wait until they are 59 ½ years old to withdraw it. Decades of growth can add up to significant earnings!
Smart Habits for a Lifetime
When your child becomes an adult, there are many financial firsts to celebrate. A first credit card, first 401K, first auto loan, and first mortgage, to name a few. Developing smart money habits as children will give them a better foundation to successfully navigate these responsibilities. Ready to get started? Visit your neighborhood branch or https://www.ourfirstfed.com/personal/savings/first-savings.
First Fed is a member FDIC and equal housing lender.