What Is a Kids Savings Account?
Short answer
A kids savings account is a bank account designed specifically for children to save money securely while learning financial basics. It usually requires a parent or guardian to open and manage it jointly, offers low minimum balances, and earns interest. This helps teach kids the value of saving and money management from an early age.
What Is a Kids Savings Account?
A kids savings account is a type of bank account created for children under 18 to safely save money. Unlike regular adult accounts, these accounts often have features tailored to young savers, such as low or no minimum balance requirements and parental controls. Typically, a parent or guardian co-owns or oversees the account to help manage it responsibly. The funds are protected by federal deposit insurance, providing security for the money deposited.
This account encourages children to start saving early, understand how money grows with interest, and develop good financial habits. Unlike a checking account, which is used for daily spending, a savings account focuses on longer-term money growth and financial discipline.
How Does a Kids Savings Account Work?
When a parent or guardian opens a kids savings account, they deposit money that the child can add to over time. The bank pays interest—usually a small percentage—on the money saved, so the balance grows slowly. For example, if a child deposits $100 and the interest rate is 1% annually, after one year, the account would earn $1 in interest, making the total $101.
Parents often encourage children to deposit allowance money, birthday cash, or money earned from chores. The account is monitored jointly, so parents can teach kids how deposits and withdrawals affect the balance. Some banks offer online or app-based tools to help kids track their savings goals.
Why Does a Kids Savings Account Matter?
Starting a savings account early helps children develop a sense of money management and responsibility. It provides a practical way to teach saving, delayed gratification, and the concept of earning interest. This early exposure can build confidence in handling finances and reduce money-related anxiety later in life.
For parents, a kids savings account offers a safe place to keep money for their child’s future needs, such as education or hobbies. It also creates opportunities for conversations about budgeting, goal setting, and the value of money. Teaching kids about saving can lead to better financial decisions as adults.
What Are Common Features of Kids Savings Accounts?
Kids savings accounts generally share several features designed to suit young savers and their families:
- Parental control: Parents or guardians are typically required to be joint owners or custodians of the account.
- Low minimum balance: Most kids savings accounts do not require a large starting deposit or minimum balance.
- Interest earnings: The money in the account earns interest, helping it grow over time.
- Withdrawal limits: Some accounts limit how often money can be withdrawn to encourage saving.
- Educational tools: Banks may offer apps, games, or progress tracking to engage children.
- No fees or low fees: Many accounts waive monthly fees to encourage saving.
These features differentiate kids savings accounts from regular savings or checking accounts.
What Terms Are Often Confused with Kids Savings Accounts?
Some terms related to kids and money accounts can be confusing. Here are a few to know:
| Term | Explanation |
|---|---|
| Child savings account | Another name for kids savings account, used interchangeably. |
| Custodial account | A financial account managed by an adult on behalf of a minor, which may include investment options rather than just savings. |
| Education savings account | A special account designed to save for education expenses, with tax advantages, different from a regular kids savings account. |
| Joint bank account | An account owned equally by two or more people, sometimes used for kids with parents but usually for older teens or adults. |
| Kids checking account | An account for spending money with debit card access, often linked to a savings account but used differently. |
Understanding these distinctions helps families choose the right account for their goals.
How Do You Open a Kids Savings Account?
To open a kids savings account, a parent or guardian usually needs to take these steps:
- Research banks or credit unions: Look for accounts that offer good features like no fees, easy online access, and educational resources.
- Gather documents: Typically, both the child’s and the adult’s identification is needed, such as a Social Security number and birth certificate.
- Complete an application: This can often be done online or in person at the bank.
- Make an initial deposit: Most banks require a small deposit to open the account.
- Set up online access: Parents and children may get login info to monitor the account and teach savings habits.
After opening the account, parents should explain how it works and encourage regular deposits to build savings.
What Should Parents and Guardians Do Next?
Once the kids savings account is open, parents can help children get the most from it by:
- Setting clear savings goals, like buying a toy or saving for college.
- Encouraging regular deposits from allowances or gifts.
- Checking the account together monthly to review progress.
- Teaching about interest and how money grows.
- Using bank tools or apps designed for kids to keep saving fun.
- Discussing how saving fits into broader money management, including budgeting and spending wisely.
Parents can also explore related accounts and financial products as the child grows, such as teen checking accounts or custodial investment accounts.
Frequently asked questions
Can a child open a savings account on their own?
In most cases, children under 18 cannot open a savings account without a parent or guardian as a joint owner or custodian. Banks require adult supervision to ensure responsible management and compliance with legal requirements.
How much money do you need to start a kids savings account?
Many banks allow kids savings accounts to be opened with a small initial deposit, sometimes as little as $25 or even less. It's best to check with the specific bank or credit union for their minimum deposit and balance requirements.
Do kids savings accounts earn interest?
Yes, kids savings accounts usually earn interest, though the rate is often low. Interest helps the money grow slowly over time, reinforcing the benefits of saving early.
Is the money in a kids savings account safe?
Yes, funds in kids savings accounts at banks are protected by federal deposit insurance up to the insured limit. Credit unions offer similar protection through the National Credit Union Administration.
What is the difference between a kids savings account and a custodial account?
A kids savings account is typically a simple bank account for saving money, usually jointly managed by parents. A custodial account is a broader financial account where an adult manages investments or assets for a minor, often with more complex rules and options.
Can kids access the money in their savings account anytime?
Access depends on the bank’s rules and whether the account is jointly managed. Many kids savings accounts have withdrawal limits or require parental approval to encourage saving rather than spending.