Opening a Child Account | Banking Direct

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Opening a Child Account

If you are thinking of opening a child account, there are a number of things you have to consider.

First and foremost is the choice of bank. Ensure that they have accounts specifically designed for children. This might be a beneficial interest rate, or just a welcome package that sparks the child's interest, but whatever the hook, bear in mind that the more you can interest your child, the more they will become part of the process of using a bank account. And this will help them greatly in their future lives.

So, take your time and pick a bank, or financial institution that offers a good return for your money, but also one that is extremely child-friendly.

Secondly, and still with the idea of engaging your child with the process of owning and operating a bank account, try to ensure that the bank account is in their name. Nothing will turn the child off more than an account in their parents' name which appear alien to them. Whereas an account in their name will give a sense of ownership and future. You will of course be involved in the process, as a parent, or guardian, but you must be careful not to dominate the whole experience.

Thirdly, before opening the account, discuss the action with your child. Ensure that they understand the advantages of having their own bank account and how it will stand them in good stead for the future. Discuss the principles behind depositing and withdrawing money, and the basic idea behind saving money, and how money gains interest. Recent research has shown that children in the developed world have little idea about the basics behind money and that as they progress through their education, money is virtually an alien subject. This of course leads to troubles later on in their adult lives, because when it comes down to taking money decisions - such as choosing pensions, mortgages, or life policies - they have trouble understanding the basic theories behind them. Indeed, few adults in the UK seem to be able to properly grasp the principle of the Annual percentage Rate (APR).

Finally, consider the timing of the opening of your child's account. Opening an account and having the child look at a low, or zero balance week in, week out, will do nothing to your child's understanding, or enjoyment of the bank account. So ensure that when you do open an account, your child has the means to regularly use the account. For example, they can deposit their pocket money, presents money, or money from a part-time job. This will encourage the sense of engagement and allow them to see basic financial principles in action.