Fostering smart financial practices in children from a young age can help them avoid costly mistakes down the line. The sooner your child appreciates the value of a dollar, the sooner they can get to grips with long-term saving, budgeting and credit. Opening a savings account is a great first step into the world of financial responsibility.
Depending on the purpose of the account, parents may choose to open an account in their childs name at birth, accumulating funds for them until they are able to manage the account themselves, or they may want to wait until their child is old enough to grasp the concept of saving and spending before going to the bank to open one together. Some Cayman banks have saving accounts geared towards families and children age 17 and under, which give children the space to learn how bank accounts work in a more controlled setting. All things considered, parents can best determine when children are ready for the responsibility of a bank account.
Before opening an account, you should have a clear understanding of what you want to achieve. Are you setting up an account to save for college? If so, Cayman National Bank has a Student Saver account designed to help parents save money for their childrens education.
If you want to educate your childing on the importance of smart spending, Butterfield Bank has an excellent Young Savers Account. Designed for 10-17 year olds, this special account helps younger customers learn about saving money and spending wisely. Features of the Young Savers Account include interest accrued on daily balances greater than $500 and applied quarterly, a Debit Card with a $50 limit net for daily withdrawals, only access to view account balance and transaction activity and a free quarterly statement.
Alternatively, Scotiabank has a Primary Savings Junior Account and the Royal Bank of Canada (RBC) has a Leos Young Savers Account. These are just a few options on-Island that are specifically geared towards a young account holders needs.
What Will I Need To Open the Account?
Only a few banks stipulate that you are an existing account holder in order to set up an additional account for your child, but nearly all will require the following:
- Two forms of identification (e.g. valid passport and driver’s licence).
- Proof of address (e.g. utility bill or apartment lease).
- One or two character references.
- That a parent or guardian of the child is a joint account holder.
- Some banks have a minimum age requirement.
- A minimum deposit upon opening the account.
A University of Cambridge study found that money habits in children are formed by the age of seven. Set a healthy example and kids are much more likely to follow suit.
Overseas Banking for Children
Children who go overseas for boarding school need to have a way of accessing money, or paying for things, especially in the case of a delayed flight when they are travelling. If they are over the age of 10, you can open a local bank account and get them a debit card. The advantage of using a bank in the Cayman Islands is that there is no cost of transferring money between accounts, but there will be exchange rate charges. Always contact your child's bank before they travel, otherwise the bank may assume any overseas charges are fraudulent and freeze the account. Alternatively, you can try and register them with a bank overseas, however this can be tricky depending on the bank and location.
A new and much easier way to give your child access to money while they are away at school is to get them a GoHenry card. In the UK it is linked with Visa and in the USA it is linked with MasterCard. Your child will receive a debit card which is linked to an app and with this you can attach parental controls, track their spending, set spending limits, and upload more money anytime simply by transferring it from your Cayman debit card. It has revolutionised how children have access to money when overseas and completely removes the need to open them an overseas bank account.
Top Tips for Opening a Children's Savings Account
- Choose an account without a minimum balance requirement: If your child did not receive a financial windfall at birth, he or she will be able to save small amounts without worrying about maintaining a specific balance.
- Choose an account with no monthly fees: Watching their bottom line dwindle away because of excessive monthly fees will cause any young saver to lose heart. Preserve your child’s nest egg by choosing an account with no or very low monthly maintenance fees.
- Ensure your account earns interest: Look for accounts that will allow your child to earn high (or at least some) interest on every penny they save. This will encourage your young saver to accumulate a fat balance and not spend it.
- Choose an account that can be managed online: Help your child brush up on their financial management and online skills simultaneously. Choosing an account that can be easily managed from the comfort of your home.