One of the greatest gifts we can give a child is to teach them financial responsibility at a young age. And a savings account for children can go a long way in this effort. As my wife and I raise our two kids, now both teenagers, we can see just how important it is that kids understand basic money management skills.
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The right type of online savings account for a child can help teach children several important financial lessons:
- The Power of Compound Interest: While perhaps urban legend, Einstein is said to have quipped, “The most powerful force in the universe is compound interest.” Watching a savings account grow through compound interest can help teach a child the importance and benefits of saving and investing at an early age.
- Setting and Achieving Goals: Setting goals helps us think well beyond the moment. Financially speaking, consistent goal setting can help anybody achieve a greater level of financial freedom and wealth.
- The Importance of Saving: Instilling in our children the habit of saving money can help them avoid a lot of grief later in life. Teach a child this lesson early in life, and they are far more likely to maintain the habit of saving when they are older.
Best Savings Accounts for Children
So let’s turn to some of the best savings accounts for kids. When we compiled this list, we considered several factors:
- Interest Rate: A high interest savings account can help a child understand the importance of finding the best deals. While the interest rate isn’t the only consideration, it’s obviously an important one.
- Low Fees: With many bank accounts for kids, the amount of money saved will be relatively small, at least to start. The last thing you want are fees eating away at the balance.
- Low Minimum Balance: Some banks either require a substantial minimum balance or charge extra fees if a certain balance is not maintained. Unless your child’s bank account will exceed these minimums, it’s best to avoid these accounts.
- Fun: Yes, a bank account can be fun. And particularly for young children, the fun factor can go a long way in teaching kids about money.
With these criteria in mind, here are our top choices for the best child savings accounts:
Capital One 360 Savings Account
Capital One 360 used to have a savings account option just for kids. This isn’t the case anymore, but their general 360 savings account is still a good fit for the littles in your life.
This flexible bank account offers most of what we were looking for in a kids’ account: no initial deposit requirement, no annual minimum balance, and no fees. With an APY of just 1.00%, the interest rate isn’t great. But that’s to be expected in today’s market.
While these accounts don’t have fun programming especially for kids, their standard savings goal feature could be great for young savers. With this program, kids can set a goal, track their progress, and celebrate when they reach that goal.
As a parent, you can also set some limits with this account. For instance, kids can check their balance online any time, but only parents can make cash transfers and withdraws. You can also set up an automatic savings plan from your own Capital One account if you want to give your child his or her allowance electronically.
Ally Bank
We include Ally Bank in our list for several reasons. First, it has no minimums and no monthly fees. Seconds, it offers extremely competitive interest rates. And finally, it has a wide selection of savings products.
In addition to a simple online savings account, Ally Bank offers a variety of certificates of deposit, including a raise your rate CD and a no-penalty CD. As a result, Ally Bank is a great choice for older children and could certainly become their bank of choice when they move out of the house.
Related: Ally Invest – Online Discount Broker Review
Barclay’s Dream Account
This account option lets you make deposits of up to $1,000 per month, making it a good option for most kids. You can earn an outstanding 1.15% APY at the time of this update. And you can easily transfer money to and from other banks
The Dream Account also gives bonuses for good savings habits. For instance, if your child makes deposits for six consecutive months, she’ll get a 2.5% bonus on the past six months’ worth of interest earned. And if you make no withdrawals for six consecutive months, your child will earn another 2.5% bonus on the past six months’ worth of earned interest.
Barclay’s Dream Assistant tool can help kids choose a goal, figure out how much it costs, and determine how long it will take them to reach their goal.
This account doesn’t have a minimum opening balance requirement. Unfortunately, it does have some fees associated. Be sure to check out the account fees prior to opening this account for your child.
Update: This offer is no longer available.
Online Banking Caveats
One potential problem with an online bank account like those listed above: there are no branches. If you plan to have your child save quarters and dollars in allowance money to deposit into the bank monthly, this could present an issue. Still, many parents have slick allowance tracking options that would allow you to deposit allowances or earned cash straight into the online account.
Local Banks and Credit Unions
Many local banks and credit unions have savings programs just for kids, too. In fact, some of these local places do a better job of custom-tailoring accounts for kids and including the fun factor.
For instance, Forum Credit Union, a midwestern credit union, offers an Aware Kids Account, which comes with a Moonjar at account opening. The Moonjar is a great way to teach kids the three major things they can do with their money: spend, save, and give.
Similarly, North Coast Credit Union offers a Youth Savings Account that comes with some fun perks, including a report card reward savings boost for kids.
You may find that local credit unions and banks don’t offer a high savings a rate for youth accounts, though. Compare their rates to those of online banks, and then weigh other factors to determine which account would work best for your children.
Topics: Banking
Capital One Teen MONEY is a useless option for any kid that does not have a cell phone on his or her own cell phone plan. They will happily open the account and let you fund it, but junior will never get the app or website to work unless they have a cell phone and the cell phone is in their own name. If they are on many prepaid plans or a family plan, authentication will fail and they will not be able to access their account online, which means they cannot set their PIN, which means they cannot use the account at all. You can call Customer Service a dozen times and spend hours on the phone talking to one person after another who has no idea what to do, but none will help or even just tell you it won’t work, but it clearly won’t work. It is hard to believe a bank this big has no idea how its own product works.
The CapitalOne Teen Money checking account has become impossible to even open. It goes in a cycle of filling everything out, asking you now to log in to add money to the account, then kicks you right back to filling out the form again. I’ve tried it so many times, both with my teen’s log in and my log in and nothing works. I’ve even been on the phone with a rep and they told me what to do and it STILL didn’t work. I’m not sure it’s even a legitimate account for TEENS to open anymore, but I won’t waste anymore of my time on it. Off to find a bank that wants my TEENS money…..
I used to be completely happy with the Capital One kids savings account I opened for my kids in 2014. One of the changes that has been made is that each account now requires a separate phone number for verification. That means that unless you have a separate cell phone for each kid, regardless of age, and use it as the verification number on the account, they won’t be able to login into their account.
You should update this article. Barclays stopped offering the Dream account on 10/17/2017 and as of 6/7/2017 no longer offer accounts to those under 18.
I nees to open a joint savings account for my son any good ideas on where to go
i have a 9 y/o who i would like to set up so that he has a debit card. i will be on the account with him. any ideas which bank can accommodate us?
Ginny, I like the Capital One 360 Money Card. It will have some limitations for a 9 year old, but it works great. Our two children have used the card since they were in high school.
It is high time that we teach our children the basics of financial management at an early age.It is going to be really easy with these accounts.You rightly said that it shall be more like a fun along with some learning.
Important thing is that parents should always be there to supervise them as children accounts can be ‘double edged sword’ too.Thanks for sharing Rob!
I have to say that the best thing I ever did for my teen aged daughter is to get her her own paypal student account. She has her very own debit card that she can use anywhere. It’s linked directly to my account so I’m able to send her money on the fly, I’m able to view all of her purchases, and best of all there are no fees and there is no chance of her spending more money than she has available. I’ve been able to teach her financial responsibility and at the same time been able to control her spending if needed. I would HIGHLY recommend paypal over any other pre-paid accounts!
Ally requires ATM card users to be 18yrs or older, so its really not an option.
Custodial account holders do not get ATM cards and joint account holders must be ≥18.
i want to make an account
Iam a 16 year old and so i wish to open a bank account which also offer ATM card……..
I have a 7 yr old. We are excellent bank of america customers. We went into one branch and they said they would waive the fees for our kids. Went into another branch to set it up and they flat out refused. They are willing to loose our business over a dew dollars a month. Oh well. Thxs. Jill
I just signed up for Dough Roller and I am learning alot. My parents did not teach me alot about credit or managing money when I was young. I don’t want to make that mistake with my 3 year old. How old does my daughter have to be to open an account?
Adam, most bank accounts offer a debit or ATM card. For minors, however, an adult will have to be on the account, too. There are also prepaid cards designed for teenagers. Good luck.
Hi DoughRoller I just wanted to ask the web if there was such thing as a children bank account and a plastic card that connects to a children’s bank account that has money in it so that is all Love,Adam.
The key is to just get kids started early. Too often we all fail to plan and don’t take advantage of compound interest. Even if it’s just $10, get started saving now.