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Kids learn money lessons young — even 5-10-year-olds may already have an emotional connection to spending or saving. The earlier you start building their financial foundation, the more opportunities you have to practice skills that will shape their relationship with money.
Banking for kids can open new avenues for parents and kids to learn alongside each other and manage money thoughtfully, and it can start when kids are as young as 6 years old.
While tools like debit cards and apps to track spending might seem advanced for elementary school, they can give parents resources to teach financial literacy and extra insight into their kids’ habits.
Here’s how to find banking options that work for your kids, and tips for fun ways to encourage good financial habits.
Why Kids Should Have a Bank Account
Theoretically, your child could stash allowance under the bed or in a piggy bank for safekeeping. But a formal financial account can offer advantages from an early age. Children as young as 6 years old may be able to open a parent-owned account. Here’s why this can benefit them:
- Learn by doing: Just like kids are often more interested in trying new veggies if they help in the kitchen, they may be more likely to absorb financial lessons if they can take a hands-on approach.
- Take care of money: You might not mind (as much) if kids leave a few toys on their bedroom floor, but scattering cash might be more of a concern. Having a separate account to deposit money can help emphasize treating money carefully.
- Develop savings habits: Encouraging kids to plan and save for long-term goals teaches delayed gratification and savings habits that will benefit them throughout their lives. Even elementary-age kids are old enough to form the foundations for lifelong habits.
- Categorize savings and spending money: A tangible distinction can help children separate money they save and what they’re free to spend. You might let your child keep pocket money at home but bring savings to the bank.
- Earn interest: Even if interest earnings are low, it’s valuable to teach kids the basic principles of using accounts that help grow your money.
Savings vs. Custodial Account
The type of account you open for your child might depend on your goals. If your focus is teaching your child day-to-day money management, a traditional savings account can help them practice saving and spending.
If you’re hoping to build a nest egg for your child’s future, you might want to consider an UTMA or UGMA, or a similar custodial account. Custodial accounts are managed by an adult (often a parent) on the child’s behalf, and the child takes over the account when they come of age. Contributions to a custodial account are irrevocable. One advantage of an UTMA or UGMA is you can use it for investments, which may have a much higher rate of return than traditional savings account interest.
Different Options for Banking for Kids
Depending on your child’s age and how you’d like them to use financial tools, a few different options can make sense. You can start with one at a time or use a combination. Features to consider with any kind of financial tool for kids include:
- Low or no account fees
- Low or no minimum balance
- FDIC-insured to protect money
- Automated savings transfer options for convenience
- Interest rates, where applicable
- Kid-friendly features (e.g., financial literacy education games, options for parents to pay for chores or allowance if they want to)
Traditional Bank Accounts
Depending which bank you’re with, you may be able to open a joint parent-child account for young children. Parents can set specific spending limits (e.g., $20 at restaurants, $15 anywhere), so you don’t need to worry about overspending. You can automate allowance payments and assign one-time or recurring chores to pay once kids complete them.
Many banks offer account options for minors to own a joint account with parents. Check a few to compare interest rates where available, minimum age, fees, and education features.
Debit Card for “Credit” Practice
Research stretching back decades suggests people tend to be more willing to overspend with credit cards and that they self-regulate better with cash. And yet, about 40% of Americans go cash free in a typical week, and plastic payments are important for creditworthiness (and can come with valuable perks). So how can parents prepare kids for a credit card-heavy world while managing the temptation to overspend?
Debit cards give kids the chance to practice card payments in a controlled way.
Kid-Friendly Financial Apps
According to survey data from Forbes, 78% of U.S. adults prefer digital or mobile banking. Your kids may grow up preferring to handle finances via app, too. Revolut <18* is a financial super-app that helps kids ages 6-17 test the waters of money management. Revolut <18 has no monthly fee with a Standard account, and offers parents options like setting spending limits or getting notified when kids make a purchase. Kids can also request or make payments to friends on the app, building social skills around finances.
How Parents Can Help Kids With Banking
Opening your child’s account is only the first part of the process. Banking for kids isn’t “set it and forget it.” Your active involvement is key to helping kids get the most from their financial education. These tips can help money lessons stick and make banking more fun.
For Younger Kids
Especially for young children, the more tangible you make money, the better. Handling physical coins and bills is an important part of how kids get familiar with money. You might set a tradition of counting out allowance dollars together and setting savings in a separate place (e.g., an envelope you hold for safekeeping). Depending on your schedule, you might plan a trip to the bank weekly or monthly so kids can hand their savings to a bank teller themselves.
You can also give kids a visual guide to their savings at home. Most kids today (and frankly many millennial parents) don’t need to rely on balancing a checkbook to track finances. It’s still beneficial to practice tracking saving and spending. Tracking on an app is one way to go. If kids aren’t ready for digital tracking, making a wall chart can help represent a savings goal.
For Older Kids
Older kids can start to understand more complicated nuances of finances. You can talk more about how taxes work or how to save toward multiple goals at once (e.g., medium-term saving for an upcoming trip and long-term saving for a car). Cash apps can have a social component, so it can be helpful to talk with kids about their feelings if they see friends splurging. You might also want to teach kids to spot common financial scams.
For All Ages
One advantage of having a joint account or being on the same app is keeping an eye on your child’s spending. Check in regularly on debit card activity or transactions on an app.
The point isn’t to micromanage. There can be a benefit in letting kids make money mistakes (within limits). If your child spends their $20 of “anywhere” money on ice cream cones and doesn’t have cash left when a new game comes out, learning by experience can be more powerful than a reminder to think ahead. But as a parent, you should have access to check your child’s transactions so you can catch issues regarding their money habits.
For example, you might say, “Hey, I noticed your savings haven’t gone up in a while. Did you want help getting back on track?” Or if you see a pattern appearing on a cash app or financial app with social transactions like Revolut <18, you can start a conversation. Maybe you notice your teen making multiple payment requests to friends. They might be lending money and need help navigating the dynamics of getting friends to pay them back on time.
Another idea to make money management more rewarding for kids of all ages is to add your own “perks.” You could match a certain savings amount to help them reach a goal or offer a bonus for an impressive report card or good habits (like sticking to their spending limit for a certain number of weeks in a row).
Parents have more options than ever for tools that promote financial education. You can help kids develop routines, plan and reach goals, and get comfortable with various ways of using money. As they grow old enough to earn and manage money more independently, they’ll have a strong foundation to grow on.
*Revolut is a financial technology company. Banking services provided by Metropolitan Commercial Bank (Member FDIC). Revolut Prepaid Mastercard is issued by Metropolitan Commercial Bank (Member FDIC) under Mastercard International license, subject to applicable terms.
At Savingforcollege.com, our goal is to help you make smart decisions about saving and paying for education. Some of the products featured in this article are from our partners from whom we receive compensation, but this doesn’t influence our evaluations. Our opinions are our own, not those of any bank, investment manager, or student lender.
