There are so many good reasons to start a savings account for your baby or child that it would hard to pick one “best” reason for doing so. What you are doing when you open a savings account for your child is actually helping them take a first step toward financial freedom. Most banks and building societies have special baby savings accounts with very tempting features like high interest rates, free gifts, like books and collectible toys, and sometimes discount codes for shopping.
It doesn’t matter whether you’re saving for your child for a specific purpose or just to build up a rainy-day fund. The fact that you set up an account for your child and regularly put money into it – no matter how small an amount – not only builds future wealth, but teaches your child, as soon as they are old enough, how banks work and the importance of setting money aside regularly.
The habit of saving money, when started young, is a habit that will stand children in good stead when it’s time for them to move out into the world. Opening a child’s savings account usually requires applying at a bank by filling in a form. Baby savings accounts are usually offered for children from birth to about age 7.
You will be required to show proof of the child’s identity, such as a birth certificate, medical card, or passport. Proof of address is usually required as well, so be sure to take a recent utility bill with you when going to open an account. Banks have different requirements for the amount necessary to open an account, but in many cases the amount is quite small: £1 in some cases!
But, don’t just choose the nearest bank, or the one you use yourself. There are enough incentives with savings accounts for children that it is well worth the time spent online comparing perks and interest rates, which can vary significantly. If you compare savings accounts before opening one, you could increase the amount you earn per year significantly, depending on how much you contribute to the account.
While no parent would want to force their child to put all of his birthday money or allowance into the bank, you should start encouraging your young children to put aside a portion of their money into a savings account, whether it’s some of their allowance, or half of a cash birthday gift, to get them into a good savings habit. By the time your child is grown, she can see for herself how it adds up and what a difference it can make in terms of financial security.