How Does a Savings Account Benefit Children?

In 2014, the Reserve Bank of India allowed banks to let minors open savings accounts. A kid can have a minor’s or children’s savings account opened in his/her name. To be eligible to open the account, your child’s age must be up to 18 and you (the guardian or parent) must hold a savings account in the same bank. The account would provide the same facilities as a regular savings account. These include a debit card, passbook, chequebook, and internet banking facility. 

Benefits of Kids in Using a Minor’s Savings Account

Learn to grow money

Your child can store money in a piggy bank too. But does it allow the saved money to grow? No. Therefore, it’s much better for your child to use a savings account so that the deposited money grows over time with interest. Isn’t that why you too chose to use a savings account? Soon even your child will learn that money grows on investing it. This can prepare your child to responsibly invest in the future. 

Grasp how to budget expenses

A savings account for children comes with a debit card. Don’t stop your kid from using this card. You need not worry that your child will become extravagant on using the card. It will have a specific limit on the daily spends. So, he/she will rather learn budgeting and saving skills. 

Do you have a practice of giving the child pocket money? From now on, consider transferring the amounts into the minor savings account. Then watch your child slowly understanding and getting acquainted with a less-cash future. He/she will also learn to plan expenses and spend as per the available funds.  

Learn to repay loans 

Your child is not earning. So, you deposit an initial amount of money on the kid’s behalf to open his/her minor savings account. You can tell your kid that it’s a loan from parents. Your child will understand that it is his/her responsibility to pay back your money gradually. Then as the kid saves money and earns interest, he/she can learn to responsibly repay you a rupee at a time. 

This can help instil a deep sense of financial discipline in children and show them how money earned through interest can be used to finance outstanding obligations.  

Apply the knowledge of Mathematics in banking

Time to practically apply the knowledge that your kid learns at school. So, say, your child is learning Mathematics in school. He/she can then apply the math skills of calculating compound interest when using the children’s savings account.

This can also help the child check the accuracy of financial procedures. Suppose the bank credits interest to the child’s savings account every month. He/she can calculate the interest amount on his own based on the given rate of interest and check whether it matches the bank’s figure. This will enhance the child’s sense of finances. 

Make sure that the chosen savings account for children offers highly competitive interest rates. This can maximise your child’s savings and secure his/her future.