Explain that savings accounts pay interest, and that potential savers can compare APYs from bank to bank to find the highest rate. Also, let your child know that some savings accounts have maintenance fees that can eat up any gains.
Once you’ve opened the account together, you can help your child set a savings goal and figure out how to meet it. This will help them learn delayed gratification, and you can use this opportunity to teach them methods for making saving fun. Have your child create a savings thermometer or other visual savings tracker that they can color in as they meet milestones on their savings journey.
The first year’s calculation is straightforward: 1.05% of $1,000 is $10.50, so after one year, your child’s savings account will have grown to $1,010.50. But in year two, she’ll earn 1.05% interest on the full balance of $1,010.50, which means another $10.61 will be added to her balance, bringing it to $1,021.11. After three years, she’ll have $1,031.83. After four years, $1,042.67. And after five years, her balance will have grown to $1,053.61.
Robust math skills and good financial habits may seem like all you need to make savvy money decisions. But understanding the history of banking in the United States will give your children important context for their finances. In particular, you can use the opening of a new bank account as a jumping-off point for the following history lessons:Over a hundred years ago, banks had no source of emergency reserves to fall back on if everyone suddenly decided to withdraw their money all at once.
Source: Education Headlines (educationheadlines.net)
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