In order to maximize savings and provide a good learning experience, I subscribe to a three-bank system. J has savings accounts at the National Bank of Mom, our local bank and an online bank.
Bank of Mom
The first stop for savings is the National Bank of Mom. J divides his money between his savings, spending and giving envelopes, and I pay interest monthly on the money in his savings envelope. He gets a statement printed and emailed to him, and he writes the interest in the register, keeping the account balanced. We make note of the increasing amount of interest each month, which will prepare us for a more in-depth conversation about compounding. Right now, our focus is on putting at least 10% of all money into savings and the idea that your money can make money.
Every few months, we take the cash from the savings envelope to our local bank. I think it’s important for him to go to a physical bank and deposit money. (So much happens electronically nowadays, and I think it can be difficult for kids to understand. This is why I pay his interest and allowance in cash, so that he can hold it in his hands and work with it.) The tellers are also very nice to him, which adds to his experience.
When looking for a bank, you might want to start with your own bank, but you could also look at other local banks or credit unions. Also important when choosing a bank:
- Free (no fees)
- Low minimum
- Easily accessible
- Convenient hours
- Bonuses: a decent interest rate, a free change machine, perks to open an account, online and/or kid-friendly resources, the ability to view balances online and/or make transfers from your account if you also have an account there
A few times a year, I move money from the local bank to an online bank. Many online banks (like Ally) have higher interest rates than you’ll find at a local bank. Right now, he’s earning 1% interest. He doesn’t see this part of it at this age, but I feel better knowing that our money is working a little bit harder than if we just stopped at the previous step.
As We Grow
When he gets older, it will be important for him to have a checking account and debit card. Hopefully we can open this at our local bank to keep things simplified.
What about you? How do you bank? Leave a comment below — I’d love to hear your ideas!