The first purchase I remember saving up for was a miniature waterbed for my Cabbage Patch doll. The salesman at the furniture store promised to save the display model if I could save up the $39 – a fortune for a six-year- old in 1984. Save up I did. My allowance and the extra money I earned helping neighbours accumulated in a jar in my room until I had enough to buy that waterbed, a prized possession for many years.
You don’t need a bank account to teach your young children about saving money and delaying gratification – a simple jar like the one I had will suffice. But once your children are old enough to understand money without needing to count pennies and loonies, it’s time to help them open their first bank account.
For Gail Vaz-Oxlade, personal finance author and host of television’s Til Debt Do Us Part, that magic age is 10. Her most recent book, Money Smart Kids, offers parents a wealth of ideas on how to teach children smart money management.
By age 10 “they can really understand concepts like interest,” says Gail. “As for what to look for, you want an account that rewards kids in some way, a bonus interest rate, or matching introductory deposit, for example.”
When I was ready for a bank account, I accompanied my mother to her bank. Today, parents know that not all youth bank accounts are created equal, so it’s smart to comparison shop. Here’s how to find the right bank account for your child.
Run the numbers
While most youth bank accounts have no monthly or annual fees, some offer higher transaction limits than others.
A limit of 15 transactions per month is more than enough for your six-year-old, while your 16-year-old could easily go over the limit in a single week.
CIBC and TD Canada Trust offer unlimited transactions, allowing kids to make as many deposits, withdrawals or debit transactions free of charge. BMO offers 30 free transactions a month, Scotiabank offers 20 and RBC caps their young savers account at 15 free transactions a month.
Check out community-based credit unions, too. FirstOntario Credit Union, for example, offers a no-fee savings account for kids with unlimited free debits which pays a bonus above a regular savings interest rate.
Talk to your kids about using automated banking machines – as with your accounts, withdrawing cash from an independent or competing bank’s ABM can cost as much as $5 per transaction.
Walk-ins are welcome at most banks; however, setting an appointment to create your child’s bank account can make the experience more enjoyable. You’ll need your child’s Social Insurance Number and birth certificate or passport to confirm their date of birth. Children under 12 require a parent or guardian as their joint account holder – that’s going to be you, so bring your government-issued identification as well. As the joint account holder, you’ll have access to their statements, and can deposit or withdraw funds on their behalf.
A learning tool
Your child’s bank account might come with paper statements or online access only. If your child is old enough, you can allow him to make transactions on his own or limit the account access to the type of transaction permitted. Take the time to review their statements with them and discuss interest, fees and their savings goals. “Your life is your classroom,” says Gail. “Every financial interaction you make is an opportunity to teach your children smart money management.”
Teaching kids money basics
Gail Vaz-Oxlade says don’t wait until it’s time for a bank visit to teach money management. “Money basics need to be taught from a much younger age than 10. Children as young as three can learn about money by ‘exchanging’ their money for a small treat in order to learn that money is a means of exchange – that the money goes away.” She suggests starting an allowance at age six, and beginning discussions about saving at that time.