The Hidden Benefits of a Youth Savings Account
April was National Credit Union Youth Month, which meant credit unions across the nation celebrated youth and encouraged young people to Give a Hoot About Saving. If you live on Maui, here at Wailuku Federal Credit Union we're continuing to help jumpstart the saving habits of our keiki with a $10 coupon for new savings accounts opened by youth 17 and younger. Stop in, or call 808.244.7981 to find out more!
Education About Savings Can Start Early
Kids learn lots of things in school, but one thing that usually isn’t covered is personal finance. If you're a parent or guardian, it's likely going to be on you to teach your dependents about things like budgeting, saving, and the other basics about handling money.
This education can start earlier than you think – as early as pre-school, when kids begin to understand what money is and what it's used for. When children get a little older, one of the best ways you can help them learn about personal finance is through helping them open their own personal savings accounts. This comes with some obvious benefits (compound interest!), but some not-as-obvious ones, as well. More than anything, it's an opportunity to introduce some important concepts and skills surrounding money and financial decisions.
A Wealth of Benefits
Teaching About Goals: Putting money aside works best when there's a purpose connected to it: a vacation, a new bike, a comfortable retirement. It's no different whether you're eight or eighty. A savings account encourages a child to set a savings goal and work to reach it, whether great (a college education) or small (a Star Wars action figure). Setting and achieving goals is an important skill in all aspects of one's life, one that will keep paying off again and again in the future.
Teaching Financial Basics: By setting savings goals, a child begins to understand that different things have different costs. And through saving to reach a certain financial goal, they come to understand the basics of income and expenses – that things have a price, and your financial resources must meet that price. This is an important lesson in a culture of credit cards, one where kids see parents acquiring goods and services but without witnessing an obvious payment for those goods and services.
Teaching Responsibility: Children come to learn that if they don't responsibly keep track of their money and don't contribute to their savings, then their goals will not be met. Kids of all ages (and adults!) feel a thrill at the rising balance in their account -- but they also feel a sense of pride, knowing they made smart decisions and didn’t throw that money away before it made it to the bank.
Teaching Compassion and Perspective: By setting goals and saving towards them, kids get a sense of how financial resources are tied to what people have and don’t have. They can start to form a bigger picture about life, and how some people are more or less fortunate than others. They also get a more realistic about their own family life, and why they can or cannot have certain things. They understand that the things they do have are the result of planning and choices (for better or for worse) on the part of their parents or guardians. All of this information helps them make better and more thoughtful decisions regarding their own finances.
Teaching the Value of Investing: A basic savings account also teaches that investing smartly and consistently can grow your money. Many kids are blown away by the idea of interest – that responsibly putting money aside can not only protect their money… it can actually earn them more money.
As you can see, there are many reasons to encourage a youth to open a savings account, especially the variety of important lessons they can teach. Maybe the most compelling argument for a youth savings account, though, is to imagine the absence of some or all of the benefits described above.
Remember, kids are unlikely to get these lessons at school or elsewhere. So consider a youth growing to adulthood without learning about setting financial goals, or the relationship between income and expenses, or the relativity of people's assets, or how responsible investment is a smart move that literally pays off. That's a recipe for a problematic relationship with money in the future.
Helping a youth open a savings account is certainly not a substitute for parental guidance towards financial responsibility, but it can be a really important and helpful part of the journey. Many credit unions run promotions to encourage new youth savings accounts, and some even offer special rates or cash for the first deposit.
To learn more about savings accounts at Wailuku Federal Credit Union, call 808.244.7981 or come on down and see us. No matter how old you are, it's never too early to start saving, and making a plan to turn your dreams into reality.