Having a child for the first time is a bit of life changing experience (now there’s an understatement). You’ve got to change your way of thinking and acclimatise to the daunting but exhilarating responsibility of nurturing and raising a tiny human being. Of course, with this comes all kinds of challenges: how can you make sure your child does their best in school? How do you ensure they eat a nutritional and balanced diet? Will they socialise well with other children? These are questions that all parents have to ask themselves.
However, perhaps one of the greatest concerns is how best to plan for your child’s financial independence – just when is the right time to open up a young person’s bank account?
Usually, it is a good idea to set your child up with a bank account when they start to receive regular amounts of pocket money or money for completing chores around the house. By setting your child up with a bank account at this time, you will be teaching them valuable lessons about modern money management as you guide them through the process of earning, spending, and (most importantly) saving. And this is definitely a process that you will have to guide them through. In order for having a bank account to be a positive thing, you will need to be a positive financial role model.
If your child’s pocket money accumulates in change on the bedroom floor, they will be more inclined to spend it on sweets and small toys. As we all know from experience, having cash in your wallet makes you more inclined to spend it. If, on the other hand, that money is instead tucked away safely in the confines of a bank account, your child can view money in a different light. They will hopefully start to see the benefits of banking rather than spending all their money, and even saving up for something extra special. Helping to initiate a savings goal for your child, perhaps for a particular purchase in the future, is a fantastic way to instil important lessons about money management early on, making it far more likely that your child will grow up to be a financially savvy adult.
Even though you should provide some guidance to your child as he or she begins to manage money, it would be wise, within reason, to allow them to make some financial missteps. After all, some of the greatest lessons that we learn throughout our lives are through our mistakes. If your child decides to make a spontaneous purchase that they later regret, this could teach them a valuable lesson about the horrors of impulse buying, and they will hopefully start to understand that having some kind of financial plan (however flimsy) is better than none at all.
Opening a bank account is a necessary step in any young person’s development, providing incredibly valuable lessons in saving, accumulation of interest, and spending that can be utilised for the rest of their life.
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