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Savings Account
How a bank savings account can help build a bright future for your child
Key Takeaways
Children develop the habit of saving early which builds a safety net and reduces impulsive spending
- A savings account helps children learn banking procedures and become more independent with money
- Digital statements and tracking help children monitor spending, set goals and understand interest
- Having their own account boosts confidence, responsibility and basic mathematical skills
How a bank savings account can help build a bright future for your child
Since 2014, the Reserve Bank of India (RBI) has allowed children aged ten and above to operate their bank accounts. But is it wise to hand over such control to children? As it turns out, it’s very much advisable – in more ways than one. Operating their bank account imparts a host of benefits to children. Let’s see what they are.
1. They acquire the saving habit early on
Saving is an important habit. Savings offer a safety net, reduce financial uncertainty, and curbs problematic expenditure. With a savings account, children can begin grasping the idea of saving, parking one’s money in a safe place, and allowing one to earn more money. Children who start saving early are more likely to continue as they grow older.
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2. They become familiar with banking procedures
The modern banking system is simpler than ever, but there is something of a learning curve with an ever-growing array of tools such as branch banking, phone banking, netbanking, etc. Children who start banking early get a head start in understanding the banking system and its procedures. They can also function more independently; if children are given debit cards, they don’t need to carry cash. You can put their allowance in their bank account and provide them with the freedom to withdraw it as and when they need to.
3. They can track their money and spending patterns
Through netbanking and digital bank statements, children can track their money and observe their spending patterns. By doing so, they can become more conscientious of how and where they are spending. This tracking also enables them to set financial goals, optimise their spend-save ratio, and plan for future spending.
4. They acquire confidence and independence
When children see a bank account in their name with money in it, they feel ownership and are more careful with it. They also feel more independent, which automatically leads to more responsible behaviour. When given control over their finances, children are forced to think critically, imagine cause-effect relationships, foresee consequences, and make decisions after weighing pros and cons.
5. They understand the value of money
Operating bank accounts independently instils a sense of ownership over the funds in them. This allows kids to track their expenses and learn the value of money. They understand the concept of interest; and how savings can earn additional income. They can observe their bank balance going up and down in real-time and plan for future purchases.
6. They pick up mathematical skills
Perhaps the most significant advantage of allowing children to take over the reins of their bank account is that it teaches them important mathematical concepts such as the power of compounding. Compound interest is one of the fundamentals of sound investing and wealth creation. When children understand that their money can generate more money by sitting in the bank rather than in their pocket, you help them build a base for savvy investing later in life.
“Start ‘em young” is a fantastic approach for easing children into banking. By setting the stage for your children’s financial independence, you are empowering them to make sound fiscal decisions for the rest of their lives.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.
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