Children putting coins in piggy bank. PHOTO | FILE
What you need to know:
Opening an account for your newborn is no longer an outrageous idea and some parents are opting out of spending too much money on diapers, baby clothes and toys and instead making direct deposits into the baby’s bank account.
Children rely heavily on their parents and guardians to have an understanding of the world around them. Their perceptions on life in general and values instilled in them are shaped by the people they constantly interact with.
This is why it is never too early to teach them the value of money by opening a bank account for them.
Jacqueline Waweru, the managing director of financial advisory services firm Anchorage Limited says opening an account for your children is one of the ways parents can provide them with a sense of responsibility and discipline at a very young age.
“When you take children to work with you, they are able to see what you do and pick the work ethics. If you want to make your children more conscious about their spending habits, why not let them play an active role with their own bank account,” she said.
Many banks do not have a minimum age restriction and one can open an account for their newborn and children who are below the age of 18 years.
To open an account for your child, all you need is their birth certificate, the minimum opening balance and copies of your I.D card as the guardian of the child.
With the ever increasing costs of living and emergency expenditures that crop up when least expected, it is becoming difficult to set money aside every month - let alone save for their newborn or five-year-old child.
Ms Waweru says opening an account for your newborn is no longer an outrageous idea and some parents are opting out of spending too much money on diapers, baby clothes and toys and instead making direct deposits into the baby’s bank account.
“Today many parents want to take their children to the best schools and they can book a spot in advance even before the child is born. Timing really depends on the parents and what they are willing to invest for their children,” she said.
Saving plan
When children are aged below 36 months, most of their expenses would revolve around food, diapers and the occasional clinic visits as such it is relatively easier to save more of your monthly budget than when they start to go to school.
As a parent, you need to develop a saving plan for your child and clearly decide what the money being saved will be used for. One might choose to set aside money from the time the child is two years or less as a way of planning early for their college education.
“You need to decide how much money you are willing to save every month which you can then set aside every month, quarterly or even twice a year,” she added.
If you are not good at saving, rather than withdraw money from your account and put it into the account of your child, you could put a standing order with your bank ensuring that a certain amount is automatically transferred every month.
Each bank is different when it comes to what it offers in their children’s savings account but it is important to look at the required minimum opening and operating balance, whether or not there are any fees attached to the account, as well as their interest rates.
Post Bank, for instance, requires Sh50 while Equity Bank requires Sh200 for the child’s account to remain operational. Most the banks require a minimum and operating balance of Sh500.
Banks like I&M and Consolidated Bank require balances of Sh1,000, Barclays Bank requires an opening balance of Sh2,400 while for one to open an account for their child at Prime Bank, they will require a minimum balance of Sh5,000. Some bank accounts provide bonus interests for few or no withdrawals over a period of time.
Others provide additional programmes like monthly events for their junior savers as well as reading materials appropriate for their age.
It is always important to shop around and read the fine print of each account before choosing the one that is best suited for you and your child.
Piggy bank
For children who recognise the value of money, she advises introducing a piggy bank through which children can save any money they receive from family and friends.
“When you actually visit the bank with the child and help them count the money they are about to deposit, they get to learn firsthand about saving and banking. They get to know how to budget for the allowances you give them and be conscious of what they want to buy,” she adds.
Parents might opt to move the money into a fund when the child turns 18 years, with the fund becoming accessible to them when they are 21 and just starting out life on their own.
“Savings accounts are not the only investment plans for your children, you could opt to buy into education plans from insurance companies or set up a trust fund where the money is kept in a fixed deposit until the children are of age,” she advises.
