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Checking and Savings Accounts For Kids

March 25, 2019

Young boy counting the coins he has saved.When is the best time to open one for your child?

How financially savvy are your kids? 

Depending on your answer, our friends at Balance Financial Fitness offer some great advice.

According to a recent survey, only 5% of adults received any kind of financial education in school. It is a scary statistic, and may partially explain consumers’ record-high credit card and student loan debt.

If you want to equip your kids with the tools to be financially secure adults, a good place to start is with a savings and/or checking account. Once they see money going in and coming out, it can drive home a lesson about money management.

Wondering if they can handle the responsibility? 


Savings Accounts

Most kids can typically grasp the concept of a savings account early in their development. Here’s how to know if your children are ready to use one:

  • They’re curious about money - If your child expresses a genuine interest in coins, shopping, or anything related to money, this can be a good segue into a savings lesson: financial institutions allow you to put money aside until you really need it.

  • Their piggy bank is overflowing - If your kids have a lot of change in their piggy bank, watch out. It may disappear before your eyes. Take this opportunity to teach them that if they save some of their money in an account, it can earn interest or dividends over time.

  • They have a savings goal - If your children are saving up for something big, this is the perfect time to introduce a savings account. They can make a deposit into the account so they will not be tempted to spend all of their cash.


Checking Accounts

Checking accounts tend to be better suited to older kids who have had more exposure to money. Here are some signs that your kids could benefit from a checking account:

  • They’re responsible - No matter how responsible you are, it can be tempting to withdraw more cash than you should. You might wait to open an account with your children until they demonstrate responsibility in other areas, such as getting a driver’s license or maintaining a part-time job. 

  • All their cash is stuffed into their wallet - The wallet-as-checking-account is dangerous for several reasons. Not only can cash easily get lost, it’s hard to track your purchases. By contrast, an account statement lets you view all of your spending and withdrawal activity, which can be handy for budgeting and a great teaching tool.


If you’re eager to introduce your children to the world of personal finance, checking and savings accounts are a good place to start. Just watch for the signs, and start when they’re ready.

Source: Balance Financial Fitness March 2019


If you’d like help with savings or checking accounts for your kids, just ask. 


Learn about the different types of Youth Accounts, and their benefits, on our Youth Accounts page.

About Youth Accounts

 

Posted in: account, checking, kids, money, saving

How to Start Saving For Your Kids’ College

August 2, 2018

Parents help young children with homework as they prepare for attending college somedayEducation Savings Account vs. a 529 Plan

There are several options when saving for your children’s college expenses. It’s important to understand them and choose what’s best for you. Along with regular savings options, First Source offers a New York State 529 College Savings Plan, and a Coverdell Education Savings Account. What is a 529 plan? The 529 Savings Plan is a good option if your children are relatively young, you’re going to commit to saving regularly, and you have the time (you start early). The 529 plan has a higher contribution limit of $10,000/year, and anyone can contribute. Let’s say it’s your child’s birthday: all party attendees could give money as a gift toward this account.


How does a 529 Plan work? 

In a 529 Plan, your account earnings grow without you having to pay federal taxes on them, and some states (like New York) have other tax benefits as well. When your 529 funds are withdrawn and used for education, the funds are tax-free (with some restrictions). And you don’t have to use them only as savings for college; covered expenses also include private elementary or secondary school tuition. If you want to withdraw the funds for something other than education, that’s ok, too, though you will have to pay taxes and fees. Find more information online at nysaves.org.


What is a Coverdell Education Savings Account?

The Coverdell Education Savings Account is a good option for a family on a tighter budget. Contributors must contribute by the due date of their tax return (not including extensions). The funds can be used for either college or private schools, and cover a wider range of K-12 expenses. The funds must be used by the time your student reaches age 30, unless there is a special needs situation. No states currently offer state tax deductions for Coverdell accounts. Check contribution and income limits for each year you plan to contribute, as they are subject to change. Ask us for more details if you’re interested in a Coverdell account. 


Choosing a College Savings Plan

There are advantages for each type of account, and many people even save using both Coverdell and 529 accounts. Live Smarter by making an appointment today to meet with one of our Financial Services Representatives to discuss your best college savings plan approach. 

 
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Posted in: 529, account, college, plan, savings

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