For parents, a kids savings account allows them to teach their children about finances in a more meaningful way than a simple dinner-table lecture. Kids can make deposits and withdrawals and watch their savings grow, all with parental controls and oversight. It might even inspire an entrepreneurial spirit, with kids looking for ways to add to their balances.
Jonathan Morales opened kids savings accounts for all three of his boys “to give them a head start in understanding money with hands-on experience.” He says the accounts have helped his children, now ages 15, 13 and 8, learn to manage their money responsibly.
“Each of our boys have learned something different based on their age and maturity level,” says Morales, who lives in Anaheim, California, and serves as division director of community and business development at JPMorgan Chase. “It’s impactful for them to see interest build up and have the number on the account grow over time.”
[See: Best High-Yield Savings Accounts]
Why Should You Open a Kids Savings Account?
Offered by many banks and credit unions, kids savings accounts are bank accounts generally designed for those under 18. They typically require a parent or guardian to be a joint owner of the account. These accounts often come with educational tools, parental control features and no fees or minimum balance requirements.
They also come with a remarkably wide range of interest rates. While some banks pay fractions of 1% on your child’s savings, others pay astronomical rates that can reach 10% APY. So it can make a difference to shop around when opening an account for your child.
To be sure, it’s unlikely any 8-year-old is getting rich off the interest from their savings account. While some banks offer eye-popping APYs on kids accounts, that rate typically applies to a relatively small balance — often no more than $500 or $1,000. If your child is getting 7% APY on $1,000, at the end of one year they’ll have earned about $70 in interest, enough for a mid-level Lego set. It’s not a high cost for the bank, and the upside is that the child — and perhaps their parents — may turn out to be long-term customers.
[See: Best Credit Unions]
Kids Savings Accounts That Pay 7% APY or Higher
While APY may not be the top priority for many parents opening kids accounts, it can be a nice differentiator. A higher interest rate makes it easier for a child to see their money grow. A lesson about compounding interest is a little easier to understand when you can actually see the interest compound.
Here are some banks and credit unions that pay 7% APY or higher on kids savings accounts.
Spectra Credit Union: Brilliant Kids Savings
APY: 10.38% Balance earning top APY: Up to $1,000 Ages: 17 and under Eligibility: Anyone can join by becoming a member of the American Consumer Council.
While many savings accounts on this list are only available to those who live within a specific area, the Brilliant Kids Savings account is open to anyone nationwide, as long as they join the American Consumer Council. The account has no monthly fees and comes with financial literacy games kids can play. Balances above $1,000 earn 0.05% APY.
Neighbors Credit Union: SMART Savings Account
APY: 10% Balance earning top APY: Up to $1,000 Ages: 22 and under Eligibility: You or a relative must live or work in St. Louis area.
This kids savings account offers one of the highest APYs around, and it is one component of a larger program designed to teach money management skills. It’s available to savers up through their 22nd birthday, which is higher than most kids accounts. Balances above $1,000 earn 0.1% APY.
American Riviera Bank: Kids Savings Account
APY: 10% Balance earning top APY: Up to $500 Ages: 17 and under Eligibility: You must open an account in person at one of the bank’s California branches; a parent or grandparent must have a separate account with bank.
This California community bank has branches in the Santa Barbara and San Luis Obispo areas, giving nearby residents a great option for earning a high APY on a kids savings account. There’s no minimum balance requirement or monthly fee, and balances above $500 earn 0.1% APY.
[SEE: Best Free Checking Accounts]
7 17 Credit Union: Youth Startup Savings
APY: 7.17% Balance earning top APY: Up to $1,000 Ages: 17 and under Eligibility: Ohio residents can become a credit union member if they live or work in the credit union’s footprint, or by joining the American Consumer Council.
The Youth Startup Savings account can only be opened in person at one of 7 17 Credit Union’s northern Ohio branches. There’s no minimum deposit required. Balances higher than $1,000 earn 0.08% APY.
Community First Credit Union: YouthSaver
APY: 7.07% Balance earning top APY: Up to $500 Ages: 17 and under Eligibility: You must live, work or go to school in the credit union’s Northern California footprint.
Young residents of Northern California’s coastal counties can earn an APY that matches their 707 area code with this high-yield savings account, which has no monthly fee or minimum deposit requirement. Balances above $500 earn 0.05% APY.
Spectrum Credit Union and Chevron Federal Credit Union: MySavings Youth Account
APY: 7% Balance earning top APY: Up to $1,000 Ages: 21 and under Eligibility: Anyone can join by becoming a member of one of the nonprofit partner associations listed by the credit unions.
Spectrum Credit Union and Chevron Federal Credit Union merged more than a decade ago but kept separate brands, each of which offers this high-interest kids account. It’s available nationwide to those who join one of the credit unions’ nonprofit partners, but you can’t open a separate kids account with each institution. Accounts can be opened online. Balances above $1,000 earn 0.75% APY.
WECU: First Step Savings Account
APY: 7% Balance earning top APY: Up to $500 Ages: 19 and under Eligibility: Anyone who lives, works or attends school in Washington state.
While the WECU kids savings account earns 7% APY on the first $500, children can earn an additional 7% on the first $250 of their checking balance if they also open a First Step Checking Account. Neither account charges a monthly fee or requires you to maintain a minimum balance. Balances above $500 earn 0.25% APY.
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These Savings Accounts Will Pay Your Kid 7% APY and Higher originally appeared on usnews.com
