Finding savings accounts that are good for children

Joint accounts can teach kids about fees, interest, and other banking concepts.

Just as you wouldn’t send your kids to school without the right supplies, you wouldn’t expect them to learn about smart saving strategies without a few helpful tools.

Enter savings accounts. Although they might seem like mere parking spots for money, joint savings accounts for children can teach them about interest, fees and other important banking concepts.

The joint ownership means parents manage the cash in that account until the child turns 18.

The first step, though, is finding a good account. Your best bet is likely a credit union or online bank, which tend to charge fewer fees and offer higher interest rates than big banks.

Here are a few tips for finding the best place for kids to save cash.

Ignore gimmicks

A good kids’ savings account looks a lot like one you might open for yourself, with relatively high rates — think 1% and up — and no monthly fees.

Some banks offer accounts that are explicitly marketed as savings accounts for kids. Most are mediocre, carrying monthly fees and low rates while providing few educational tools.

And if you decide to hold off on opening your child’s first savings account until he or she is 15 or 16, a standard account would be a better fit.

If you’re interested in tools that will help your child learn about finance, consider visiting online resources, such as those offered by MyMoney.gov, which is part of a federally backed initiative to boost financial literacy.

This website offers activities that touch on topics such as money management and the basics of coins and currency, which can complement the features your savings account might offer.

Use tracking tools

You’ll want to see your kid’s funds grow, not get eaten away by recurring fees. You’ll also want your child to track those funds and learn how to manage money.

Many online banks let you create savings goals and offer calculators to help you track the interest you earn, which can serve as a good introduction to the benefits of compound interest.

Exploring these features with your child on online bank sites can also be educational.

The process of hunting down a good account highlights the values of patience and persistence when looking for money-related products, as many of the options you initially encounter might not be very good.

In-person banking

Credit unions have their own strengths: Some offer high rates on standard savings accounts, and visiting a physical branch can make the process of setting aside money more tangible.

Depositing cash into a savings account in person and then withdrawing it for a fun purchase later underscores the value of delayed gratification.

The earlier children can understand that concept, the better.

Other options

Although savings accounts can be a good way to introduce kids to the principles of setting aside money, these products shouldn’t be the main way you save for important expenses, such as college.

For that, you’ll be better served by a 529 plan. These products are tax-free investment vehicles you can use to pay for certain higher education expenses, such as tuition and textbooks.

But when it comes to socking away your child’s allowance and letting those funds grow — however slowly — an account that limits monthly fees and pays high interest rates will serve well.