A child savings account is just like an adult saving account offered by banks and other financial institutions. Although there are a few variations, they are basically safe cash accounts that earn some interest. A child savings account is meant for children under 18 years. Tax is usually deducted from this type of account. However, you can claim the amount deducted as tax because a child does not earn enough money that makes him/her eligible to pay tax.
The benefits of opening a child savings account
1. Your child will accumulate a significant amount of money over the years
Most people open this type of account for their children because they want to save money that will help them in future. Making small savings every month for your child can make him/her have a huge sum of money to use by the time he/she wants to go to college or when he/she turns 18.
2. Helps to make a child more “money aware”
A child savings account will make a child more money aware. Your child will know the value of money. This account will help him/her know the importance of saving money. It is important to start early to make your child develop a good saving habit so that he/she can start saving some pocket money or the cash given as presents when he/she gets older.
A small saving account can really change how a child thinks about his/her future. Going to college will seem like an attainable goal for children who are from middle income families. This type of account is not only good for a child; it is also a very good for the parents.
There are different types of child savings accounts. Each type of account has its own benefits. You should take time to look at each account so that you can select the one that suits your child best.