Wonder how to get your kids hooked on savings? You can start them as young as third grade, when allowance-giving kicks in. And savings account nuts and bolts, such as interest rates, fees and minimum deposits, offer teachable moments along the way. Some banks, websites and credit unions are even upping the fun factor with prizes, social networking and Web tutorials.
"Teach kids to put off immediate gratification for long-term gain," says Laura Fisher, director of the American Bankers Association Education Foundation. "It's a valuable lesson all through life."
Sorting through kids' savings accounts may take some time. Big banks may not offer the fun, hands-on training that kids need. That's why it makes sense to turn to credit unions, community banks and online financial sites.
For Web-savvy kids, online banks make sense. For example, online bank ING Direct is easy to use and doesn't charge fees. "Children don't know the value of a dollar," says Arkadi Kuhlmann, CEO of ING Direct. "Savings accounts are part of that whole program." So, ING offers its own fun tool, Planet Orange, that uses cartoons to teach saving and spending habits.
Other kids crave human contact. In that case, your own community bank is a good resource. Canandaigua National Bank & Trust in Canandaigua, N.Y., has a Looney Tunes savings account for kids with no service charges or minimum balances. Bankers there give out memorabilia, such as pens, pencils and cards for saving quarters. "When you're making it fun, kids are more engaged," says Steve Martin, a senior vice president at Canandaigua Bank. "They say 'wow, that's cool.'"
Credit unions are another option. Advancial FCU based in Texas has a Money Musketeers savings account where kids earn points for every $5 invested, which can be redeemed for prizes. Others, like American First Credit Union, based in California, offers a Safari Account with a $5 minimum deposit and an online clubhouse. "Credit unions with their lower fees and minimums are a very good way to go," says Jordan Goodman, the author of several personal finance books including "Everyone's Money Book."
Once you have the account, here are four tips for how to use it as a teaching tool.
Use incentivesAllowance bonuses are excellent ways to inspire kids to save. Try holding a "double Tuesday," where kids can double their allowance by doing chores, says Fisher. Another option is matching savings contributions.
Set goalsMost kids want something, like an iPod, that can provide opportunities for lessons in saving. Estimate how much money is needed for an item and then set targets, says Kuhlmann. As the goal gets closer, the child sees the money grow.
Online savings tool SmartyPig, which has no fees, lets kids set goals and then chart progress. Other people can also kick in money. "The site holds you accountable for reaching that goal," says Bob Weinschenk, CEO of SmartyPig. "It's a way of setting more rigid guidelines."
Make regular depositsTake your child physically to the bank, says Goodman. "Have him or her make deposits, or they'll think the account is just a money tree." Repetition is key. Fisher suggests having three jars -- for saving, sharing and spending. Take the savings to the bank once a month.
Also, some communities have in-school banks, says Fisher. "Students collect savings at lunchtime and then take it back to the bank," she says.
Take advantage of teachable momentsWhen looking at bank statements together, explain terms like interest. "I teach my kids that interest is about rent," says Kuhlmann. "If you lend money to the bank, then it pays you rent -- or interest. If you leave it in the account, then it earns interest. That's compound interest."
"Allowance-giving takes tracking," says Fisher. "You can pepper in education as you go along."
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