What is the best savings/debit account for a 12 year old?

My 12 year old son has his first "job" helping a neighbor with odds and ends 3 times per week for a total of 5 hours.  I want him to learn the value of money and savings, but also would like for him to be able to use his earnings towards things that he wants (within reason).  What is the best type of account for this age group for him to learn some "money smarts"?

  Topic Investing Subtopic Tags Savings First job
2 Years 2 Answers 1.6k views

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  1. Sergey Zubkov 137 Community Answer

    As a minor in USA he can have a UTMA/UGMA account from the moment he first got an SSN. It can be a plain cash savings account at a bank like Ally, or a full featured brokerage account with stocks etc on it at a retail brokerage like ETrade (not an endorsement etc, those are the accounts I got for my kids). Formally, you as the custodian are in control of such accounts until the 18th birthday, which is when you lose access and he becomes the sole owner. At that point he may spend the money unwisely and you have no say in it.  Until then investment choices and transfers in and out are up to you, but you can (and should, at this age) choose to involve him.


    But that's more of a long-term investment. For day to day spending and earning/allowance, some banks offer child and teen access to your account, with debit cards they can use at ATMs and stores, for example Capital One has one for 8 years old and up, Chase has one starting even at 6 year old, Amex and some smaller banks do, too. That may be a more immediately rewarding experience, watching the balance on the phone app change with each transfer or purchase.

    UTC 2021-05-18 03:37 PM 0 Comments
  2. You should open up a savings account in a local credit union.  There's something to going to the bank to deposit funds.  The real lesson here is that money comes from working.  Kids will easily learn the lessons of direct deposit or internet banking when they're 18+.  The local credit union may also have classes for kids to help teach about money.


    The best way to teach kids is that there are only 3 things to do with money: save, spend, give.  These should be done in certain age appropriate ratios.  For them to save up to buy something down the road like a video game or even saving for a car when they turn 16 would be a good goal.  Buy things with cash and not use debit/credit cards, for bad habits and bad psycology happens.  At 12 years old, good ratios to follow are give 10% (local animal shelter or school fundraiser), spend 20-25%, save the rest for a purchase later down the road.  Good to establish that saving muscle when they are young.


    HTH


    UTC 2021-05-18 05:03 PM 0 Comments

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