Savings Accounts for Children | Steps and Tips to Opening an Account
In order to complete this process you’ll need an email account. You can get a free one at yahoo.com or gmail.com or hotmail.com. Any will do. Keep your email address handy as you’ll need it throughout this process.
Preparing to Open an Online Account – Step 1: A Local Bank Account
In order to most effectively use an online account, whether savings accounts for children or your own IRA or brokerage account, you need a local bank to act as a liason between you and your online account. Find a local bank that offers free a checking or savings account, open an account there and wait for your initial deposit to be available. You bank needs to be connected in some way to a banking system such as ACH or EFT in the US, or SWIFT internationally. These are the electronic systems that allow the processing of payments between banks – usually delayed one to two days depending on which routing your funds take. Wires are expensive (but same day) but not recommended.
Some local banks (most nowadays) offer some online form of banking. If that is the case and some or all of it is free then sign up for it. Get all the information about signing in for the first time and setup. This will come in handy if you choose to use your computer to track your finances.
Do not leave your new local bank without knowing these two things (ask your teller or branch manager to write them down for you):
1. Your routing number
2. Your account number
Step 2: Setup Your Online Account (This will be where your account first, then setup savings accounts for children later)
The next piece of the puzzle is to create an online account with a high yield savings account bank (such as Ally, HSBC, ING, or Emigrant Direct – author is an affiliate of Ally and HSBC but in all honesty, any of these four are fine and pay respectable interest rates and are FDIC insured – presently I think Ally pays the best rate).
You’ll need a few things to pull this all together, so here’s a list:
1. Your email address (this is one of the ways your online bank can fix password problems for you)
2. Your mailing address
3. Your phone number
4. Your social security number (for IRS purposes)
5. A strong password to use
Your new online bank’s internet site will walk you through the account setup process. Follow the steps to complete account setup. When your account has been created and verified, it’s time to link your two banks (local and online) by doing a small test funds transfer.
Step 3: Link Your Local Account to the Savings Accounts for Children with a Small Funds Transfer
Now the fun starts. Log in to your online bank, and select “Add (or deposit) funds to your account.” Trust me, it’ll be on the screen somewhere… I think ING calls it “Transfers.” You might see it elsewhere as “Move funds.” Here’s what the typical steps are to put this all together:
1. Login to the new online savings account you set up
2. Select deposit funds
3. Choose “setup new bank” (or whatever language your bank uses to talk about linking to a new bank account)
4. Enter the information on the new bank – you’ll have to give it a name – for example “Mylocalbank”, you’ll enter the routing number you got in step one, as well as the account number from the same step.
5. Choose a nominal amount of money to deposit (many online banks offer bonus cash if you deposit $100… so deposit $100 and get the bonus cash I say…). If $100 is inconvenient, do $10.
6. Some banks offer multiple ways of transferring money (wire, ACH, EFT, pony express, etc.) – select ACH or EFT (whichever is free)
7. Some banks allow you to setup recurring (or repeating) transfers. Since this is a test, we want to select “one time only” for this transfer.
8. At this point verify the information and click “OK” (or “Accept”) or whatever the button is for “continuing”
Using Savings Accounts for Children Is A Great Way to Bond with Your Children
Now you should receive some verification (either onscreen or email) that your transfer was setup, and when it will likely take place. It will likely take a day or two to process, so check both your local bank and your online bank to verify that funds left your local bank and arrived at your online bank. If the funds moved, you’ve done it!
Congratulations! You’ve Done Quite a Bit Today!
Putting together online accounts like this does require some setup but once you’ve done it once for yourself it is then easier to setup similar savings accounts for children in your family as well. You won’t necessarily want to setup a local account for each child, but an online for each child makes sense. Think about what you’ve accomplished today: You’ve gotten a checking account locally (free), you’ve linked it to a high interest rate savings account online (again… FREE!), and you’ve used your computer to move funds from one place to another (again… FREE!!!). Once you’ve mastered this funds movement, you can teach your children to do the same with the savings accounts for children you setup for them after doing your own account. Believe me, getting through all this once seems like a lot but it is a HUGE leap forward for you and your family. Good luck! Open an online account now.
