Opening a Bank Account for your Baby
A wise parent understands that saving money in a bank for future use or for an unforeseeable emergency is a necessity. Saving for the baby not only shows that the parents care to dot their young one. but they are also thinking of their child’s survival, comfort and prestige in the future.
A few years ago. parents bought piggy banks (containers designed for saving money, especially in the form of coins, at home) for their children to save coins remaining from their allowance after school. This still does occur in some families.
However, piggy banks have two setbacks: Children can only start saving when they receive an allowance or access to the coins, thus a culture of saving is introduced late. Secondly, the children can easily gain access to piggy bank savings. Sometimes it is the parents who ‘break’ into the piggy banks at a time of need for extra coins to buy groceries, for example a packet of milk needed in the morning!
Many banks in Kenya offer savings accounts for children whose operations are conducted by their parents or guardians until they are considered grown-up at 18 years.
What are the requirements by the banks?
In most banks a copy of a parent’s or a guardian’s legal documents such as the ID will be required. The birth certificate of a child is also a requirement.
Since the child is a dependant, the parent will be required to make frequent contributions to the account according to the agreement with the particular banking institution—on behalf of the child until he or she is old enough to take over management of the account.
What of the benefits?
Saving for a long time provides an accumulation of money that could be put into good use by the child in the future. For example, the child could pay his or her college fees or medical bills. Therefore, the earlier parents open the account, the better.
In the event of death of the parent, a child will not be left financially disabled as the funds are made available by the bank either through a guardian if the child is still underage (subject to terms of the account) or upon maturity at 18 years of age.
Saving inculcates a culture of wise spending and investing in a child’s mind especially if the parent explains that the allowance they would have given is instead being re-directed to the bank account for their future use.
It is therefore important for the parent to impart in the child a sense of ’ownership’ of the account. The parent must also recognise and respect the child’s account, and not get into the habit of using it as an emergency kitty.
Incentives offered by banks to junior account holders, such as birthday presents, festive holidays’ presents and bonus payments, teaches the child the rewards of saving money.
Banking for children also provides a forum for social interaction with other junior savers.
What are the challenges?
Money like all other resources can sometimes be scarce. If the parent has made an agreement to have the savings deducted from his or her salary on a monthly basis, it may strain his or her own savings and force them to discontinue the noble investment.
In terms of accessibility, bank accounts are unlike piggy banks. In piggy banks, small amounts of money even coins are saved on a daily basis whereas banks require a stipulated minimum amount on a frequent basis. This limits parents who cannot afford banking requirements for the junior account yet can easily allow their child to keep change. It is advisable for such parents to continue with piggy banks, rather than give up junior’s saving all together.
END:PG12/60