kids savings accounts

Savings Bonds are a Great Investment For Kids

Posted on 20. Apr, 2010 by admin.

Even though many children are taught math, reading and other statistical programs in school, they may have no understanding of even the most basic financial concepts. But by purchasing savings bonds for kids, it can teach them valuable lessons about saving money early in life – and adding to those savings regularly – can reap rewards when it comes to paying college costs, getting a car or reaching other goals in life. Best of all, there is very little risk when it comes to savings bonds, which can be a superb way to discuss risk versus safety when it comes to investments and savings.

Ideally, children should be involved in the entire process of obtaining and keeping track of savings bonds (with parental assistance, of course). Just as counting pennies from a piggy bank can be fascinating to children, learning about savings bonds can be made equally interesting. Information should be as simplified as possible, starting with an easy definition of savings bonds. Children can easily grasp the concept that savings bonds are a way for someone to purchase a bond from the government.

Children should also know that they purchasing bonds mean they are loaning their money to the government in return for a promise to pay back the money with interest. It helps to stress the fact that interest is extra money the government pays to those who buy bonds from them so that investors won’t just get their original payment but also get a bonus amount of money. For kids who like to learn visually, try taking ten or twenty dollar and explain how much extra they’d earn on the money if invested in savings bonds. This can be a great step in helping kids get some financial literacy about safe investments.

Because the average child won’t understand how to purchase savings bonds, be sure to tell them about banks and other financial institutions. Although bonds can also be purchased online, children lose the experience of meeting bank officials and seeing how to buy savings bonds locally. Since many children aren’t invested in long term goals but only think about what they’ll want to buy on a day to day basis, it may take a bit of time before they understand the benefit of regular and steady savings. Be prepared for this but keep stressing the positive reasons to buy savings bonds.

It can also help to set a specific savings goal, whether it is to buy a car after graduating from high school or to save for college. Some parents allow their children to allocate a small portion of their bond savings for a short-term goal (at redemption) while using the rest for larger goals. By doing this, savings bonds become more attractive and they can be tracked in a fun way. It can even become a savings game, particularly if parents are enthusiastic and praise their children when they grasp key concepts about savings bonds.

Make sure that children know the meaning of EE Savings bonds, how their value is calculated and how money accrues. It can also be fun to go online and check out savings bonds calculators to see how much a bond will be worth in the years to come. To get started, take your child to a bank (or other financial institution where bonds can be purchased) and have them help fill out the required paperwork, usually a relatively simple application. Have them hand over money to the bank representative and explain that many bonds take time to arrive. If desired, a gift certificate can even be printed out.

Once savings bonds are purchased, be sure to have periodic discussions with children about how their investments are doing. Keep track of increases in bond values and reinforce how easy it is to earn larger returns by saving early and regularly.

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