Savings for children can start in a piggy bank after which you can then open a bank account for them. It’s recommended that by the time your child is eight years old he or she already has a savings account that can be monitored by himself or herself. In keeping a savings account you should search for one that will offer your child the best deal as interest rates vary from bank to bank. Also note that since interest rates are very modest these days, it is important that you work with your child to consider several alternative investments that pay interest or dividends as well. These may not be as safe or liquid, but they’ll give your child more interest over the long run. Other interest-bearing investments you can consider for your child for a start are fixed deposits, treasury bills, bonds and stocks. These investments are more sophisticated and may require a relatively large initial investment. The investment option you decide on will determine the balance your child needs to work towards in order to move funds from the savings account.

Another thing you need to teach your child with respect to investing is diversification. When your child was saving coins and notes in a jar, it might have been a good idea to keep everything in one place. That way your child would have seen how the savings grew by looking at how high the coins/notes rose in the jar. As your child’s savings grow from a few notes into thousands, keeping it in one place is no longer the best idea. At this point, your child needs to diversify her investments. Diversification in this regard means putting money into different investments. In effect, it’s hoped that by spreading money around, your child won’t suffer too great a loss if one or two investments do poorly. This helps your child to still be in good shape financially. You and your child must work together on how to allocate assets among investment and at what point to change this allocation.

Have you started teaching your children about investments? What has your experience been like? Drop your comments below.

Do have an amazing week!

Photo Credits: JIRO/Corbis

– Gbonjubola Sanni