When I was pregnant with my three-year-old son Mason, a family friend (who happens to be a banker) gifted us with a baby carrier and a piggy bank.
The carrier we had registered for, but the bank was a delightful bonus. We started putting in pennies, nickels and dimes every evening. When it became full, we used the coins to start a little savings account for Mason—with a whopping $22.
To be honest, we didn’t think too hard about the whole thing. The piggy bank looked cute on his dresser, and it was an easy way for us to get rid of loose change that wasn’t accepted at the laundromat. Besides, once it was full, it was a no-brainer to take it to the bank.
We figured we were taking a small step toward teaching our son the value of saving his money—an especially important lesson for a kid living in flashy, overpriced New York City.
We’ve continued to fill that piggy bank with our spare change, plus birthday and holiday gifts, and deposit the money whenever it’s full. Ultimately, we plan to let Mason take “ownership” of it once he’s in first grade, when he’ll learn about counting money and identifying the different types of coins. We want to show him that by saving his nickels and dimes he can accumulate a significant amount of money over the years (and, hopefully, how worthwhile it is to save instead of spend!).
Apparently, we’re on the right track. New research reveals that not only does a simple savings account make kids more financially aware, having one means they’re more likely to accrue assets, go to college and invest in the stock market. Here’s why.
How Research Supports Saving
“Even a small savings account can change the way that children think about their future and going to college,” says William Elliott III, associate professor of social welfare at the University of Kansas in Lawrence, who has done extensive research on the way in which child savings accounts (CSAs) can help reduce debt. “You’re creating this savings mentality, so children are becoming more financially aware. ”
For children in low- to middle-income families, having even a little money in the bank designated for education may help them—and their parents—realize that college is an attainable goal, says Elliott. “Some experimental data has proved that savings change the way children think about their future,” he explains. “Having an account, having a structure in place, can have a positive affect not only on the children’s expectations but on the parents’ expectations.”
In fact, 2011 research from the Center for Social Development at Washington University in St. Louis suggests that college savings accounts containing as little as $1 result in students being up to seven times more likely to attend college.