It is never too early to start saving money. In fact, the earlier that you start, the easier it may be to get into the habit of saving and budgeting your money in general. Therefore, parents may want to open a savings account for their child as soon as he or she is born.
Why Start Saving So Soon?
Anecdotal evidence seems to suggest that children who are taught good fiscal habits by their parents tend to continue them later into life. Therefore, parents who start a savings account for their children as soon as possible can set them up to be good money managers. Also, the earlier that you or someone else starts saving on your behalf, the more deposits that can be made into your account.
Starting a Savings Account Is Easy
Banks make it as easy as possible to open and fund a savings account. Thanks to the Internet, you can open an account without even going to a bank or being a member of a physical branch location. Generally, you only need $1 or more to fund the account, and there may be no minimum balance to maintain. On top of that, your account earns interest each day that it exists. While interest rates aren’t great at the moment, that could change at any time. As interest compounds over time, you can still get a tangible return for doing nothing at all.
Starting a Savings Account Early in Life Gives You a Head Start in Life
Starting a savings account as early as possible helps you prepare for major expenses going forward. For instance, putting $20 a week into a savings account or having a parent or grandparent do the same enables you to save over $1,000 a year. Assuming that an account is made for you at birth, that is over $18,000 that you will have for college when you graduate from high school. That could be enough to pay for community college or a significant portion of a state college education.
Ideally, you will start saving as soon as possible. While it is never too late to open a savings account, you miss out on the financial security that comes with having a healthy emergency fund to fall back on if you wait too long. You also miss out on the ability to earn interest on your money, which will grow exponentially thanks to compounding.
David Milberg is a financial expert and an investment banker from NYC.