Kids Saving Accounts | Teach Finance

Let's face it - not everyone grows up like me - fascinated with every last nuance of finance, investing, etc. That isn't an excuse not to learn the basics of personal finance for yourself and your family though.

While you don't have to know a lot about banking, economics, or investments to survive in the world, the truth is the more you and your children know, the easier and better your lives will be in the future.

Learning to work with money online can be the excuse you need to get yourself educated about basic finances too. It's never too late to get ahead.

There is great value to opening both a local savings account for your family and then link that one account to a saving account online for each of your children (and yourself). Online banks pay a much higher interest rate than local banks ever will.

Problem is that opening up an online saving account requires extra money (~$25 per account for your initial deposit) and it also requires a leap of faith into making financial transactions online. Taking this step is an extremely important step if you expect your children to leap ahead of their peers in financial education.

Nearly all online US deposit institutions are equal with slight variations in interest rates and or services. There are some things to consider however, and one very important thing to look for when choosing a bank.

First and foremost - look for the following letters somewhere on the bank's home page: FDIC. This indicates the bank is a member of the Federal Deposit Ins Corporation, which protects clients' deposits (like yours) in the event of a bank failure (like the 70 or so that have happened in the last 12 months). editor's note - in 2009 the Fed has now seized over 100 deposit institutions - (con't 12/09) now over 120 banks seized this year. Now at over 340 institutions shut down as of February 2011.

A second caveat I like to give (in recent days especially) is to not simply compare banks based on the interest rate offered. Some banks are not headquartered in the United States (where the strongest financial regulations exist). Some deposit institutions (even those in the US) badly managed other parts of their businesses and either failed entirely, or were the recipients of large sums of TARP money (think Citigroup, Bank of America).

Deposit institutions that are deeply involved in other more risky lines of business put your accounts at risk. These same banks may offer higher rates. If you can not afford the inconvenience of not being able to access your money immediately - think about going with a less diversified bank (think Emigrant Direct).