Hey Kids: Here’s a Way to Save
For generations, parents have relied on a simple argument to get their kids to save: Take your coins and dollar bills to a bank, and you’ll get back more than you put in. Banks are happy to drive home the message. At North Akron Savings Bank in Ohio, a character named Dollar the Dragon tells kids in an online newsletter that a savings account can help them “keep money in a safe place and even earn more.” A newsletter of the American Bankers Association encourages kids to start a savings account, “then sit back and watch” the money grow.
There’s just one problem, of course: When it comes to paying interest on those savings, not much is growing these days. With the Federal Reserve keeping interest rates close to zero, the average annual percentage yield on an ordinary bank savings account has fallen to 0.21 percent. Total earnings for kids who manage to sock away $1,000: $2.10 a year, or about enough to treat Mom or Dad to a cup of coffee. “It’s basically a war on the savers,” says Ian McCulley, an analyst at Grant’s Interest Rate Observer.
For their part, banks say it still pays to encourage kids to save, even if the rewards are harder to explain. Laura Fisher, director of the American Bankers Association’s Education Foundation, says current income isn’t the main reason to encourage kids to sock away money anyway. Children, she says, should be taught to open accounts because “the bank is a safe place for their money.”
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