Most parents will admit that their kids know more about computers, social networking, and texting than they do. Whether it's MySpace, Facebook, Twitter, or texting with their phones; chances are the kids could teach their parents about the latest communication technology. So why do so few kids have online savings accounts? Especially when you consider the rates can be much higher on an online savings account than a savings account at the local bank. Sure your kids won't have an actual piggy bank like the bank down the street might give away, but do they mind?

Online Savings is Cool
Taking a passbook to the bank to deposit money to your savings account might be a fond childhood memory, but it just isn't cool anymore. Kids today have grown up in the information age. Why exert the physical energy and time to go the bank when online banking is simple. Logging into a secure bank website to check a balance or receiving a text message that a deposit has been received makes sense to them. You might not know how to bank from your phone, but mobile banking will be easy for them to figure out. Online banking and mobile banking are definately easier than branch banking, but what about safety? If your child can't be trusted to clean their room or brush their teeth, how on earth can you trust them with online access to banking funds? That's why an online savings account makes sense as opposed to an online checking account. Just like the good old-fashioned piggy bank, an online savings account will be goal-oriented. This is not an account to withdraw money or write checks from like a checking account. If you set up this account for them, tell them they need a specific savings goal and savings plan. And don't worry your kids will still think it is cool even if the withdrawals are limited. That's because you are giving them financial independence and kids love independence.

The Mechanics of Opening a Bank Account for Your Child
You can open an online savings account for your child either jointly or as a custodian. If you open it jointly, you own 50% of the account and one of you will report the interest earned under your social security number. A joint account gives both owners the ability to deposit and withdraw funds. This is the easiest way to open a bank account for a child, but the money is not solely theirs. If you open the account as a custodian, designated as UGMA or UTMA accounts, you control the funds until the minor is 18 years of age. But, make no mistake, the money now legally belongs to the minor and you can only spend it for their benefit. Consulting with a financial advisor to find the best arrangement for your family is a good idea.

Spread the Word
Kids like to do things in groups. If your child opens up an online savings account, chances are that his or her friends will follow shortly. This is a good thing. Kids are also competitive. Imagine how you might feel if your child starts mowing some extra lawns or taking on extra babysitting jobs to keep a leg up on their friends. If your child is saving for a specific goal like a down payment on a car or a school trip, you can also bet that they will update their social networking pages to show their progress. Again, this is a good thing. Your child is saving money and not just spending it. Your child will take pride in reaching savings milestones. Your child may also learn to play the rate-catching games. Swapping online bank savings account to keep earning the highest rates possible. It's all part of being a young entrepeneur.

Online savings accounts can be opened for as little as $1. They are easy to open and simple to maintain. Savings is a lifelong skill you can teach your child and it is never too early to learn. Start today.