Teaching kids about money is one of a parent’s most important jobs, and today, it’s easier than ever to open a bank account for a minor, both in-person and online.
Here’s everything you need to know if you are considering opening a bank account for a minor.
The Importance of Opening a Bank Account for a Minor
You might think your child must be a certain age to learn or care about money, but there’s no such thing as being too young. Kids learn from parents’ behaviors, and the earlier you include kids in important decisions, including how to save money, the easier it will be for them as they get older.
So why should you consider opening a bank account for a minor?
- Hands-on teaching – Talking about money is often too abstract, and kids learn the best when they can do it for themselves. When you provide kids with a bank account and help them make real financial decisions, they’ll learn much faster.
- Compound interest – The earlier your child learns to save money, the more time it has to grow. Let your child see the magic of compound interest at an early age. By the time they are older, they can make even bigger decisions to help their money grow, such as investing.
- Stops the instant gratification – Many kids struggle with the need for instant gratification. Going ‘old school’ and teaching kids about money and how to save for what they want can help them make less impulsive decisions.
- Teaches goal planning – Kids aren’t born knowing how to plan and set goals; it’s a learned skill that can be taught using a savings account. You can teach your kids to set goals and take steps to reach them.
- Gives kids a solid financial foundation – Kids that grow up with money saved already have a solid foundation when they set out on their own. Making saving a regular part of their lives will empower them to make smarter financial decisions when they are in the real world.
How to Open a Bank Account for Minors
To open a bank account for someone under 18, you must be at least 18 years old yourself. You don’t have to be the child’s legal guardian, however, putting your name on the account holds you legally liable.
The person that opens the bank account for a minor maintains control of it until the child reaches maturity, which in most states is 18, but in a few, it’s 21.
Check out your options when choosing a bank account for a minor. First, look at reviews, ratings, and what the bank offers. Then, find a bank with the highest APYs and lowest fees that has easy access for your child, including convenient ATMs.
We will cover our top 3 bank accounts for minors below.
Most banks have a quick application process you and your child must complete.
First, it will ask basic questions about your name, address, social security number, and birthdate. Then, the bank uses this information to verify your identity and compare it to the IDs you provide.
Due to the U.S. Patriot Act, banks must verify each person’s identity that’s on the account. This includes full names and addresses, birthdates, social security numbers, and for adults, a government-issued ID.
Some banks have specific requirements, such as U.S. Bank. To open an account for a child, you must provide ID for the children and adults. Children can supply things like a passport or other official documentation. Occasionally, they’ll ask for a second piece of identification, which could be a student ID.
Set Up the Account
Once you receive approval from the bank, you’ll get a bank account number and a debit card. If you open the account in person, you will likely receive everything while you’re there.
If you open an account online, it may take a few days or weeks for the debit card and bank account information to be mailed to you.
Make First Deposit
Once you open your account, you can make your first deposit. To make it even more special, let them deposit money in person. They’ll remember it for a long time and feel good about it too.
If you open the account online, you can transfer money electronically from your bank account, or you can teach your child how to make a mobile deposit if they have a check to deposit in their new account.
3 Best Bank Accounts for Minors
There are hundreds of options for bank accounts for minors. However, I’ve found the top accounts that most parents agree are great for their children.
Greenlight is a debit card for kids. It’s a great way to help kids learn how to manage their money while providing parental support. Greenlight is tied to a child’s chore list and allowance, and parents get real-time alerts when kids conduct any banking transactions.
The Greenlight debit card is a prepaid card that parents fund. This ensures kids don’t spend more than they have, but there’s also a feature for them to request more money from you and provide a reason.
Parents can shut the card off or restrict spending at certain stores or above a certain amount.
Parents can also add a brokerage account to their child’s Greenlight account, allowing kids to invest in stocks with parental approval.
Copper is a banking app for teens ages 13 to 17. It’s a great introduction to a checking account with a debit card that involves parents, but lets teens feel in control.
Teens can use their Copper debit card in any store or on Apple Pay and Google Pay. In addition, Copper uses an ATM network with 55,000 fee-free ATMs, and lets parents oversee a teen’s financial transactions.
Parents can send money to teens instantly, and kids can use the automatic savings feature to learn the importance of saving.
To open an account with Copper, teens must deposit $10, but no ongoing balance is required. The dashboard is user-friendly and helps teens understand instantly where their money went and how close they are to reaching their financial goals.
3. Chase First Banking
Chase First Banking is a great first bank account for kids. Parents must have a Chase account to open a minor bank account, but if they do, it’s free.
The account is available for kids ages 6 to 17 and provides plenty of educational opportunities to help kids learn the ropes of handling money. Like most minor bank accounts, parents have complete control and 100% transparency with the account, so they know where a child stands with their finances.
There’s no monthly service fee for the account and no minimum deposit requirements. In addition, Chase has over 16,000 ATMs, and its educational tools can’t be beat.
Types of Bank Accounts for Minors
Before opening a bank account for your child, decide the purpose of the account.
If you’re opening an account to have a safe place for money they receive as gifts, you might consider a savings account. But, if you have an older child ready to spend money in the real world, you might consider a checking account. As long as your child is a minor, you’ll always have control of the account and can see every transaction they make.
Here are the most popular types of bank accounts kids can open.
A checking account is best for pre-teens and teens. Once your child is old enough to spend money on their own, a checking account makes it much easier. Most checking accounts are FDIC-insured and have unlimited withdrawals via ATM, electronically, by writing a check, or via a bank teller.
Be careful when choosing the right checking account for your kids. Ensure the chosen account’s ATM network is convenient so your child doesn’t pay ATM fees.
A savings account is great for kids of any age, especially newborns or young children. A savings account is one of the safest places to keep money your child receives and allows it to earn interest.
You’ll find better APYs in online savings accounts, but if you want to give your child the experience of going into the bank to make deposits or withdrawals, you may want to consider a local bank.
Until kids are 18, they’ll need either a joint or custodial account. A joint account means you own the account together, and both account holders have the same rights. The account is in both names, not just the child’s.
With a joint account, parents have complete control over the activity on the account, which can be a good option for young children who don’t fully understand how to handle money yet.
A custodial account is similar to a joint bank account. This account is in your child’s name, and they are listed as the account owner, but a parent oversees it acting as the custodian. In other words, the parent makes the financial transaction, but the child owns the account and money.
For example, you can open a custodial bank or investment account in your child’s name, and they take control of it when they reach maturity. At that time, the parent no longer has control of the account. This differs from a joint account, where both the child and parent exist as co-owners.
It might sound crazy to think of your child’s retirement, but the earlier you or your child save for it, the more their money will grow. Kids can open a traditional or Roth IRA, which will be a custodial account until they reach maturity (18 or 21 in some states).
A retirement account with tax advantages may also be used for higher education expenses without incurring tax liabilities, so it’s important to consider even when your child is young.
When choosing the type of retirement account, think about the tax advantages. If you open a traditional account, there is a tax break when you contribute, but your child will pay taxes on all money withdrawn. If you open a Roth IRA, there’s no tax benefit now, but the contributions and earnings grow tax-free.
Prepaid Debit Cards
A prepaid debit card is like a gift card. You put money onto the card, and that’s all the child can spend. Unlike a credit card, kids can’t go over their limit as the transaction will be declined if there isn’t enough money on it.
This can be a good first step for young kids who venture out on their own and make financial decisions. Then, as your child gets good at using a debit card and not overspending (or trying to), you can transition into using a traditional checking account with a debit card to teach your child real-world financial tricks.
Tips to Open a Bank Account for a Minor
Finding the right bank account is a big job. You have many options, and no two banks offer the same features. While each person has different needs and likes, here are some of the top features you should consider.
Bank Ratings and Reviews
Always check a bank’s rating and reviews before opening a new account. No matter how good the advertisements or their website make them sound, see what real people have to say. Find out what they think of the customer service, account offerings, and how the bank handles any problems.
You don’t want to make your child’s banking experience frustrating or overwhelming. Instead, you want a bank that’s easy to work with and will help your kids learn the importance of personal finance.
Most banks have a mobile app, but not all are user-friendly. Look at each bank’s mobile app and decide if it’s easy enough for your child to understand. If you open a bank account for your child, you should be able to teach them how to use it too. Since most kids live on their phones today, it should be an easy transition.
Some banks offer kid-friendly apps or games that help kids learn more about handling their money.
Most brick-and-mortar banks pay peanuts in interest, but try to find one that pays the highest APYs. Online high-yield savings accounts usually pay the most interest, but you may find local banks offering promotions or decent interest rates.
While the APY isn’t the only factor, finding a bank that pays well so your child can see the benefit of saving money is best.
Teaching your child about banking requires visits to the bank. Make sure to choose a bank with convenient locations that allow you to take your child to make deposits and withdrawals. Even though most banking transactions are online today, nothing can replace learning in person.
If you open a checking or savings account with a debit card, make sure the ATM network is local and convenient. If your child uses an ATM out of the network, they may pay fees. Therefore, you want to instill in them early on to avoid as many bank fees as possible, starting with sticking within your ATM network.
Parental Controls and Features
Most custodial accounts include parental controls and features but never assume. Some apps, for example, allow parents to limit where a child can spend money and can shut the card off for spending temporarily.
Think about the control you want over the account and find a bank that offers it. Some banks have extensive parental controls, and others have very few.
Transparent Fee Information
Review the fees a bank charges and ask about any hidden fees. Look for banks that disclose all fees or, better yet, don’t charge any fees. Most banks have options for kids that don’t charge monthly fees, but even if they say they don’t, read the fine print; there may be services they charge for but don’t disclose upfront.
Safety and Security
Always make sure a bank offers FDIC insurance before opening an account for a child, but also look at other security measures. For example, look for bank-level encryption when conducting transactions online and two-factor authentication on apps.
Linked Debit Card
Some bank accounts for kids have linked debit cards that parents can control. Parents can fund the card from their account and turn it on and off as they see fit. Some cards are also tied to a child’s chores and responsibilities, automatically allowing parents to pay for chores or accomplishments.
Keeping Your Minor’s Bank Account Safe
Opening a bank account is a big deal for kids, but it also comes with risks, especially if you bank online.
From the start, teach kids to keep their information private and never share their account information with anyone.
Keep your child’s bank account information somewhere that no one can access, such as a fireproof safe at home, and make any passwords for online accounts complex. Also, consider changing the password every couple of months to prevent hacking.
Only access your child’s bank account on secure devices and teach them never to type in their password in front of anyone. For example, if you teach your child to use an ATM, show them how to cover the keypad so no one can see them typing in their PIN.
Frequently Asked Questions
There are many things to consider when opening a bank account for a minor. Take a look at these frequently asked questions to ensure you are fully informed!
Is It Safe to Open a Bank Account for a Minor?
It’s safe to open a bank account for a minor if you choose a well-known and FDIC-insured bank. However, like any banking information, keep the account information safe and ensure that the account’s custodian is trustworthy, such as a parent.
Are There Any Tax Implications to Opening a Bank Account for a Child?
Any interest children earn on their bank accounts before age 14 is taxable. However, the first $950 is taxable at the children’s tax rate, and any amount above that is taxed at the adult’s rate. Once a child is over 14, all earnings are taxed at the child’s tax rate.
Can Parents Withdraw Money From Their Child’s Bank Account?
Parents can withdraw money from their child’s bank account if they are joint or custodial owners.
Can Minors Write Checks?
Most banks won’t give minors a checking account but instead, give them an online account and debit card that they can use just like a check.
Can Minors Open an Account on Their Own?
Minors cannot open an account on their own. To open your own account, you must be 18 (21 in some states). However, minors can open an account with a custodian who oversees the account.
Can Parents Open an Account for Their Child Online?
Not all banks allow parents to open an account for a child online. Each bank is different, so read the fine print on the application to determine if you can.
How Much Is Needed to Open a Kid’s Bank Account?
Most banks don’t have a minimum deposit requirement for kids’ accounts. But if they do, it’s typically as low as $5 to $10.
Is It Possible to Gift Money to a Child’s Bank Account?
Some accounts, such as a UGMA (Uniform Gift to Minors Act) account, allows anyone to gift money to a child’s account. Kids can use the money however they want once they reach maturity; it’s not an account meant only for college expenses.
Is Opening a Bank Account for your Child a Good Idea?
Opening a bank account for a minor is an excellent decision for parents. You help set your child up for financial success by teaching them about money early on.
Start with a savings account as a newborn, and as your child ages, consider a checking account or prepaid debit card to give your child real-world experience handling money.