How to Open Bank Accounts for Kids

Opening a bank account for your child can be a great opportunity to teach them about financial literacy. It gives kids insight into the function of a bank and allows them to set monetary goals and then a budget based on what they want to achieve. Although there are many reasons for a child to have a bank account, minors cannot open an account without a parent or guardian listed as a co-owner. Here is a step by step guide on how you can open an account for your child.

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Explain the importance of the account

Make sure your child knows what the purpose of the account is and what the rules of the account will be. Children shouldn’t think of it as just a sum of money that never runs out, but rather something they have control over. Ask them to set financial goals, like saving up to buy something they really want like toys and clothes. You can also ask them to set aside a certain amount to help with college, or something else in the future to give them an idea of ​​short-term savings goals versus long-term savings goals. long term.

Choose an account type

There are three basic types of accounts you will consider for your child: spousal, custodial, and prepaid. A joint account is pretty much exactly like the one you have with a spouse or business partner. You and your child will have access to the account to make deposits and withdrawals. This can be a checking account that allows you to make frequent withdrawals, or a savings account more focused on storing money that your child can access when they are older. This is a good option if your child is a teenager and has a job where they can make their own money.

A custodial account puts you as the responsible parent as guardian until the child turns 18. This means that you make all deposits and your withdrawals must cover your child’s welfare expenses. Eligible expenses include things like school supplies, dental braces, and other expenses that directly benefit your child. Custody accounts are more about creating a nest egg that your child can use when they grow up.

The prepaid option involves giving your kids a prepaid debit card that you top up with cash. Although a joint checking account usually has a debit card, the prepaid debit card is best for young children who may not yet have a way to earn money. A prepaid debit card still teaches the concept of only spending what you have based on the amount you deposit. Cards like Greenlight are specially designed for parents to work with their kids – Greenlight even has an app where kids can view the account – set spending goals and manage a savings account.

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Find the best option

The easiest place to open an account for your child would be at the bank you use. Check out what their policies and offers are for children’s accounts and if these seem to be what you’re looking for. Otherwise, there are plenty of other options to research, such as how much a bank offers in terms of returns on the savings account, how much supervision a child has over their account, and what tools come with the account. For example, CapitalOne offers a children’s savings account that offers an annual percentage return of 0.30, with no fees and no minimum balance requirement.

For a more holistic option, Copper Banking is designed for teens ages 13-17 and has an app where kids and parents can both oversee the account, and it also allows money to be withdrawn within 55 000 ATMs nationwide. Copper also sets aside a certain amount of income for savings. Current is an option for teens that does everything Copper does, but also offers rewards on certain purchases, teaching kids the benefits of cash back. There are tons of options to choose from when it comes to banking for your kids, so be sure to review all that’s available.

Request an account

Once you have made a decision, you can submit an application. You will usually need identification for you and your child, such as your driver’s license and your child’s birth certificate. Most application processes are fairly quick and painless, and you should have the account the same day you apply.

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Activate debit card

If you requested an account that came with a debit card, be sure to activate it as soon as it arrives so your child can start using it. Better yet, take them through the activation process so they learn how to do it for the future.

Download all necessary apps

Whether it’s your bank’s app or another app you’ll need to track your child’s expenses, be sure to download it, sign up, and learn its features in order to get the most out of it. the most of all that your child’s new account has to offer.

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Fund it!

If you are the primary funder right now, go ahead and deposit some money so your child can start managing the money. If your child has a job, have them ask their employer how they can set up direct deposit so they can start using their account regularly for day-to-day expenses.

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