March 5th 2024.
As the world becomes more digitalized, it is becoming increasingly important to teach children about financial literacy at a young age. One way to do this is by opening a bank account for your child. Not only does this allow them to learn valuable money management skills and budgeting habits, but it also gives them access to funds for day-to-day expenses and learning opportunities. There are many options available for children's bank accounts, including junior savings accounts, ISAs, and current accounts specifically designed for kids.
According to Louise Hill, co-founder of the GoHenry pocket money app, children's financial habits are formed by the age of 7. This highlights the importance of teaching kids about money and managing it responsibly, especially since financial education is not typically included in primary school curriculum. By giving children access to a bank account, they can start learning and practicing these skills early on, which will greatly influence their decisions and habits later in life.
When choosing the best account for your child, it's important to consider affordability, accessibility, and educational tools. Look for accounts with low or no fees, convenient access methods, and features that encourage saving habits. It's also wise to distinguish between account types based on your goals. For example, a current account may be more suitable for accessible funds for learning experiences, while a savings account can accrue interest on larger sums. Junior ISAs provide tax-efficient long-term investing, but funds are locked until the child reaches the age of 18.
Opening a bank account for your child is a similar process to opening an adult account. You will need to provide basic personal details for both you and your child, such as names, birthdays, and social security numbers. You may also be required to verify your identity and fund the initial deposit. If opening the account online, you will need to provide account and routing numbers for transfers. Many providers also offer debit cards for kids, which allow parents to monitor their child's spending after activation.
There is no specific age that is deemed the best to open a bank account for your child. Every child develops at their own pace, so it's important to consider their level of financial awareness and readiness. Some experts recommend starting with a savings account around the age of 6 to nurture their curiosity about money. Others may show interest once they start earning an allowance or have a job. Whenever the opportunity arises, opening a bank account for your child can reinforce positive money management habits.
There are various options for children's bank accounts, each with their own unique features and benefits. Some banks offer spending limits and parental controls, while others focus on savings and investing. Here are some examples of bank accounts that may be suitable for your child:
- Axos First Checking: This account is available for teens aged 13 to 17 and has no monthly maintenance fees. It also offers interest on checking account balances and daily transaction limits for cash withdrawals and debit card purchases.
- GoHenry: This prepaid debit card acts as a digital "pocket money" account, allowing parents to load funds and set spending notifications and controls. It is available for children as young as 6 and includes savings options, with no load, transaction, or foreign fees.
- Step: This account offers teens the freedom to spend, save, and invest, and also helps build credit with its Smart Pay feature. It has no monthly or overdraft fees and offers a competitive savings rate.
- Chase First Banking: With access to over 15,000 Chase ATMs, this account is a more traditional banking experience for kids aged 6 to 17. It has no minimum deposit or monthly fees and allows parents to set spending limits and alerts. The parent must be a Chase customer to open this account.
- Capital One 360: This fee-free banking option offers multiple accounts for different goals, including a kids savings account, a MONEY teen checking account, and a joint parent-teen account. It also offers a debit card and online banking app, with no minimum deposit or monthly maintenance fees. The savings account has a high interest rate of 2.5% APY.
- Copper: This account comes with a debit card for kids and teens to spend and withdraw, as well as savings rewards, direct deposit, and a Divvy feature for investing. It is available for children and teens and has no monthly fees.
- Alliant Credit Union: This credit union offers teen checking accounts for ages 13 to 17 and kids savings accounts for 12 and under. The accounts must be joint with a parent or grandparent and have no minimum balance or service fees. The teen checking account also comes with a debit card, and the savings account has a competitive interest rate.
- MPH "Makes People Happy" Bank: This account is available for kids and teens aged 10 to 24 and offers a contactless debit card, no monthly fees, and a savings app for kids. The savings account also has a high interest rate compared to traditional bank accounts. Employed teens can also get paid two days early with direct deposit.
- Greenlight: This app offers a debit card and investing options for kids and teens, as well as parental controls for spending. It also offers cash back for savings and rewards for good money habits. There is a monthly fee, but parents can use the app to pay their child and keep track of their spending and withdrawals.
Overall, there are many benefits to opening a bank account for your child, including no overdraft fees, parental monitoring, and hands-on experience with managing money. With the help of age-appropriate banking tools, children can learn and develop important financial skills that will benefit them for a lifetime.
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