With no income to save, a child’s savings account can feel a bit funny.
But it can be a useful tool for parents to employ. By helping your kids develop good money habits and become familiar with confusing concepts, such as the time value of money, you’ll set them up for a lifetime of financial success.
Account details and annual percentage yields (APYs) are accurate as of February 5, 2024.
When should you open a bank account for your child?
The timing of such education depends on your child’s maturity level and the type of account you’re using. Savings accounts don’t require much financial savvy, and are thus a good place to start, especially because nearly all kids will have used something approximating a piggy bank by the first grade.
“Personally I’d do it right away,” said Nicholas Bunio, a certified financial planner (CFP) in Downingtown, Pa.
“I would not use this for college savings, but just a nice way to build up a few hundred dollars in savings. Then, once the child is old enough for chores, they can learn how to be responsible with money by putting their chores money into the account.” Said Bunio.
As long as you, as a parent or guardian, are willing to be a joint owner for the account, you can open a kid’s savings account for your child whenever you’d like. You can open some types of savings accounts as soon as your child is born and has a Social Security number (SSN), such as a 529 college savings account.
Some key moments that may inspire you to open one include when:
- You want to start saving for their college.
- Friends and family give monetary gifts.
- They have a savings goal they want to achieve.
- You start to provide them an allowance.
- They start earning money from gigs or a part-time job.
Checking accounts
Many banks pair checking and savings accounts so it may be tempting to open both.
A kid’s checking account can be a great way to teach basic money management. But checking accounts are more hands-on and can require a greater level of maturity. And your child may still make mistakes.
“Young children are like sponges and can develop lifelong ideas about money,” said Jared Jones, partner and lead advisor at Omega Wealth Management in Arlington, Va. “Parents should start working with children as early as possible to define terms like spending and saving in age-appropriate ways.”
If you want to open a checking account along with a savings account, look for when:
- Your child handles their pocket change or allowance well.
- They start earning income.
- You trust them not to lose a debit card.
When researching the best checking accounts for kids, pay attention to whether there are overdraft and non-sufficient fund fees, and what the debit card replacement fee is (just in case). While writing checks may be going the way of the dodo, checking accounts are still vital to personal finance.
How to choose the best kids’ savings account
Looking at what your current bank or credit union offers is a great place to start on your campaign to find the right kids’ savings account.
But what exactly do you look for besides the words “kids’ savings account?” Here are a few things to note as you do some research.
- Age restrictions. Individual banks can set their own rules (to a point) regarding age limits on different types of accounts. Make sure your kid is old enough for the account you want. For example, the Chase High School Checking℠ account is only available for teens from 13 to 17 years old, while the Alliant Credit Union Kids Savings Account is open to children 12 and younger.
- Maintenance fees. No maintenance fees are always a good deal, but especially so for younger savers who likely don’t have significant income. Monthly fees that bring down your savings and eat away at what you worked hard for can be discouraging.
- Minimum balance. When you first start to save money, you likely don’t have much in your pockets that you can put into a bank account. Your balance can also drop considerably once you reach a savings goal and make a withdrawal.
- A savings yield. Earning an interest rate on your savings can be encouraging and help teach your child the time value of money. If parental controls aren’t a priority, check out high-yield saving accounts.
- Limits and parental controls. Limiting how much your child can withdraw from their savings account in one go can help prevent a big mistake. Many kids’ savings accounts will automatically have a low withdrawal limit. For example, the daily transaction limit for Axos Bank First Savings is $100 in cash.
- A well-rated app. While kiddos tend to take to technology much faster than adults, a mobile app that has an intuitive design can prevent confusion and accidental transfers.
If you’re looking to save in preparation for college, also consider the impact the account can have on college financial aid.
While 529 college plans have less of an impact (they’re typically counted as a parental asset), joint savings accounts and custodial accounts are a different story.
Kids’ savings account vs. custodial account
Custodial savings accounts are owned by a parent and then turned over to the child once they become a legal adult. “At age 18 or 21, the [custodial] account must be handed over to the child. No ‘ifs ands or buts.’” Said Bunio.
If your child has thousands of dollars in their name when they apply for financial aid, any aid they receive may be reduced.
If that’s not a concern, however, custodial accounts can be useful. Your child can’t make withdrawals until they receive ownership. Regular kids’ savings accounts don’t have this limitation.
Learn more: best investment accounts for kids.
How to open a kids’ bank account
Once you whittle down your choices and have settled on a bank or credit union, it’s time to apply for an account.
You could open the account online, in person at a branch or over the phone. Expect your financial institution to ask for the following items on the application.
- Personal details. For both you and your child, you’ll need to provide your full, legal names, dates of birth, Social Security numbers and contact information, including residential address.
- An initial deposit. You may not be required to make an initial deposit, but you’ll have the opportunity to. If you are required, be ready to make a transfer from another account or, if you’re in person, have cash or check on hand.
You could also be asked for:
- Photo identification. If you go in person, you may be asked to show a photo ID, like your driver’s license.
- Student identification. If your child is applying for a student account, they may be asked to show a student ID or other proof of school attendance, like a report card.
Once you’re approved, the account is officially open.
Benefits of a kids’ bank account
Opening a bank account for your child will likely pay off down the road. That’s due to several built-in advantages of kids’ bank accounts.
- It helps your child learn the basics of money management.
- It builds solid savings habits.
- It shows them the value of compound interest over time.
- It makes them more likely to learn from and benefit from understanding investment goals.
Like any financial endeavor, good habits make good money managers, so get your child active in managing the account as soon as possible.
Teaching your child the importance of saving money
Sit down with your kid and discuss why saving is essential and agree on how much and how often they’ll make deposits.
That could mean that half of their part-time job earnings each month go into savings (they can spend the other half) and then maybe a third of cash from birthdays and holidays go in as well. Deposits could be made in several ways:
- Directly, at the bank or credit union.
- Via mobile app.
- On the bank or credit union’s website.
- At an automated teller machine (ATM).
Allow your kiddo to participate as much as possible, doing things such as choosing the PIN for the ATM card (if there is one) and making the first deposit with your supervision.
And consider having your child participate or observe other family financial aspects. “For older children and teenagers, we encourage parents who are charitably inclined to involve their children in giving as early as possible. This provides a great opportunity for parents to communicate family values.” Said Jones.
Frequently asked questions (FAQs)
In most cases, minors must have a parent or guardian to open an account with them. Children can’t legally sign legal documents that are necessary to agree to a bank account. There are some exceptions; for example, Wells Fargo Clear Access Banking℠ allows 17 year-olds to open an account in person without a parent.
The national average savings rate is 0.45% as of May 20, 2024, according to the Federal Deposit Insurance Corporation (FDIC). It doesn’t track interest rates on kids’ bank accounts specifically and rates can vary wildly from bank to bank. For example, Wells Fargo Clear Access Banking℠ doesn’t offer a yield, while Bethpage Federal Credit Union offers up to 5.00% APY on the Bethpage Student Savings Account.
Most banks and credit unions offer bank accounts for minors and they can easily be opened either at the actual branch location or via the financial institution’s website or mobile app.
