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- A kid's savings account usually must be opened alongside a person that's over the age of 18.
- Once your child gets to a certain age, you may need to open a new account.
- Before you open a bank account for a minor, make sure you outline a clear purpose for the account.
If you think your child is ready to manage money, setting up a bank account may serve as a beneficial tool for teaching your child about saving for financial goals.
Below, we'll guide you through the process of opening a bank account for your child, as well as provide tips and guidelines to help them manage it.
What is a kid's bank account?
A kid's bank account is a type of joint bank account between a child and another individual.
There aren't any federal laws that prohibit a minor from opening a bank account on their own. However, there are state laws that say a bank account for a minor must be opened by some someone that 18 years of age or older. If you live in a state that doesn't include a minimum age requirement in the state law, most financial institutions will still have a policy that says an adult is needed to open the account.
There are two primary joint bank account options: kid's savings accounts and teen's checking accounts. Depending on where you bank, you may need to open a traditional savings account or a specialized bank account tailored only for children.
A kid's savings account will earn a bit of interest on money deposited. The amount of interest you'll earn will depend on the institution. Online banks and credit unions usually offer a higher rate than brick-and-mortar banks.
Kid's checking accounts include debit cards or ATM cards and are better for multiple monthly transactions. However, most accounts require the child to be at least be 13 years old.
At certain financial institutions, you may also see custodial accounts. A custodial bank account is not the same as a traditional kid's bank account. Custodial accounts are a type of investment account, and a child will obtain ownership of the account after the age of 18.
How to open a bank account for a minor
To open a bank account for a minor, one of the individuals signing up for the account must be over the age of 18. You will likely need the following documents to open an account online or at a branch:
- Adult's US ID (Examples: driver's license, passport)
- Adult's Social Security number (If you don't have a US ID, refer to our list of banks and credit unions that make it easy for immigrants and non-US citizens)
- Adult's current bank account number (Banks usually connect kid's accounts to parent's accounts)
- Child's US ID (Examples; social security card, birth certificate, school ID, passport)
- An initial deposit (Banks usually ask for $0 to $25 to open an account)
What to look for in a kid's bank account
Elaine King, CFP, founder of Family and Money Matters, advises parents to have a clear purpose for the account before setting it up.
"Let's say there's a 10-year-old kid. A savings account would be the best. I can't see the child going to an ATM, so it would be a savings account. Then after a while, I would open a brokerage account for that child," says King.
Expanding on the example, King suggests parents introduce savings accounts as a first step to teach children about how money can grow. Then, as a second step, the parent could introduce investing.
King also says, in her experience, the best account option will depend on the parent's banking habits.
"The best example — to have good financial literacy — is going to be the parents. If a parent goes to the bank, teach your child to go to the bank. If the parent does online banking, then open online banking for the child," says King. "The easiest thing is to talk to your banker or your investment advisor and ask them to open an account for your child. In this sense, you're doing something you as a parent are familiar with, and you are amplifying the relationship."
If you're a beginner to banking in the US, King says parents may want to consider exploring local community banks. You may be able to foster a closer banking relationship since local banks have closer ties to local communities than national banks.
How you can monitor a bank account for a minor
Some kids' bank accounts have special parental monitoring features. For instance, some of the options mentioned in our list of the best banks to open a savings account for a child let parents put limits or alerts when a child withdraws a set amount of money.
If you choose to open a specialized kid's bank account, the financial institution will include age limits for the account. Once your child reaches a certain age (usually 13 or 18-years-old), your child will have to transfer funds to a new account, or the bank will enroll the child automatically into a traditional savings account.
Pay attention to minimum account balances and fees. Common fees include monthly service fees or out-of-network ATM fees.
Additional tips for teaching kids about financial literacy
Before you open a bank account for your child, King recommends parents teach children the value of money.
"If I'm a kid and my mom is putting money in the savings account, that doesn't mean anything to me. I don't know how much she had to work hard for or what $10 is worth. For a little kid, $10 is a lot of money," King told Insider.
King also says when parents set aside money for financial goals, they should have open communication with children about money so they can understand why money is being saved and appreciate it.
King says parents could say, for example, "Look, we have a budget of $100 to go out. But, we're going to spend $80, so $20 we're going to put it in your savings account, and that is for you to go to college." That way, a child recognizes the money is being used for a specific goal.