Is it time for a young person in your life to start understanding how banking works? Do they get an allowance? Are they raking in some cash for odd jobs? Or perhaps they are just plain curious about how money works, or you’re eager to get them in the habit of saving?
Whatever the trigger, there are plenty of benefits a kid can reap from learning how to bank before they leave the nest. Gaining financial literacy and responsibility is a very good thing. Fortunately, an array of banks and credit unions offer minor accounts designed for exactly this purpose.
Because most state laws and corporate policies don’t enter into contracts with minors — and opening a bank account is a kind of contract — most banks require a child to have an adult as a joint account owner.
That’s where you come in. It’s tempting to simply open an account for your young one at the place you do your banking. But it can also be worth comparing accounts to see which institution offers the best fees, rates, and other features specifically for minor accounts.
To help with your search, here are answers to several frequently asked questions regarding opening a bank account for a minor.
What Is a Bank Account?
Much like regular bank accounts, minor bank accounts provide convenience, safety, and flexibility when it comes to saving and spending money.
For younger children, saving money in a safe place may be the primary reason to open a minor bank account. Sure, that piggy bank you bought them is cute, but it’s not exactly Fort Knox. A bank account is secure, and the funds deposited will likely earn a bit of interest.
Teens may find the same benefits to a savings account. However, they may also be excited to test-drive the checking and debit-card features that minor checking accounts offer. These accounts can be a valuable learning tool in terms of budgeting. They will become familiar with how money flows in and out of an account; they may even overdraw their account for the first time and learn from it.
What Do I Need to Open a Bank Account for My Child?
As you shop around for an account, you’ll see that each financial institution has its own rules regarding documentation needed to open a bank account for a minor. In most cases, whether you are opening an account online or in person, you will need the following, in addition to a sum of money (often between zero and $25) to open the account:
Government-issued photo identification is a gold standard for proving you are who you say you are. If you don’t have a driver’s license, a passport will likely be acceptable.
Social Security Card
You may or may not need the actual card in front of you; just knowing your Social Security number should do the trick.
Child’s Social Security Card
Many people apply for their child’s Social Security number at birth; it’s an important thing to have for obtaining medical coverage or government services. Have those nine digits at the ready.
Child’s Birth Certificate
The bank will want to document that your child is who you say they are. That birth certificate is an important way to do just that.
Proof of Address
A typical way to authenticate your address is with a recent utility bill. If you don’t have a hard copy of your bill lying around, you should be able to easily download a bill from your provider’s online portal.
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Types of Bank Accounts for Children
As with standard banking, checking and savings are the most common types of accounts for minors. There are, however, some special aspects of both types of accounts when the child is under age 18. These accounts can help teach good money management and support your family savings efforts. Let’s take a closer look at how they work.
Checking Accounts for Children
Minor checking accounts are common offerings at banks. Most accounts are designed for kids ages 13 to 17; in other words, kids who are a little older and ready to learn the budgeting skills needed to balance a checking account. Some teen checking accounts offer interest, and the best of the bunch offer very low or no fees. This is important since teens are unlikely to carry large balances in their checking or savings accounts. You don’t want fees eroding or even erasing their money.
Savings Accounts for Children
Lots of banks offer special savings accounts for kids. Age restrictions vary, but these may be designed for younger children (the 12-and-under set). There are even savings accounts designed for babies. Check at a couple of banks you are considering for this kind of account and compare offerings.
Many of these accounts have competitive interest rates Some, however, require a minimum deposit to earn those rates. In addition to looking into those details, also see what kind of parental controls are available. These typically allow you to monitor the account and control access. This can be a good thing to have in place in case your child decides to go splurge on videogames or the like.
Recommended: How Does a Savings Account Work?
What to Look for in Bank Accounts for Kids
As you look for the best checking and savings accounts for kids, here are a few things to keep in mind.
Interest. As mentioned before, you may want to compare interest rates on a number of children’s savings accounts. Some are quite competitive but may come with other requirements.
Fees. You want a minor banking account that doesn’t charge the same types of fees you find on an adult account. Many banks waive an application fee and the monthly maintenance fee. But debit card and ATM fees may still apply. Because an adult is the joint account owner, sometimes overdraft and other fees are eased. Be sure to check specific fees on the minor account carefully.
Balance Requirements. Sure, you’ll start the account with an initial deposit, but after that, how much do you need to keep at the bank? Kids’ accounts may require a minimum balance to avoid monthly fees or earn the best interest rates.
Aging Out of the Account. Many banks convert kids’ accounts to standard accounts once the child turns 18. This often takes both adults and the account holder by surprise. The conversion can mean adult account fees, minimum balance requirements, overdraft fees, and changes in withdrawal and deposit protocols. With savings accounts, it may mean a change in interest rates and balance requirements.
On the other hand, some banks allow children to keep their minor account well into their twenties. And there may be special considerations for kids who turn 18 and are students. Be sure to understand what your child’s account allows.
Apps and Financial Literacy Features. Many minor accounts offer apps that help you monitor the account and your child’s activities. Some even go so far as to allow you to assign chores and make the decided-upon payments. In addition, you may be able to get a preloaded debit card for your child, which can help teach budgeting in a very hands-on way. When all the money’s gone, your child will likely understand the value of careful tracking expenses.
Notifications. Many banks allow you to sign up for automatic notifications whenever a transaction has taken place on the minor’s account. This not only lets you know that your child may be overspending but you may also be alerted to any suspicious account activity.
Sometimes, a minor’s account has a small amount of money that slowly accrues as your child deposits birthday money and some summer-job earnings. Other times, a budding entrepreneur or devoted saver might have a higher balance. In either case, interest income on your child’s account may be subject to taxes, specifically what’s known as the “kiddie tax,” which applies to children under 19 and full-time college students under the age of 24. Any unearned income over $2,100 is taxed at the rates that apply to trusts and estates. This is to avoid parents putting large amounts of money in their children’s name and likely lower tax rate.
In addition, funds in your child’s bank accounts can affect their financial aid awards. Because money in a child’s name is weighted more heavily in financial aid formulas than it is for parents’ accounts, you may find high bank account balances work against your student when it comes time to apply for financial aid.
Now that you understand the ins and outs of opening an account for a minor, you can take the next step and figure out the best place for your child to start banking. Congrats on taking this step to foster a healthy financial life for your child.
Open a Bank Account With SoFi
Currently SoFi Bank does not offer accounts to minors. But while you’re researching minor bank accounts, why not take a fresh look at your own banking needs?
If you want an account where you can earn interest, spend, and save all in one place, check out SoFi Checking and Savings. Sign up for direct deposit, and you’ll earn a competitive APY. Plus, you won’t pay account fees and you’ll have access to 55,000+ fee-free ATMs worldwide.
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SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 8/9/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..
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