Financial success is often a result of healthy money habits, and building a savings account is a great practice to start early. It can be an instructional tool for minors to teach them about money management, although these accounts do come with age restrictions.
Children under 18 can gain real-world financial experience with a savings account, but you need to consider age limitations, money goals, and account types before going to the bank. As you understand the how and why behind youth accounts, you’ll be prepared to support the financial success of your children.
- You must be at least 18 years old to open a savings account since those underage cannot sign a legal document.
- Minors can have joint savings accounts with their legal guardians that may come with additional perks.
- Custodial accounts, youth savings accounts, and education-based accounts are three options a minor and their guardian can consider.
Age Requirements for Savings Accounts
Opening a savings account with a bank means you enter into a contractual agreement with the institution. This is why it's difficult for minors to open an account on their own. Children under 18 are not allowed to sign a contract, although specific ages and prohibited activities can vary by state.
Typically, an adult will open a savings account on behalf of or in joint partnership with someone younger than 18 years old. There isn’t a minimum age for opening a savings account, and some parents even start them for newborns.
It’s important to be clear on your savings goals because a normal savings account may not be the most lucrative option. For example, if you want to save for your child’s education, a 529 offers more specific value.
Why Can’t Minors Open Their Own Accounts?
No law specifically states minors cannot open savings accounts, but they are not able to sign legal documents in most states. This would prohibit them from entering a contractual agreement and thus signing documents to open a savings account on their own.
The mandate is specific for those under 18 years old, but ages vary by state. For example, Nebraska recognizes minors as being under 19 years of age.
Every state has something known as the age of legal majority, which regulates activity and determines responsibility for actions. Legally, parent and guardian obligations expire when the child reaches that legal age.
Responsibility is placed solely on a minor’s shoulders once they reach legal age. That means a child would have total ownership of a savings account when they turn 18. You can find banks that allow for continued supervision by the custodial adult if you have concerns about the child’s money management.
When Should You Open a Savings Account?
Consider the financial goals you have for a child in opening a savings account. Do you want them to learn healthy money management skills? Are you encouraging them to save up for a big purchase? If yes, these are great reasons to open a savings account for a minor. A savings account can give your child access to financial education and real-world experience with money.
If you want to set aside college tuition or have assets to share once they reach legal age, you may be better off with other options. These include tax-advantaged 529 plans for educational expenses and Uniform Gifts to Minors Act/Uniform Transfers to Minors Act (UGMA/UTMA) for asset transfers, including non-cash assets.
How To Open a Savings Account for a Child
The first step is to opening a savings account for a child is to shop around and find the best options to suit your family’s needs. Some things to consider include:
- Minimum deposit amount
- Balance requirements
- Fees or other costs
- Best interest rates
- Branch locations for in-person banking
- Available educational resources
- Child-specific accounts
You will need to decide whether to open a savings account or a custodial account, such as a UGMA or UTMA. For both types of accounts, contributions are irreversible, placing restrictions on any withdrawals.
A UGMA account holds financial assets only, such as cash, securities (stocks, bonds, mutual funds), and insurance policies; a UTMA account holds tangible and intangible assets, such as real estate.
Shop around for a low- to no-cost youth savings account and one with higher interest rates—a bonus to having your money work harder for your child’s success. Once you find an option that meets your requirements, opening a savings account for your child is typically easier if you already bank at the selected institution. You will need to provide identification for yourself and the child, such as Social Security cards, a birth certificate, and government IDs. Finally, you will transfer funds electronically or with a check to cover the initial deposit.
Minor Accounts vs. Regular Savings Accounts
Some banks will offer a special minor savings account, sometimes referred to as a student or youth savings account. A minor account includes joint ownership between parent and child with additional parental controls and activity monitoring. Banks may also offer special perks for a youth account, such as educational content to help grow their financial literacy.
Banks will outline what happens to a minor account when the child turns 18 or the state’s legal age. Some may transition to a regular savings account with fees attached. Other banks may uphold joint ownership between guardian and minor unless otherwise instructed.
Frequently Asked Questions (FAQs)
How much money do you need to open a savings account?
Minimum deposits are different for every bank, and you’ll want to pay attention to how much you need to open the account in your research. Credit unions or specific youth savings accounts may be the best option for the lowest minimums.
How do you open a high-yield savings account?
The main difference between a regular savings account and a high-yield one is how much they earn for you based on interest. The process of opening them is the same. Research your options and open an account at your selected institution.
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