Tips on Opening a Savings Account for a Teenager

Parents and son talking with a banker as they open a savings account.
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You may have taught your child how to save and grow their allowance through a piggy bank or chores, but now that they're a teenager, the time has come to learn new forms of financial responsibility. This includes teaching your teen about the power of a budget, the benefits and dangers of interest, and why opening a savings account will make their future easier.

In a 2021 survey of teens by JuniorAchievement.org, researchers focused on their financial goals and concerns, which were heavily influenced by the COVID-19 pandemic. One-quarter of those surveyed indicated that they would delay plans to attend college, and 43% of high school juniors and seniors expect their parents to cut back on their financial contribution to tuition and other costs. Only one-third of the class of 2020 say that being financially independent from their parents is a top goal over the next ten years, a decrease from earlier year surveys.

Other Key Takeaways:

  • More teens (22%) earned money in 2019 by working independently, compared to 2018 (16%).
  • Most teens depend on gifts for spending money (64%), while many receive allowances for doing chores (32%). 
  • Most teens who make money have some sort of bank account (61%), while the rest save their money unbanked, such as in a shoebox or a piggybank.
  • Of those teens with a bank account, the largest percentage (41%) go to the bank to withdraw money, while nearly as many (39%) use ATMs or ask their parents or guardians to withdraw money on their behalf (38%).
  • Just over a quarter (27%) use a phone or tablet apps to make transfers or payments, while a smaller percentage (12%) use products like Venmo or Zelle to send money.

Learning Financial Literacy

Whether your teenager is mowing lawns, babysitting, or working at a restaurant, saving is an lesson in financial management that can't be learned too early.

When introducing your teen to the world of banking, you'll want to consider fees and requirements together, as well as the location and digital accessibility of their bank. The age of your teen is also significant when opening a savings account, and they should be made aware of how these companies use their financial information and personal data.

Fees and Requirements

When exploring the idea of opening a bank account with your teen, check in with your bank or credit union first, as you're familiar with its policies and can introduce them to the people you know there.

In advance, help your teen prepare questions that will highlight potential fees, digital access, and interest rates, and insist that they bring each question up with the bank or credit union representative.

Considering that one-third of teens who are saving are putting away $20 or less each month, you'll also want to encourage your teen to select an account with no required minimum balance and no monthly account-maintenance fees. Ensure that there is no limit to the number of small deposits allowed, and encourage your teen to always read the small print.

Remind them that they need to read and comprehend what's in the contract they sign. Overdraft and non-sufficient funds (NSF) fees constitute around 75% of the total fees that consumers incur, and they average over $250 per year. Teens should be aware that inactive account charges and other fees will eat their hard-earned income quickly if they aren't careful.

Bank Location

You should open a savings account for your teen at a bank or credit union that offers digital banking and is also located near where you live. You could find a bank near your teen's school, your local supermarket, or your home. Apart from saving money on gas expenses, a digitally integrated, conveniently located bank will make it more likely that your teenager will make regular deposits.

Minimum Age Requirements

Parents can open up a savings account on behalf of a baby, and age should not be a concern or restriction for your teen's access to a savings account once the account has been opened. Initially, however, most major banks require someone to be age 18 or older in order to open a savings account, meaning that you'll need to sign on as a joint account holder at first. As detailed above, look for an account that works for your teenager’s access, earning, and saving patterns.

Earning Interest

If your teen's justification for a savings account is to set aside money for the long term, then it's best to find a savings account that can keep reasonable pace with the rate of inflation. There is little point in saving money with a bank, only to find that the money has lost most of its purchasing power due to inflation.

For the sake of learning and due diligence, you should review and discuss the interest rate that the savings account will pay before you open an account; but if your teenager is looking for a place to keep their spending money, the inflation and interest rates will not be decisive factors in where they choose to bank.

Checking Accounts

In tandem with their savings account, your teen will likely want to open a checking account for their day-to-day spending, and to facilitate digital transactions. Keep that in mind as you consider each bank and credit union, and give preference to those that offer both savings and checking accounts for kids.