Today we discuss how to go about opening a bank account for your children's money. Watch (or read) to find out more!
(Video is 4 minutes. The full transcript is below.)
Full Transcript of video
Hey friends, the Fearless Advisor here. Today I am going to discuss opening bank accounts for your kids.
Wallet money versus bank money
Times are changing as our technology progresses, but we still need banks to function in our everyday lives. As my kids continue to save money and learn the difference between wallet money and bank money, opening bank accounts is necessary. Wallet money is easy to understand and consists of some ad hoc spending money. Bank money has a few purposes, such as money for paying bills and short-term savings. Bank money also includes an emergency fund.
Why I prefer online-only bank accounts
As a personal preference, I like banking with an online-only institution. My reasoning is that I can do all my banking online and with an ATM, should I need some cash. This approach allows me to earn a higher interest rate than a brick-and-mortar bank and not have to concern myself with fees and account minimums.
However, online-only banks do not accept cash deposits.
Where my issue arose is when my kids started saving larger amounts of money and needing to learn how a bank works. My kids’ money is cash, and online-only banks have not figured out how to deposit cash yet. Plus, keeping their cash safe from loss was starting to increase my personal guarantee to cover their money.
Factors to consider when looking for a bank for your kids
Since hands-on learning is effective for my children and they had too much mattress money at home, I began the search for a local bank. My primary search criteria were finding accounts without any fees, no minimum account balance, and a convenient location.
Accounts for children 13 years and over
The great news is many institutions offer checking accounts for children of all ages. What I found is checking and savings accounts are offered for kids ages 13 and older. The checking account will likely offer a debit card. Now, depending on the financial maturity of the child, it may be wise to keep that debit card with the parents as they learn how the card works.
Accounts for children under 13
For children younger than 13, there are savings accounts with more restrictions for removing money from the account. Most likely you will have to go into a local branch to withdraw money. In my view this is not a bad thing as the visits will be infrequent. Plus, the children will get to see some of the workings of a bank branch. They may even get some candy.
What is required to open a bank account for your child?
Opening these accounts will require a parent to be on the account. No surprise there. All people on the account will need to provide their Social Security numbers and some identification. Be sure to speak with the institution of your choice prior to opening the accounts to learn all the requirements needed. Since young children do not have identification, this requirement is handled in other ways.
Children can also invest their money.
I would like to mention that a bank, or credit union, is not the only solution for money a child may not need for a long time. Children can invest their money as well. This presents another opportunity for kids to learn about investing and putting their money to work for them. If the child has federally reported earned income, they can even start saving in a retirement account! More on these to come in future videos.
Would you like more support?
If you have you have been thinking about opening a bank account for your children, I encourage you to start your research now. Some quick searches online will help you create a short list of institutions to consider. Also, feel free to schedule a call with me if you’d like more insights on this topic as it relates to your family situation. Thanks for joining us!
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