Youth Accounts at Banks

Banks have long offered various types of checking accounts and savings accounts. Some of these accounts are actually fully developed products that are different from other offerings. Others are merely gimmicks, and some bank account types lie in between.

Youth Accounts Banking

One such niche account offered at many banks is a youth account. These accounts are typically broken up into youth savings accounts and youth checking accounts. Just what each account is, and how it differs from other accounts depends on the bank.

youth savings accountsFor the most part, special bank accounts for young people are joint accounts with limited access for one person. For most purposes, a person under the age of 18 cannot legally enter into a contract. No contract, or banking agreement, then no account, not even a kid bank account. Instead, in order to open a kid savings account or student checking account, the bank will require an adult’s signature. No matter what it gets called on the statement, what you have really just opened is a joint account with the child.

So, then what is the point of a youth accounts?

As an adult, you might not like the idea of joint account with your child. Maybe that sounds like “too much” or something “too formal.” A youth account, specially designed for a parent-child relationship (or grandparent-child, or any adult to child) just sounds better. But, make no mistake. In the end what you have is a joint savings account or joint checking account. If you read the fine print, all the window dressing in the world does not change the fact that you, the adult, are liable for the account and all activities within. That means you’ll need to control access to things like online banking passwords and the child account’s debit cards or ATM cards.

However, youth accounts are a good way for banks to both start creating mind share in future customers, as well as providing an inexpensive service to make parents happy. Youth accounts frequently have very low, or no minimum amounts to open or minimum balances to maintain. So, just the $20 bill from Grandma could be all it takes. Some banks offer other perks. Bellco Credit Union offers a higher interest rate on youth savings accounts, up to $500, and Beth Page Credit Union currently offers a whopping 3.0% interest on the first $1,000 in a youth account. This offers a great way for little Billy or Susie to learn about interest and what it can and can’t do. While 3.0% interest is way higher than you’ll get on any adult savings account, 3% on $1,000 is a mere $30, and you won’t keep getting 3.0% on the amounts over $1,000. This is a good time to teach youngsters about fine print, too.

Many banks and credit unions offer various educational tools or newsletters to account holders as well.

Another difference comes from limiting the actions the child can take. Theoretically, as a person on a regular joint account the child would have access to all the funds. Practically, however, until the child has ID such access would be difficult at best. No teller will hand over a fifty dollar bill to an 8-year old without a nod (and ID) from a parent first. However, a child account typically formalizes this, restricting all withdrawals to require parental consent.

Youth Checking Accounts

As the child approaches 15 or 16, the option of a youth checking account opens up. Obviously, the point of a checking account involves more potential for spending money. Again, for contract and liability purposes, this is a joint account. If your teen is bouncing checks, you are responsible for any fees and debits. Make sure you are getting real free checking with your youth checking account, or another account (or another bank) is probably a better option.

These days, the better route for many teens is to have a debit card associated with the account that is not setup to allow overdrafts. In this case, just like with an adult debit card, the merchant swipes the card and verifies sufficient funds before completing the transaction. In this way, kids learn about managing money and balancing their checking account (it’s still embarrassing to be declined, even as a kid), without the possibility of getting under water and racking up bounced check fees or other debts. Even if you are protecting them from money problems with this account, take the time to explain the importance of good credit and maintaining a clean credit report.

Again, the best youth checking accounts offer low, or no, minimum balance and no monthly fees.

Youth accounts are a great way to prepare kids for a financial future, and an important step in getting them used to dealing with financial institutions, especially high schoolers who will be turning 18 and getting into the world as adults on their own very soon.

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