Bank Accounts Minors

     A minor is someone under the age of eighteen.  A person under the age of eighteen cannot be obligated under a binding contract; therefore any bank that decided to open up an account for a minor is risking the minor being irresponsible through overdrafts and fees.

     Some states have written laws that explain that the minor's age can be ignored and the contract is enforceable regardless of age.  All states are different, so you need to contact your bank and discuss the laws applying to your state's minors. If your state doesn't have regulations against children under eighteen entering into contracts, you could have your child as a joint account holder so that both of you have access to the funds.  The funds would be transferred to the child in the event of your death.  One benefit to a joint account is that both account holders are responsible for overdrafts or issues, and the parent is able to have some control over the account.  

     A second important thing to remember about opening a bank account for a minor is to open a POD or "Payable on Death" account.  What this means is that the parent will have control of the funds in the account until the parent's death, and then the funds will be given to another beneficiary.  Once you believe that your child is responsible enough to handle the money upon your death, you can simply remove the "POD" label.

     There are a lot of positives related to assisting your minor child with opening a bank account.  In my opinion, it is an excellent way to teach your child the value of money.  Your child will learn at an early age how to manage his money.  He will also learn about how interest works.  I am a school teacher, and I teach fifth graders, and it is amazing to me how little they know about money, and especially how little they know about credit, debt, interest, etc.   Therefore, as parents, it is our job to teach our children how to earn and invest money.  Being able to see how money accumulates in a savings account is a very important skill for children to have, and the earlier you begin assisting your child with saving money, the more money he will be able to save over time.

     Remember that when you open a savings account for your child, you must teach your child about the long-term benefits of investing.  It is a great opportunity for you to explain the concept of interest with your child and even do some real-world math problems with him.  Be patient with your child.  If you have your child earning money for chores, his impulse is to spend the money rather than save it.  Try to work out a system with him in which he saves some money and spends some money.  Also, remember that your actions speak louder than words, and that means that you need to be setting an example for your children as well.  They need to see you practicing good spending and savings habits.  This will impact them the most.

      For questions about banking and savings accounts, talk to representatives at your local bank.  They can give you specific details about the best accounts to open for your child and what your state's regulations are.