It’s never too early to start learning about personal finance, but how old do you have to be to open a bank account?
In most banks, the age requirement to open a bank account is at least 18 years old. Anyone younger is considered a minor and will generally need a legal guardian to be the joint account holder. To open an account for a minor, you must be a signer.
There is no federal law preventing a minor from opening a savings account. But in most places, they can’t do so on their own. This is because a banking relationship is governed by state contract laws, and minors don’t have the legal authority to enter into a contract on their own.
Most states allow a parent or guardian to open a bank account for a minor. As of 2016, however, some limits were in place in Texas, Oklahoma, Missouri, West Virginia, Florida, and the District of Columbia. The practice was not permitted in Massachusetts, New Hampshire, and Wisconsin.
Banks also have their own requirements. Each bank’s eligibility requirements are different, but there are a few commonalities: The adult account holder must be a U.S. citizen 18 or older with a government-issued ID. (The adult doesn’t have to be a parent or guardian; they can be any family member or even a friend of the family.) Typically, these types of accounts are called student checking accounts or teen checking or savings accounts.
Bank accounts with or for minors fall into three categories: custodial, education, and joint accounts.
A financial account that is opened and controlled by someone over 18 for a minor is called a custodial account. These come in two forms:
The minor takes control of the account and becomes the account owner when they come of age, but don’t have access to the money until then.
These accounts, known as 529 plans, help pay for education expenses from kindergarten through college. Withdrawals are tax-free as long as they’re used for eligible expenses. They’re investment or savings accounts with no income or contribution limits, but the parent controls the accounts.
With a joint account, you and your child share an account and both have access to it.
These savings accounts can help pay a child’s future education expenses or teach them to save for another goal, such as a car or a rent deposit when they decide to move out, but the adult controls the account.
Here are examples of what different banks have to offer:
The papers you need to open a bank account with or for a minor may vary for each financial institution. Whether you are applying at an online bank or a brick-and-mortar bank, most banks will ask you for the following:
In addition, you will likely be required to meet monthly balance requirements or maintain a minimum balance so the account doesn’t close.
When the minor reaches the age of majority, which varies by state, they gain control of the account. The age of majority is commonly 18, but sometimes it can be 21 or older. Make sure to understand when the beneficiary, who in this case is the minor,can take control of the account and how long you can maintain custodianship.
It’s helpful to consider the pros and cons of opening an account before you do so. Remember: You will be the signer and joint owner. If you’re not quite ready to open a bank account for your minor, you may want to look into other options like prepaid debit cards.
These accounts tend to be easy to set up and allow you to deposit as much money as you want, giving you flexibility with no penalties for early withdrawal.
Access to a bank account can teach your child budgeting and money management skills. Some savings accounts designed for minors include educational materials, either via apps or pamphlets, that can increase their financial literacy.
Most banks now allow you to access your bank account online, which makes it convenient for you to be able to access or pay your child’s account within a tap of a button at all times. You may opt-in to receive notifications of fraud alerts, deposits, and spending alerts.
As mentioned above, you’ll be able to view or access your child’s account since you are the joint co-owner. Your child can withdraw the money at any time for whatever purpose they want, but they need your permission to do so.
There are some downsides to opening an account with or for your child, including fees and tax implications. You may have control over your child’s activity now, but once they turn 18 (or in some cases 21), the money will belong to them.
Since you are the account co-owner, you are responsible for overdraft fees, monthly maintenance fees, bank account fees, etc.
Any income or growth is taxable at the child’s income rate. If their interest, dividends, and other unearned income adds up to more than $2,200, it can trigger an unearned income tax for children. In addition, if your child is saving for college, it will count as part of their assets when applying for financial aid, which could hurt their application.
Opening an account for or with a minor can provide opportunities for them to learn about money and prepare for the future at the same time. A variety of accounts and programs exist, and they vary from one bank to another, so it is important to investigate your options and choose the best one for your child’s current situation and the future.
Jeff Smith is the VP of Marketing at Self Financial. See his profile on LinkedIn.
Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Counselor® and a Bilingual Personal Finance Writer and Educator dedicated to helping populations that need financial literacy and counseling. Her informative articles have been published in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal financial and motivational site www.AcetheJourney.com and translated into Spanish the book, Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English personal finance courses on behalf of the W!SE (Working In Support of Education) program has taught workshops for nonprofits in NYC.