Your child bank account may have a requirement of minimum average balance to be maintained at all times.
Opening a bank account in the name of your child could be the first step to make them familiar with matters related to money. Getting familiar with the basics of banking and finances could go a long way in building a savings habit in them. But, before you visit your banker to open a child bank account, there are a few things to keep note of.
If the child age is below 18, the bank will call these a minor account. For kids below 10, the account has to be jointly operated with the parent or guardian, but if the child’s age is between 10 and 18, the account can be operated by the child. On crossing the age of 18, the account may be converted into a regular savings account and the parent cannot operate it thereafter.
Although the minor account comes with features such as internet banking, ATM or debit card, cheque book facility etc., make sure to confirm from the banker for any kind of restrictions on their usage. The transaction password may not be provided on such accounts.
Show the child the cheque book and its features along with how it is to be used. Draw a cheque in your name and see how the statement reflects the debit and credit entry in both the accounts.
To keep the minor account funded, you as a parent will want to make a seamless transfer of funds from your account to the minor’s account. There could be a ‘standing instructions’ facility to debit money from parents account to the minor account – make sure to use it. Transfer of funds could be possible also through NEFT mode. Children may also be taught about such features and their use.
Some banks may issue photo ATM cards which may also carry the name of the parent. Take your child to the ATM and make them check out how to use the ATM card safely. In fact, safe banking features need to be told to the children every time a banking transaction is conducted. Tell the children about the important dos and don’ts of banking when using ATM cards or net banking.
There could be a pre-set limit on daily and annual spend in the child bank account. You may even set your own limits to enhance safety. Make sure the SMS feature is enabled and you get an alert on every transaction.
Now, comes an important feature that you as a parent need to keep note of. Your child account may have a requirement of minimum average balance (MAB) to be maintained at all times. Make sure you stick to it else a penalty is charged eating into your returns and capital.
While opening the account, make sure to confirm from the banker about the safety and protection features that may come in-built in a child account. From username, passwords to safe use of net banking, give your child the right start by taking the child to the bank while opening the account in his or her name.