Many banks give the option of opening a savings account aimed specifically at children. Depending on the age of the child, most banks offer two separate accounts for minors.
Parents nowadays do not have to wait until their child turns 18 to let them experience and make them learn how to use their own savings account. Many banks give the option of opening a savings account aimed specifically at children.
For instance, children-specific accounts include the State Bank of India’s PehlaKadam and PehliUdaan, ICICI Bank’s Young Stars Account, Union Bank of India’s Youth Banking Accounts, and HDFC Bank’s Kids Advantage Account. Parents can open these minor accounts for children even below the age of 10 years.
The age of the child plays an important role. Depending on the age of the child, most banks offer two separate accounts for minors. For those below 10 years a particular type of account is offered, and the other for those above 10 years and up to 18 years. For a child below 10 years, an account if opened has to be operated jointly with the parent/guardian. For those above 10 years and up to 18 years of age, the child himself can operate the account. After the child reaches 18 years, the account becomes inoperative and needs to be converted into a regular savings account.
Experts, however, suggest one should consider a few important points while zeroing in on such an account.
5 things to consider before opting for a minor savings account:
1. Funds transfer: Parents or guardians should make sure that the minor account gives a ‘standing instructions’ facility. This allows auto debit money from the parents’ or guardian’s account to the minor account. Most banks also allow only inter-bank funds transfer (NEFT).
2. Spending limits: Parents should find out the daily spending limit allowed for the child, along with the yearly maximum limits for both spending and withdrawals. The spending limit varies from bank to bank For instance, while some banks permit a daily maximum spending limit of up to Rs 2,500, others restrict it to Rs 5,000. Banks also impose a cap on the total debits in the account in a financial year.
3. Debit card: Some banks give the option of carrying the name of the parent or the child on the card, while a few also issue a photo ATM-cum-debit card. To receive automated messages after transactions, parents should make sure the SMS alert feature is active. Find out if the account comes with a personalized checkbook, specially made for kids. Experts say parents or guardian beforehand need to show the child how to draw a cheque and should also take the child to the ATM to show how to withdraw money safely.
4. Minimum balance: Find out the minimum balance required in the child’s savings account. Generally, banks require a minimum average balance (MAB) to be maintained. This is followed by banks to avoid any penalties. Minimum average balance ranges between Rs 2,500, and Rs 10,000, for most banks.
5. Banking communications: Parents should also find out how the bank communicates with the guardian, on any transactions done on children account. Experts suggest one should choose a bank where such transactions are communicated to the guardian via email and SMS. Some banks provide this service for free, whereas some charges additionally for this. Also, find out if the accounts have the security of zero liability. This feature protects the child’s debit card against any theft, misplacement or unauthorized purchases on loss.