A savings account is the first step in a financial journey. Often, when a person starts earning, he only gets a savings account, but now many parents prefer to have their minor children open their savings account and start handling their own funds.
Learning about finance is something everyone can benefit from, and a savings account is a great way to do that. Several savings accounts are now available, specially meant for minors. Parents can choose from many such accounts to fulfil the minor’s present and future needs.
Having a savings account has several benefits. Let’s check them out one by one.
Gateway to the financial world
Whether it’s an investment in mutual funds, insurance, stock market, a small savings scheme, or spending money on online shopping, making payment through a debit card or UPI, a bank account is essential in all such transactions. So, a savings account is the gateway to the financial world. By operating their own savings account from a young age, minors can understand the features such accounts offer and utilize them once they grow older.
Adhil Shetty, CEO, Bankbazaar.com, says, “Most people begin their financial journey with a savings account. This product is a great way to educate children about the importance of saving and money management, which are essential life skills and will help them manage their money sensibly.”
Help children learn money management
A savings account can teach minor account holders how to manage their money effectively. All the transactions carried out with the account are recorded and can be later accessed with an account statement. Minor account holders can refer to their account statements to better understand how to budget their expenses.
Inculcate a saving habit
Not only are savings accounts an excellent option to park money, but they also offer attractive interest. Account holders can also sweep the extra funds from their savings account to an FD and earn a higher interest rate. When minor account holders operate their savings accounts, they can watch their savings grow and thus may be motivated to save more money.
Parents can monitor the account
A person under the age of 18 years is categorized as a minor. However, banks further categorize savings accounts for minors into two categories – Those under 10 years of age and those between the ages of 10 and 18. Accounts for minors aged 10 years or younger are operated jointly by minors and their parents/guardians.
Parents can set restrictions on minors’ spending through bank accounts and check their account statements to guide them so that they can manage their savings accounts. Parents can provide their mobile numbers to receive OTP and transaction alerts to stay updated about the account’s activities.
Helps instil financial discipline
Savings accounts usually come with a chequebook, debit card, and online banking facility. However, there may be charges applicable for certain account-related transactions and services. By operating a savings account, minors can familiarise themselves with account-related requirements such as a minimum account balance, chequebook charges, etc. It can help them manage their account more efficiently and save money.
Parents can invest in their child
Parents can invest in their child’s name with a minor’s savings account. It can help parents plan their investments better by segregating their corpus from the one they are building for their child.
Things to keep in mind when opening a minor’s savings account
Before a minor child opens a bank account, they should be educated about safe banking practices. Parents/guardians jointly operating the account too should be careful about certain safety practices. These include registering their mobile number with the bank instead of using the mobile number the minor can access. By doing this, they can keep track of the account activity. Once the child attains majority age, the minor savings account can be converted into regular savings account while retaining the original account number. To do this, the bank may require certain documentation such as age proof, identity card, PAN card, photographs, etc.
Before opening a minor’s savings account, you must check the account’s features and charges, such as transaction restrictions, minimum balance requirements, safety features, etc.