School curriculum doesn’t teach much about personal finance, from my experience. My school had a 3 day mandatory class in 9th grade that quickly went over checking accounts, taxes, debt, student loans, applying to colleges, and basic budgeting, but we weren’t given the opportunity to ask questions.
Opening a bank account as a kid is a great way to build real-world experience and learn about personal finance in a relatively safe environment without having too much money to play with and making big mistakes.
Can you legally open a bank account, or do you have to wait until you’re an adult? Let’s discuss it!
How Old Do You Have to Be to Open An Account Yourself?
The legal age to open a bank account is indeed 18. The reason is that you are signing a contract with the bank when you ask to open a bank account, and they approve you to open it.
Don’t fret, though, because it is still possible to have a bank account as a kid or teenager!
Are My Parents Able to Open An Account For Me?
The short answer is: YES! Your parents or a responsible adult in your life that you trust with your personal information and money can open a joint account with you so long as they are over 18 years old and in good standing with that bank. You need to have your social security number and date of birth to open a bank account.
Good standing means that they hadn’t left overdrawn accounts with that bank before or left loans or credit cards unpaid. If your parents owe that bank money and you open a joint account with them there, they could seize the funds to pay for the outstanding balance of your parents.
This situation happened to me when I opened my first bank account with my mom. I had started my first business and opened a joint account with her at a regional bank. I didn’t know my mom owed them money, but they took my first month’s worth of sales to cover her debt before I was able to close that account and open an account at another bank with my dad so I could run my business.
Types of Accounts That Can Be Opened With a Parent
- Joint Account. With a joint account, all joint owners will have access to funds, be able to make deposits or withdrawals, and make purchases using a debit card attached to the account. Be mindful of overdrafting the account because all account owners would be held liable. Parents will have access to see what transactions have been made. Ask about switching the account to yourself after you turn 18 to see what that bank’s rules are.
- Custodial Account. This account is opened by a parent for their child and allows parents to save and invest on behalf of the child. The money belongs to the child, but kids aren’t allowed to change the account because you are not the owner of it, like with the joint account. The money in the account will be turned over to the child once you reach 18, and you can do what you want with it at that point. If you want to add money to the account before 18, speak with your parents and ask them to do it on your behalf.
- 529 College Savings Plan. This is a savings plan for education expenses and can be spent tax-free if the money is spent on higher education or K-12 tuition up to $10,000/year. The higher education costs that qualify are tuition, room and board, trade school, overseas programs, and graduate school costs.
- Coverdell Education Savings Account (ESA). This allows for the ability to pay for education expenses using tax-advantaged dollars, but the downfall is that not everyone is allowed to use an ESA. The limit for annual contribution is lower than a 529, so using other funding sources for educational expenses may become necessary.
- Prepaid Cards. This option isn’t ideal compared to a bank account because fees are charged for loading these cards with funds. Most banks don’t charge fees, or the fees are much lower than that of prepaid cards. But, if your parents cannot help you open an account or you’re scared of overdrafting the account, this is a perfect way to get used to managing money on your own.
Good Habits to Start When You Open a Bank Account As a Kid
- Set goals for the account. Think about why you want to open the account in the first place. Are you trying to learn money management? Maybe you’re looking to make some interest on your money or put money into savings for long-term needs.
- Create a budget. If you’re trying to build credit or learn how to manage money, creating a budget for yourself will help you learn to pay bills on time and keep track of your spending habits.
- Determine your short, mid, and long-term savings goals. Most kids want the opportunity to spend your allowance on the hottest toy that all of your friends have so you can play with them. This is an example of a short-term savings goal. A mid-term goal example would be saving for a larger purchase like a bicycle because this will take time to save up for but is a realistic goal to accomplish within less than 1 year. An example of a long-term savings goal would be saving for your first car because this goal may take a few years to reach, so get started saving early!
- Find ways to add money to your account. Whether you plan on talking to your parents about an allowance, getting a job, or starting a business, there are many ways that you can add money to your account to put towards your goals.
- Learn how to withdraw cash. Cash can be taken out of a bank account using an ATM or from a bank location. Cash is handy to use where debit or credit cards aren’t accepted or in areas where vendors offer a cash discount on purchases. I always have $100 in my wallet for emergencies or whatever the cost of a tow costs in the areas I will be traveling in. I travel a lot and have found that most tow services cost about $100, and the driver only accepts cash. The gas station near my house offers a cash discount on gas, so I make it a habit to take cash out before getting gas to pay in cash and get the discount.
- Practice reading bank statements. Most banks release account statements monthly that show every transaction, whether money was deposited or spent. Statements will also show money paid in interest during the statement period. I check my bank statements regularly to ensure that all transactions have been recorded accurately and that my account has not been hacked or funds have been spent fraudulently. I had an issue a couple years ago where a family member had been spending money out of my account without my consent because they had my social security number. Checking the bank statement allowed me to learn that money was being spent and nip it quickly.
- Learn to comparison shop. You want to keep as much of your money as possible because you will work hard to earn it. Learning how to compare prices on items and shop sales will help you keep your hard-earned money while still buying the things you want and need.
- Use your debit card or prepaid card. Using your card will help you learn how to use it. Pay for items at the store using your PIN or run the card as credit to experience how these transactions are different. Making transactions with the card as a kid will help you learn how it works with real-world experience.
- Set up regular savings deposits. Every time you get paid or receive money, set up an automatic transfer through the bank to put money into your savings for a percentage of the money. I have 20% set up for my nieces, but you can choose whatever amount you want.
- Learn the value of giving. Having a bank account will allow you to see how much money you have at any given time and give some to others in need. I practice giving because it helps me be grateful for everything I have. I have given school supplies to teachers in my community, tithing to my church, food to the food bank, and diapers to a homeless shelter.
Opening a bank account as a kid is possible if you have an adult in your life that you trust with your personal information and your money. Do some research on banks in your area to determine which would be the best for your goals, and work with your parents or trusted adult to set up an account for yourself. Working with a bank account as a kid will give you real-world experience and help build money management skills to carry into life as an adult, so this process is invaluable!