What Is the Minimum Age for Opening a Bank Account?

Find out how young people (under the age of eighteen) can open a bank account and what kinds of accounts they can choose from. Are you interested in getting your teen their own bank account? Perhaps you are 16 years old and have just started working as an after-school employee. Contrary to

Find out how young people (under the age of eighteen) can open a bank account and what kinds of accounts they can choose from.

Are you interested in getting your teen their own bank account?

Perhaps you are 16 years old and have just started working as an after-school employee.

Contrary to popular belief, you actually do have a number of different banking options available to you.

If you are under the legal banking age of 18, this article will explain how to open a bank account and what documents you will need. Plus, learn about tax considerations and common fees to watch out for

You must be at least 18 years old to open a checking account in your own name in the United States. This is because you need to be a legal adult (also known as the Age of Majority) to sign a contract

While the Age of Majority in most states is 18, it is 19 in Alabama and Nebraska and 21 in Mississippi

There's a chance that it won't prevent you from opening a bank account even though it's higher there. For instance, Mississippi Code 93-19-13 states that anyone who is 18 or older can legally enter into contracts relating to the ownership of personal property. [1]

The minimum age for opening a bank account varies by institution, so it's best to call ahead to verify.

Can you open a bank account at 16 Opening a checking or savings account independently typically necessitates that you be at least 18 years old. If you want to open a bank account and you're 16 years old, you and a parent or guardian will need to open a joint account.

Is there a list of banks that minors can open an account with?

Even though they can't legally sign legal documents, minors do have options for opening bank accounts. In most cases, having a parent or guardian sign on as a co-owner on a bank account is the simplest solution.

Finest Youth Checking Accounts
Having a checking account is a great way for children under the age of 18 to learn about budgeting and saving. Learn more about the best checking accounts for kids and teenagers so you can help them get a jump on financial independence.
Axos Bank
  • Underage teens can open a joint checking account.
  • No fees
  • Monthly reimbursements of up to $12 for domestic ATM fees

1. Custodial Accounts

The "custodian" is the adult who opens the account for the minor's benefit and who formally transfers ownership to the minor on the day he or she reaches the age of majority.

Uniform Gift to Minors Act accounts (UGMA) and Uniform Transfer to Minors Act accounts (UTMA) are the two primary categories of custodial accounts.

For the most part, UGMA accounts can only be funded with monetary assets like cash, stocks, and bonds. Real estate and priceless works of art are two examples of the kinds of assets that can be held in a UTMA account.

Pros

  • Incredibly simple to set up
  • There is no cap on donations.
  • Elimination of all fees associated with a withdrawal
  • Better investment opportunities than a standard savings account
  • Once the minor reaches the age of majority, ownership automatically passes to them.

Cons

  • No debit card for the minor
  • Can have a negative impact on college funding.
  • Gifts and deposits made are irrevocable

Could I please open a bank account for my newborn?
Once a child has a Social Security number (SSN), custodial and joint accounts can be opened for them. Applying for a Social Security number for your child at the hospital where he or she was born is the quickest and most convenient method. [2]

2. Joint Accounts

If you're looking to teach your child how banking works, such as making deposits, using a debit card, and withdrawing cash from the ATM — a joint account is your best bet

Joint accounts are standard bank accounts with two or more owners They are common for married couples and business partners, as well as parents and their children

Pros

  • Works like a regular bank account
  • Typically no fees and can earn interest
  • FDIC insured up to $250,000

Cons

  • A parent's oversight of a minor's bank accounts (including overdrafts) is required.

In contrast to a checking account, a savings Underage checking account

Bank savings plans for teens Bank accounts for minors Receives interest Usually does not accrue interest Without a card Comes with debit card For urgent situations or long-term goals Best for regular, daily spending Limited to 6 withdrawals per month Taking out as much money as you want is not a problem. Fees (which vary by bank) Fees (which vary by bank) Does not have ATM access Has access to an ATM FDIC-insured FDIC-insured

Three: Prepaid Cards

As a general rule, prepaid cards have hidden fees on a monthly or annual basis and are not suitable for adults. The good news is that many businesses, including Greenlight and FamZoo, provide prepaid cards and financial education tools designed with children and teenagers in mind.

Pros

  • Keeps spending in check; prepaid cards cannot be overdrawn
  • Provides resources to help build fiscal literacy
  • Cancel at any time with no hassle

Cons

  • High fees
  • Earnings on a deposit are null and void.
  • Usually no ATM network, so you'll pay fees for cash withdrawals
GoHenry Kids' Debit Card
  • Real-time spend notifications
  • Easily obstruct and reveal card access
  • Facilitate secure learning of financial autonomy
Community Federal Savings Bank, member FDIC, is the issuer of the GoHenry card.
Copper
  • Interactive learning materials, a budget tracker, and instant money transfers
  • Minimum age: 13; maximum age: 99
  • Fees: None
Copper has teamed up with Evolve Bank & Trust, which is FDIC-insured for up to $250,000.
Get After Registration
Greenlight
  • Modifiable settings, expense alerts, and a to-do list built right into the app:
  • In terms of age, there is no lower limit.
  • Costs as low as $4 The monthly fee is for a family with up to five children. Greenlight Invest charges monthly.
Your funds will be held at Community Federal Savings Bank, an FDIC-insured institution

Legal Adulthood

In rare circumstances, a teenage minor may file for legal emancipation from their parents

If approved in a court of law, the minor then gains most of the legal rights and responsibilities of adults Contracts and bank accounts can be opened with this level of authority.

Opening a bank account when you're underage

To open an account at the bank that best suits you or your child, please follow these steps:

  1. In the first place, compile all relevant paperwork.
    The three most common forms of identification are a photo ID, a Social Security card, and a bill or other official document proving your current address.

You'll need both parties' personal details to open a joint or custodial account.

The next step is to either call, stop by, or register on their website
Inquire about creating a profile for the account of your liking. After that, you'll be taken to a page where you can enter your details and sign an agreement formalizing the account's creation.

A parent's signature is required on any paperwork involving a minor and a joint account.

Finally, make your opening deposit
Have at least the required amount for the opening deposit and the minimum balance. Then make the deposit to finalize your new account

When it comes to an interest-bearing account, do minors have to pay taxes?

The quick response is "it depends." If a single dependent (including a minor) has unearned income of more than $1,100, they must file a tax return unless their parents elect to include the child's interest income on their own tax return.

Nonetheless, this is a highly improbable outcome. Earning $1,100 in interest payments in a single year would require an average balance of $110,000 and an interest rate of 1 0% or more is extremely unusual in the current era of near-zero interest rates.

Savings plans geared toward a child's future education.

Parents also have the option of opening a 529 plan. There are many tax benefits to these that can help make paying off student loans easier.

In the United States, 529 Plans and Coverdell Education Savings Accounts (ESAs) are the two most common types of college savings vehicles.

ESA Coverdell
Coverdell Education Savings Accounts (ESAs) are trust or custodial accounts supported by the Federal Government and used to pay for qualified education expenses like books, tuition, computers, supplies, and even transportation. Costs associated with elementary through high school as well as college level education are eligible for funding. [3]

Stocks, bonds, exchange-traded funds, and mutual funds are all examples of investment vehicles to which after-tax contributions can be made. All gains and distributions are tax-free (just like a Roth IRA).

Coverdell ESA has some restrictions though:

  • There is an annual contribution cap of $2,000 per recipient.
  • After the recipient turns 18, no further contributions can be made.
  • Due to these two restrictions, the highest possible value per beneficiary is only $36,000.
  • You can only donate if your annual income is less than $110,000 (or $220,000 if you're a married couple).
  • The donations are not tax deductible.

529 Plans
State governments are the ones who sponsor 529 plans. Keep in mind that you can join a state's 529 Plan even if you don't live there. For example, a New York resident can open up an Arizona-sponsored 529 Plan

It wasn't until recently that K-12 and some apprenticeship programs were added as eligible expenses for 529 plans, which had previously only covered costs associated with higher education.

After-tax contributions are made to the account and the funds can be withdrawn tax-free if they are used for qualified higher education expenses, just like a Coverdell ESA.

529s are much more flexible than Coverdell ESA plans:

  • There are no caps on contributions (though annual gift tax exemptions are capped at $15,000).
  • Can be used to pay off student loans, which Coverdell ESA funds cannot
  • No income limits
  • There are no age restrictions (you can keep giving even after the recipient turns 18).

Do 529 plans qualify as a tax deduction
There are currently six states with 529 plans that provide "tax parity," allowing you to deduct contributions from your taxable income. Here are the states involved: Arizona, Kansas, Minnesota, Missouri, Montana, and Pennsylvania A 529 plan is a state-sponsored savings program for higher education that is open to anyone, regardless of residency. [4]

The Best Way to Pick a Financial Institution

It is important to think about the following when searching for the best bank to open a custodial or joint checking or savings account.

Checklist for Evaluating Financial Institutions How to Prevent Problems Possibility of a favorable interest rate. Costly subscriptions every month FDIC or NCUA insurance Initial deposit is quite large Costs are minimal, if any at all Pricey overdraft charges App that is both helpful and simple to use Institutional Banking Websites That Have Been Ignored Good customer service record Customers have given mostly negative feedback. Resources for Teaching No ATM access (for a checking account)

Read on for a summary of several of the aforementioned considerations and the roles they play.

Description of the Organization

  • Standardized Financial Institution: Commonly known and easily accessible It's easy to find a local branch and speak with a banker in person if issues arise Fees and limited benefits are the norm for these accounts, though.

Bank of America is a good illustration because

Banks that operate solely online are able to cut costs because they don't have to maintain physical locations. They may lack brick-and-mortar locations, but make up for it with no-fee checking and high savings rates and an extensive ATM network.

Take the Axos Bank as an illustrative case.

Credit unions are cooperative financial institutions that are owned by their customers and provide all the same services as commercial banks while also providing superior customer care, higher interest rates on savings and loans, and a friendlier, more communal atmosphere.

Take the PenFed Credit Union as an Illustration.

Low Fees
Once you've decided on a financial institution type, the next step is to zero in on a specific bank or credit union that charges minimal fees to maintain your account.

Be wary of minimum balance requirements, overdraft charges, ATM fees, and monthly service charges.

High APY
You shouldn't pay a bank to keep your money — they should pay you Look around for a financial institution that provides competitive annual percentage yields (APYs) on savings and/or checking account balances.

In addition, this is a great way to introduce your kid to compound interest, a fundamental concept in financial planning and retirement.

ATM Access
Make sure you have access to local, fee-free ATMs if you want your kid to learn how to use one (and that it's not a magical money machine) while you're teaching them.

You need to verify the presence of a physical bank branch in your area if you plan to use a conventional bank.

Accessible through widely used interbank ATM networks such as MoneyPass and Allpoint, digital banks are generally convenient to locate.

If you choose a credit union, you can use the ATM at their local branches In addition, many credit unions are part of the CO-OP ATM network, a decentralized ATM service for credit unions that currently counts 1,969 member institutions across the country.

Here's the Deal

In most parts of the United States, the minimum age to open a bank account by oneself is 18. Opening a bank account before you or your child turn 18 is a great way to learn financial responsibility and the smart money habits required to be successful in life

References

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