Opening a checking account for a child under 18 can be a great way to teach financial responsibility. In some cases, opening the account may be necessary. For example, if your child has a part-time job in high school, they may need a checking account to deposit their paychecks.

Before you make the trip to the bank, here are some key things to consider before opening a child’s checking account.

What are the Age Requirements?

In the United States, a minor child under age 18 cannot legally open a bank account without the assistance of a parent or legal guardian.

While many banks allow children under 18 to have a checking account, some may have minimum age restrictions, such as 13 or 15 years old. The age minimums may also vary depending on whether you want to open a joint or custodial bank account.

Joint or Custodial Account

The two primary account types available to minors and their parents are joint or custodial bank accounts.

What are the differences between the two account types?

Joint Account: With a joint bank account, the child and the parent have full access and control over the account. They are effectively treated as equal partners. The child can make transactions on the account without the assistance of the parent, but the parent does maintain a certain level of oversight by being a joint accountholder.

This account option may be appropriate for a child between 14 and 18 years of age who has a part-time job and makes their own money. It allows the child to exercise greater financial responsibility over their money.

Custodial Account: With a custodial account, the parent or guardian has full control of the account until the child reaches the age of majority, which is generally between 18 to 25, depending upon the state. Once the child reaches this age, they take full control of the account. These accounts are used for the benefit of the child but are completely controlled by the parent.

For example, a custodial account can be created when a child is ten years old to fund future college expenses. The parents and other relatives periodically deposit funds into the account, but the child has no access to these funds until the child becomes an adult and needs the funds for college tuition.

    Uniform Transfers to Minors Act

    The Uniform Transfers to Minors Act (UTMA) allows adults to hold and protect assets on behalf of minor children. This Act grants parents the authority to open custodial accounts for the benefit of their children and manage those assets on their behalf until they reach a certain age. Parents looking to open a custodial account should familiarize themselves with the key provisions of this Act.

    Parental Control Features

    Many banks offer parental control features for joint accounts that allow parents to monitor their child’s spending, set transaction limits, and receive account activity alerts. Those alerts can include a low balance or large withdrawal notifications.  

    For a custodial account, those parental controls are mandatory because the child has no access to the funds until they reach a certain age. The parent can still add notifications and alerts similar to a standard checking or savings account.

    By using the parental control features, the parent and child can learn together about managing money responsibly.

    Overdraft Protection

    Many regular checking accounts have overdraft protection for the account holder. The same protections should be a priority for a joint or custodial account with a minor.

    It’s essential to inquire about the bank’s overdraft policies. Overdraft protection can prevent the account from going into negative balances, which could result in substantial fees.

    Some banks allow parents to link their existing accounts for overdraft protection. In the event the child overdrafts on their joint account, the difference is charged to the parent’s checking account at the same financial institution.

    Transition to an Adult Account

    Once the child reaches 18 or 21, depending upon the state, many banks automatically convert the checking account to an adult account. It’s important to understand how this transition works and whether any new fees or services may apply.

    What Documents are Necessary to Open the Account?

    You’ll need to bring specific documents to the bank to open the account, which typically include:

    • Child’s Identification: You must provide the child’s name, address, birthdate, and social security number (SSN). You should bring a government-issued ID (child’s passport or drivers license) and their social security card.
    • Parent’s or Guardian’s Identification: You must provide your name, address, birthdate, and social security number (SSN). You should bring a government-issued ID (your passport or drivers license) and your social security card with your SSN.
    • Proof of Address: The bank will want to verify your residence address and mailing address, if different. A utility bill, bank statement, property tax bill, or official mail addressed to the parent may be required to verify residency.

    Visit the Bank or Apply Online

    Most banks will require a parent and their child to open the account in person at a local branch. However, some parents with an existing account at a bank may be able to complete the application process online.

    Although the online application may be more convenient, it may be beneficial for your child to visit a branch so they can meet a banking representative and have an opportunity to ask questions.

    Make an Initial Deposit

    Many banks require an initial deposit to open an account. For a joint or custodial account, the parent often makes the initial deposit. It’s generally easier for parents to open the child’s account at the same financial institution as the parent. The parent can simply transfer funds from their existing accounts into the child’s account.

    Set Up Direct Deposit or Allowance Transfers

    If you open a joint account because your child needs a bank account to deposit their payroll checks, you can assist with completing the direct deposit forms. Show your child where to find account information, such as the bank name, account number, and routing number.

    For custodial accounts, you may want to organize regular transfers to fund the account. Be mindful of the potential gift tax implications of transfers to minors using custodial and joint bank accounts. Under the UTMA, transfers to minors are generally eligible for the annual gift tax exclusion.

    Monitor the Account Regularly

    Whether you open a joint or custodial account, it’s a best practice to monitor the account activity and balances each month. For joint accounts where the child has more responsibility over their own money, you’ll want to periodically check and make sure there are no unusual transactions and avoid overdraft events.

    Stay involved by regularly reviewing the account with your child. Ensure they’re staying on top of their finances, avoiding overdrafts, and learning the basics of money management.

    Conclusion

    Opening a checking account for a minor can be a straightforward process; however, there are many things to consider. This is also an excellent opportunity for parents to teach their children about financial responsibility and maintaining a good relationship with their banks.