17 Jan When should I open a bank account for my child?

Opening a bank account for a child is an important milestone in growing up and is a great step in learning more about how the world works. Understanding exactly why you want you child to have a bank account is very important as to make sure you’re not simply opening one because little Jimmy across the road now has one! Choosing to open an account for your child, whether it’s mainly for saving money, earning and spending or so they can have their own debit card, should be just that – a conscious choice because it is a significant step.

First things first:

Why should I open a bank account for my child?

In reality, until someone has an employer who would like to pay them by BACS or who wants to pay something by direct debit, no one really needs a bank account.

Let’s face it:

For millennia, members of the human race have looked after their own currency without any help from third parties. Children can quite happily save what pocket money they’re given, or earn doing odd jobs around the house or for neighbours, in a piggybank of some description and take out whatever they need whenever they need it. In fact, I strongly recommend having a ‘piggybank’ phase as part of a child’s early financial education. Learning how money feels as well as the simple maths functions in terms of cash is still important in an ever cashless society (as well as improving numeracy skills!).

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What, therefore, is the trigger for having done with the piggy and registering a bank account with an actual high street bank?

The reason behind opening a ‘savings’ account is most obvious – you’re going to earn some interest (if you find the right account) which rewards children for saving their money. The piggybank, as useful as it has been, never offers more than 0% net interest so there is little visible benefit in keeping it in there. Furthermore, being able to see the amount of money in an account, whether is it still on a paper statement or in an online account, makes more sense than having pile of coin of various denominations occasionally sprawled around the bedroom floor.

Here’s the thing:

Opening a current account, primarily for earning and spending or ‘transactional’ purposes will depend on how independent your child is and how often they’re likely to withdraw cash from an ATM or pay for something using their card. Of course, there are pros and cons to having a debit card; mainly around the convenience and security issues, respectively.

When should I open a bank account for my child?

In my opinion, as soon as your child begins earning, spending and saving in large enough and frequent enough amounts that it becomes a hassle; that is when a real life bank account should be opened. But with this should have come a degree of independence and, therefore, my recommendation is this;

don’t ever open a bank account for your child – when the time is right, they will do it themselves

(although you might need to go with them to sign things!).

Most banks will allow you to open an account on behalf of your child as soon as they’re born. A child can open an account themselves, in most cases, when they are seven years old. At this age, they can set up a basic or current account to deposit and withdraw money (if they/you wish). Most banks offer accounts for children with a debit card from when they’re 11.

Secondary school is certainly the time when children should have sufficient independence and need for a bank account so, in my opinion, I would deem this the top end of the recommend range – they should certainly be capable of setting an account up for themselves. As for how much younger – a responsible eight or nine year old should be encouraged to set one up in order to become well accustomed to how the system works and what it feels like to be spending your own money as well as earn it. This means by the time they’re 11 and let loose with a small but powerful piece of plastic, they’ll be in no rush to buy anything and everything they see!

As for children younger than about eight; I think it can be detrimental to take away the need to carry and count change; if you want to start saving for them – put it in a trust fund and save them the confusion of having a bank account they’re hardly going to need to access for a few years.

Enterprise and financial education are great passions of mine so this is all just my opinion but I hope it is of use!