All parents want their children to be self-sufficient, especially when it comes to dealing with money. As seen often, parents don’t wait for their kids to turns 18 to get them their own bank account. Parents want to open separate bank accounts for their kids so that they can learn to manage their money from an early age. This also makes a child financially disciplined and at the same time helps him save for their future.
Various banks including SBI, ICICI Bank, and HDFC Bank offer savings bank accounts for kids, with varying features. Some of the popular child savings accounts are SBI’s PehlaKadam and PehliUdaan, ICICI Bank’s Young Stars Account, and HDFC Bank’s Kids Advantage Account.
Experts suggest instead of kids putting money in a piggy bank, children saving the same money in a bank savings account is a better option. Putting the money with the bank also earns interest instead of it sitting idle. However, before opening a savings account for your kids, parents should consider certain things, such as the security features of a bank account and spending limits of an account.
Here are 5 things you need to consider before you open your child bank account:
Choice of Account
For minors, banks generally offer two types of accounts – for kids below the age of 10 years and for kids aged between 10 years and 18 years. For the first type of kids, age below 10 years, if a bank account is opened in their name, it needs to be operated jointly by either of the parents or guardians. However, if a banking account is opened, for kids between age 10 years and 18 years, the minor themselves can operate the account without a guardian’s supervision.
A child’s savings bank account will become inactive, once the child holding the savings bank account crosses the 18 years of age. One can also keep the account active by converting it into a regular savings account. After the conversion of the account into a regular savings account, it will be treated the same way as a normal saving account with all requirements as applicable.
Limit on Spending
Parent or guardian put withdrawal limits, which is the maximum limit the child can withdraw both in a day and in a year. The spending limit varies from bank to bank. For instance, while some put the daily withdrawal limit to Rs 1,000, or Rs 2,500, other banks go up to Rs 5,000.
A few banks also have an upper limit on the total amount of money that a minor can spend from the account in a financial year. With some banks, the minimum average balance (MAB) is required to be maintained, which parents should be aware of and maintain the MAB to avoid any additional changes. For a child savings account, the minimum average balance usually ranges between Rs 2,500 and Rs 5,000.
Usually, all child savings bank accounts come with ATM and debit cards. Some banks for security and safety reasons offer debit cards with a photo of the child or have the name of the child or the parent on the card. Additionally, parents/guardians should activate the SMS alert feature so that they receive automated messages after transactions are made by the child.
Transfer of funds
With a child savings account, for transfer of funds banks allow only inter-bank funds transfer or NEFT. Parents should ensure that there is an auto-debit option active with the child’s account so that money from the parent’s account is debited to the minor account.
Security and safety features
Kids saving accounts generally come with the security of zero liability. With this feature, the child’s debit card is protected against theft or misplacement of the card, leading to an unauthorized purchase. Even with the zero liability feature, the bank needs to be informed within a certain period to time.