How Old Do You Have to Be to Open a Bank Account
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Learn the minimum age to open a bank account and the many different types of account options available to individuals under 18 years old.
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Looking to open a bank account for your teen?
Or maybe you're 16 and just got an after-school job?
You have more bank account options than you realize.
In this article, find out the age requirements for opening a bank account, and how to open one if you're under 18. Plus, learn about tax considerations and common fees to watch out for.
How old do you need to be to open a bank account?
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In the United States, you need to be 18 years old to open a bank account on your own. 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.
Although it's higher in those states, it might not affect your ability to open a bank account. For example, according to Mississippi Code § 93-19-13, all persons 18 years or older have the ability to enter into legal contracts regarding personal property ownership.[1]
However, it's always a good idea to check with your bank to find out the minimum age to open an account.
Which bank accounts can you open as a minor?
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While minors cannot sign contracts, there are many ways to open a bank account for a minor or if you're under 18. The easiest way is to open an account with a parent or guardian as the co-owner.
Kids under 18 can learn a lot about responsible spending and saving with a checking account. Check out the top checking accounts for kids and teens to give your child a head start.
First Checking - 0.10% APY
- Joint checking account for 13-17 year olds
- No fees
- Up to $12 domestic ATM fee reimbursements per month
1. Custodial Accounts
These are savings or investment accounts set up for the benefit of a minor by an adult (the "custodian") that legally transfers ownership to the minor on the day they reach the Age of Majority.
There are two types of custodian accounts: Uniform Transfer to Minors Act accounts (UTMA) and Uniform Gift to Minors Act accounts (UGMA).
Only financial assets, like cash, stocks, and bonds can be invested into a UGMA account. UTMA accounts allow for other types of valuable assets like real estate and artwork.
Pros
- Easy to set up
- No contribution limits
- No withdrawal penalties
- More investing options than a savings account
- Automatically transfers to the minor once they reach Age of Majority
Cons
- No debit card for the minor
- May count against financial aid eligibility for college
- Gifts and deposits made are irrevocable
Both custodial accounts and joint accounts can be opened as soon as a child has a Social Security number (SSN). The easiest and fastest way to receive your child's SSN is to apply when you give information for the birth certificate at the hospital.[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
- Parent is responsible for the financial activities of the minor (including overdrafts)
Savings account vs. Checking account for minors
| Savings accounts for minors | Checking accounts for minors |
|---|---|
| Earns interest | Doesn't usually earn interest |
| Doesn't come with a card | Comes with debit card |
| Best for goals or emergencies | Best for regular, daily spending |
| Limited to 6 withdrawals per month | Withdrawals are unlimited |
| Can charge fees (varies by bank) | Can charge fees (varies by bank) |
| Does not have ATM access | Does have ATM access |
| FDIC-insured | FDIC-insured |
3. Prepaid Cards
Prepaid cards almost always charge monthly or annual fees and are not recommended for adults. However, many companies like Greenlight and FamZoo offer prepaid cards along with financial education tools tailored specifically for kids and teens.
Pros
- Keeps spending in check; prepaid cards cannot be overdrawn
- Offers educational tools for financial literacy
- Easy to cancel at any time
Cons
- High fees
- No interest earned
- Usually no ATM network, so you'll pay fees for cash withdrawals
GoHenry Kids' Debit Card
- Real-time spend notifications.
- Block and unblock cards easily.
- Teach financial independence safely.
All Ages - Banking and Invest in One App
- Flexible controls, spending notifications, in-app chore list
- Age: No minimum age
- Fees: Starts at $4.99/month, per family (up to 5 kids). $9.98/month for Greenlight Max. $14.98 per month for Greenlight Infinity.
First Checking - 0.10% APY
- Joint checking account for 13-17 year olds
- No fees
- Up to $12 domestic ATM fee reimbursements per month
4. Legal Emancipation
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. This includes the ability to sign contracts and open a bank account.
How to open a bank account under 18
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If you find the bank that's right for you or your child, here is how to sign up.
- First, gather all necessary documents
These include a photo ID card, your SSN (or taxpayer identification number), and proof of address (such as a utility bill or driver's license).If you're signing up for a joint or custodial account, you will need the identifying information of both parties.
- Then, visit a branch, call, or sign up online
Ask to sign up for the account of your choice. After, you'll be directed to enter your information and sign a legal contract to open the account.If this is a joint account, the parent must sign the legal documentation for the minor.
- Finally, make your opening deposit
Make sure you have enough money to cover the minimum opening deposit and minimum balance requirements. Then make the deposit to finalize your new account.
Do minors owe taxes on an interest-earning account?
The short answer: It depends. Single dependents (including minors) are required to file a tax return for unearned income more than $1,100 unless the parent chooses to include their child's interest income on their tax return.
However, this is an unlikely scenario. Earning $1,100 in interest payments in a single year would require an average balance of $110,000 and an interest rate of 1.00% or higher — which is extremely rare in today's near-zero interest rate environment.
Educational savings accounts for minors
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Another option for parents is to open an educational savings account. These can alleviate the burden of student loans while offering many tax advantages.
The two main types of educational savings accounts are 529 Plans and the Coverdell Education Savings Account (ESA).
Coverdell ESA
Sponsored by the Federal government, Coverdell ESAs are trust or custodial accounts that can be used for educational expenses such as books, tuition, computers, supplies, and even transportation. Funds can be used to pay for K-12 and higher education expenses.[3]
Contributions are made with after-tax dollars into investment vehicles like stocks, bonds, ETFs, and mutual funds. Growth and withdrawals are both tax-free (similar to a Roth IRA).
However, there are some limitations of the Coverdell ESA:
- Contributions limited to $2,000 per beneficiary per year
- No contributions can be made after the beneficiary turns 18
- Based on the prior two limitations, the maximum effective total value is only $36,000 per beneficiary
- You must make under $110,000 per year to make contributions ($220,000 if filing jointly)
- Contributions are not tax deductible
529 Plans
529 Plans are sponsored by state governments. It's important to note that you do NOT have to live in a certain state to participate in that state's 529 Plan. For example, a New York resident can open up an Arizona-sponsored 529 Plan.
529 Plans were originally only for higher education expenses, but recently became available for K-12 expenses and some apprenticeship programs.
Like a Coverdell ESA, contributions are made with after-tax dollars and withdrawals are tax-free assuming they are used for educational expenses.
529s are much more flexible than Coverdell ESA plans:
- No contribution limits (though only $15,000 per year is excluded from the gift tax)
- Can be used to pay off student loans, which Coverdell ESA funds cannot
- No income limits
- No age limits (can keep contributing after the beneficiary turns 18)
Six state 529 Plans offer "tax parity," meaning that contributions can be subtracted from your annual income for tax purposes. These are Arizona, Kansas, Minnesota, Missouri, Montana, and Pennsylvania. You don't have to live in these states to participate in their 529 Plan.[4]
How to Choose a Bank
If you're thinking of opening a custodial or joint checking or savings account, consider these factors to find your ideal bank.
| What to look for in a bank | What to avoid |
|---|---|
| Good interest rate (if offered) | High monthly service fees |
| FDIC or NCUA insurance | Large opening deposit requirement |
| Low fees, if at all | High overdraft fees |
| Helpful, user-friendly app | Banks with neglected websites |
| Good customer service record | Mixed/poor customer reviews |
| Educational tools | No ATM access (for a checking account) |
Below, review a breakdown of some of the factors mentioned above, and why they're so important.
Type of Institution
- Traditional Bank: Traditional banks offer name recognition and convenience. It's easy to find a local branch and speak with a banker in person if issues arise. However, these accounts tend to charge fees and have few rewards.
Example: Bank of America
- Digital Bank: These banking institutions reduce expenses by eliminating the need for brick-and-mortar locations. While they don't have physical branches, they usually offer no fees, high savings rates, and nationwide ATM networks.
Example: Axos Bank
- Credit Union: A nonprofit, member-owned banking institution, credit unions offer the same services as traditional banks but matched with better service, improved savings and loan rates, and a warmer, more communal vibe.
Example: PenFed Credit Union
Low Fees
After you've selected the type of institution you want to bank with, the next step is to find a specific bank or credit union that offers low fees so that you're not paying money each month to keep your money safe.
Keep an eye on monthly service fees, ATM surcharges, overdraft fees, and minimum balance fees.
High APY
You shouldn't pay a bank to keep your money — they should pay you. Find a bank that offers a high APY on account balances for savings and/or checking accounts.
This can also help teach your child about compound interest, which is a key feature of saving for retirement.
ATM Access
If you want your child to gain experience withdrawing cash from the ATM (and learn that it's not the infinite money machine), make sure that you have access to local, fee-free ATMs.
For traditional banks, you'll need to make sure there are branches in your local area.
Digital banks usually participate in interbank ATM networks like MoneyPass or Allpoint and tend to be easy to find.
If you choose a credit union, you can use the ATM at their local branches. Many credit unions also participate in the CO-OP ATM network as well, a distributed ATM network for credit unions that currently includes 1,969 credit unions nationwide.
The Bottom Line
The minimum age to open a bank account alone is 18 in most places in the United States, but there are exceptions. 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
- ^ Removal Of Disability Of Minority: Justia US Law, accessed 2021
- ^ Social Security Numbers for Children: SSA.gov, accessed 2021.
- ^ Coverdell Education Savings Accounts: IRS.gov, accessed 2021.
- ^ https://www.policygenius.com/blog/a-state-by-state-guide-to-529-plans/: Policygenius, accessed 2021.
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Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.
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