One of the best ways to inculcate a savings habit among children is to encourage them to start getting financially literate. Letting them operate their own savings bank account is one way to introduce them to the world of banking in small steps.
To facilitate this education among children, lenders have come out with special kids savings accounts which can be opened for minors.
What is a kids saving account?
A kids saving account is a zero bank account which can be opened for children to operate by themselves. The funds in this account will come from a parent or guardian and the account will have all the features of a regular savings account like an ATM cum debit card, cheque book facility etc.
A kids savings bank account comes with certain features that can help initiate the child into operating a bank account. It is possible to open fixed deposit accounts, withdraw cash, deposit cash, use a debit card at a merchant. This provides basic understanding of how a bank account works. Since this account is linked to either the parent or the guardian’s account, the funds in this account are restricted, thus providing important financial saving lessons to the child namely that spending must be within limits.
These accounts are zero balance accounts. This means that there is no minimum balance requirement set for these accounts by banks. If the balance in this account is zero, there is no problem and there are no penalties. The balance can be added by a transfer made from the linked bank account.
Apart from giving the child features similar to a regular savings bank account, these accounts also provide other benefits like:
The child is allowed to access these features and use the bank account like a regular customer. It is also possible to start systematic investment plans and make other investments using this account. This provides financial learning on how to operate accounts and how savings and investments work.
A kids saving account can easily be opened online through the bank’s website or offline by visiting the bank branch. On submitting basic KYC documents and account details of the parent or guardian, this account will be processed and opened in the name of the child.
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