Opening a savings account is an important step toward building a solid financial foundation. But how old do you have to be to open a savings account? While adults can open accounts freely, minors often need special arrangements, and there are various options tailored for them.
In this article, we’ll break down everything you need to know about the age requirements for opening a savings account—whether you're a teenager eager to start saving or a parent looking to open an account for your child. We’ll also explore alternative options for minors, and tips for choosing the right account to help you or your child start saving.
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How old must you be to open a savings account?
Most banks require individuals to be at least 18 years old to open a savings account independently. That's because 18 is typically the legal age at which a person can enter into a contract—and opening a bank account is considered a form of contract.
The age restriction is tied to legal considerations, such as the ability to manage financial responsibility and liability. Banks want to ensure account holders understand the obligations involved, such as managing deposits and withdrawals and avoiding overdrafts.
Alternatives for opening an account for minors
When it comes to opening a savings account for a minor, traditional accounts may not be accessible without the help of an adult. However, there are several alternatives specifically designed to help minors start saving while still adhering to legal guidelines.
Custodial accounts
“Custodial accounts set up under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) come with built-in legal protections for minors,” says Andrew Gosselin, a Certified Public Accountant and Chief Financial Strategist at The Calculator Site. “The account is managed by a custodian, typically a parent, who has a fiduciary duty to manage the funds in the best interest of the child.”
The adult acting as the custodian deposits money into the account, and it can only be used for the benefit of the minor. While the minor is the owner of the funds, they do not have control over the account until they reach the age of majority (typically 18 or 21, depending on the state).
Custodial accounts offer a great way to accumulate savings over time while introducing minors to basic financial concepts. These accounts are often used to save for long-term goals, such as higher education or major purchases.
Joint accounts
A joint account allows both a minor and an adult (usually a parent or guardian) to share control over the funds. Unlike a custodial account, both parties can make deposits, withdrawals, and transactions. The adult supervises the account, but the minor can actively manage the money, being ideal for teens who are starting to earn money through part-time jobs or allowances.
Joint accounts can be a great educational tool, as they allow kids and teenagers to practice financial responsibility under the guidance of an adult. However, since both parties have access to the funds, there’s a higher risk that the money could be spent before the child reaches adulthood.
Educational accounts
Some banks also offer educational savings accounts, which are designed to help parents save for a child’s future education. “Educational savings accounts, such as 529 plans, offer some compelling benefits for students saving for college and other educational expenses,” Gosselin says. “The money in these accounts grows tax-deferred and can be withdrawn tax-free when used for qualified education costs.”
There are two types of 529 plans: prepaid tuition plans, which allow you to lock in tuition rates at today’s prices, and education savings plans, which grow through investments over time. “Many states also offer tax breaks for contributions to 529 plans,” Gosselin says. “By starting to save in a dedicated educational account from a young age, students can harness the power of compound growth to build a substantial college fund over time.”
The funds can often be used for elementary, secondary, and post-secondary education, depending on the account type.
Choosing the right savings account
When choosing a savings account for a minor, it’s essential to evaluate several key factors to ensure you’re making the best decision:
- Interest rates: According to Gosselin, one of the most important factors is finding an account with competitive interest rates. This will help your child's savings grow over time, making it a smart way to build wealth, even if they start with a small balance.
- Monthly fees: Avoiding accounts with monthly fees that can quickly eat into savings is also a smart decision. As many banks offer fee-free savings accounts specifically designed for minors, it’s worth comparing your options to avoid unnecessary charges.
- Minimum balance: Compare minimum balance requirements across different banks, and also incentives, such as bonus interest rates for meeting specific savings goals.
- Educational resources: Look for accounts with educational resources and user-friendly mobile apps. “These features make it easier for kids and teens to learn about managing money responsibly in a digital world,” Gosselin says. With mobile access, teens can track their savings and develop healthy money habits early on.
Online vs. in-person accounts: Which one to choose?
There are pros and cons to each option. Online savings accounts often come with higher interest rates and lower fees because online banks have fewer overhead costs than brick-and-mortar institutions. However, keep in mind that online accounts typically don't offer in-person customer support, which could be a drawback for those who prefer hands-on assistance.
On the other hand, traditional bank accounts offer the benefit of face-to-face interactions, which can be valuable for teaching kids the basics of banking, such as making deposits and withdrawals at a branch. These accounts may also come with more extensive parental controls and tools to help parents monitor their child’s account activity.
What you will need to open a savings account
Opening a savings account for a minor requires key documents and the involvement of a parent or guardian. Here’s what you’ll typically need to get started:
Identification requirements
Before opening a savings account for a child or teenager, you'll need to provide certain forms of identification. These usually include:
- The minor’s birth certificate or passport as proof of identity
- The child’s Social Security Number, which is required for tax reporting purposes
- Proof of residential address, such as a recent utility bill or a parent’s driver’s license
Some banks may also ask for the parent or guardian’s ID and Social Security Number, especially if they’re co-signing the account.
Parental or guardian involvement
For minors under the age of 18, banks usually require the presence and involvement of a parent or legal guardian, allowing the adult to oversee and manage the account until the child reaches the age of majority. After that, the account can be transferred into the child’s name.
Parents or guardians typically sign all the necessary forms, and they may also be responsible for monitoring the account’s activity and ensuring the minor follows any rules or regulations set forth by the bank.
Initial deposit requirements
Most banks require an initial deposit to open a savings account, though the amount can vary depending on the institution. Typically, the minimum deposit requirement ranges from $25 to $100, but some banks offer no minimum deposit options, especially for accounts designed for minors.
It’s a good idea to compare different banks to find one that suits your financial situation, particularly if you’re looking for an account with a low or no deposit requirement.
Tips for saving as a teenager
Learning to save money as a teenager is a valuable life skill that can set the foundation for future financial success. Here are some essential tips to help teens make the most of their savings:
Set savings goals
Whether you’re saving for a big purchase, such as a car or college expenses, or for smaller, short-term goals like a new gadget or concert tickets, defining what you’re saving for helps keep you motivated.
Start by figuring out how much money you need to reach your goal. Break it down into monthly or weekly targets, so you know how much to set aside from your allowance, part-time job, or gift money. Use a savings calculator to see how much your savings can grow over time.
Once you have a plan in place, sticking to it becomes easier, especially when you can see progress toward your goal.
Make a budget
Creating a simple budget is an excellent way to understand your spending habits and identify areas where you can save more. Follow these steps:
- Track your income: Whether you have a part-time job, allowance, or receive money from other sources, keep a record of how much you’re making each month.
- List your expenses: Write down everything you spend money on, from snacks and clothes to entertainment and school supplies.
- Prioritize saving: Set aside a portion of your income for savings before you spend on anything else. This ensures you’re saving consistently, rather than relying on what’s left over.
By tracking both your income and expenses, you’ll quickly see where you can cut back and save more.
Maximize interest
Look for accounts that offer competitive interest rates, which will help your savings grow over time. For maximizing interest, consider an account that offers compound interest, where the interest you earn is added to your balance and starts earning interest itself. Over time, this can significantly boost your savings.
Be aware of tax implications
“Minors with savings accounts may face tax implications, especially if they have a significant amount of unearned income from interest,” Gosselin says. “Unearned income above $2,500 will be taxed at the parent's rate, which is known as the ‘kiddie tax.’”
If you have any doubts, seek a tax professional to understand how these rules may impact your child's specific situation.
FAQs
How old must you be to open a savings account?
Typically, you need to be 18 years old to open a savings account on your own. However, minors under 18 can still have a savings account, usually with a parent or guardian as a joint account holder or through a custodial account.
Can I open a savings account at 16?
Yes, you can open a savings account at 16, but it will usually require a parent or guardian to be involved. Most banks offer joint or custodial accounts for minors, allowing teens to start saving while a parent helps manage the account.
How old do you have to be to open a savings account online?
The age requirements for opening a savings account online are the same as in-person accounts—typically 18 years old. However, minors can open accounts online with a parent or guardian's assistance, following the bank’s specific guidelines for online applications.
What documents are needed to open a savings account for a minor?
When opening a savings account for a minor, you’ll usually need the minor's identification (birth certificate or Social Security card), parent or guardian’s identification (driver’s license or passport), proof of address (utility bill or school documents) and Social Security Number (for both the minor and guardian).
Can a minor get a debit card with their savings account?
In many cases, minors can get a debit card linked to their savings or checking account, depending on the bank’s policy. Some banks offer debit cards specifically for teens, which come with parental controls to monitor spending.