The lessons and skills involved in managing money begin during childhood. When you wish to encourage saving and managing money, a bank account can be an effective teaching tool. Most savings institutions have provisions in place that enable minors to hold a savings account jointly with a parent or guardian.
Joint or Custodial Account
A joint savings account lists both your minor child’s name and your name as joint owners. This means that both you and your child have equal control of the account. A custodial account lists a minor child as the account owner, but with a parent or guardian as the account custodian. The child would not have access to funds in the account without the custodian's permission. Generally, custodial accounts change to a sole account when the minor child reaches adulthood.
Account Rules and Regulations
States may have specific regulations regarding savings accounts for minors, or financial institutions may have the freedom to set individual rules and regulations. Contact several financial institutions to inquire about opening a joint savings account for a minor. Ask about minimum deposit, minimum balance, documentation required to open the account, and interest rate. After learning information from two or three different institutions, compare the account requirements and rules, and choose one that fits your needs and desires.
Institute account protections to prevent problems on joint accounts. For example, require that withdrawals from the account have signatures of both joint-owners instead of just one signature -- similar to a custodial account -- to prevent the minor child from making unsupervised withdrawals. Enroll the joint account in online banking to enable convenient monitoring of account activity.
The Internal Revenue Service recommends that you place your minor child’s name first as the account owner and your name second. You must also list your child’s Social Security Number for tax purposes. According to the Model Gifts of Securities to Minors Act and the Uniform Gifts to Minors Act, property or money you give to your child becomes the child’s. Any interest earned from this money is taxable to the minor child, minus portions used to support the child, if applicable.
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