Kids Bank Account...is it needed?

Financial Success for Children

Revolutionizing your child's financial future may seem like a daunting task, but it's actually quite simple. All it takes is one step to set your child on a path to financial success. That step is setting up a savings account for your child.

Financial literacy is an important skill for children to learn at a young age. Teaching children about money management and budgeting can set them up for a lifetime of financial success. One of the best ways to teach children about money management is to set up a savings account for them.

Setting up a savings account for your child is easy and can be done at any age. It's a great way to teach children about the importance of saving and the power of compound interest. A savings account can also teach children about budgeting and monitoring account activity. Plus, it gives children a sense of independence and responsibility.

When you set up a savings account for your child, they will learn the value of saving money and the importance of budgeting. They will also learn about compound interest and how it can help their money grow over time. Plus, setting up a savings account for your child gives them a sense of independence and responsibility.

Power of Compound Interest

When it comes to teaching children about money, most parents focus on the basics: how to count, how to save, and how to spend responsibly. While these are all important lessons, there's one key aspect of money management that many parents overlook: the power of compound interest.

Compound interest is the interest that is earned not only on the original deposit but also on the accumulated interest over time. In other words, it's the interest that earns interest. The power of compound interest is that it can help even small amounts of money grow significantly over time.

Here's an example: let's say that a child saves ₹50 per month in a savings account with an annual interest rate of 3%. After 10 years, that child would have saved ₹6,000. But if you factor in compound interest, that same ₹6,000 would have grown to nearly ₹8,000. That's an extra ₹2,000 just from the power of compound interest.

Now, imagine if that child had started saving at a young age and continued to save regularly throughout their life. The power of compound interest would be even more significant. By starting to save at a young age, children can take advantage of the power of compound interest and build a solid financial foundation for their future.

Money Management and Budgeting

Having a savings account is a great way to teach children about money management and budgeting. It can also help children develop a sense of independence and responsibility. When children have their own savings account, they can learn how to save money and set financial goals for themselves. They can set financial goals for themselves, such as saving up for a new toy or saving for a vacation trip or saving for a gift for a friend. This can help them to learn how to prioritize their spending and make choices about how they want to use their money.

Be a Role Model

It's important to note that as a parent, you should also be a role model for your child when it comes to saving and budgeting. Show your child that you also have a savings account, and explain to them why you save money. You can also help your child to set financial goals by creating a savings plan together and helping them to track their progress.  

Types of Kids Savings Account

Although many banks would be providing savings account facility, here we are comparing those provided by State Bank of India, HDFC Bank, and ICICI Bank.

 

State Bank of India

State Bank of India (SBI) has two types of saving account for minor:

1. Pehla Kadam: Minor of any age. This account will be jointly opened with the parent/guardian. The account will be jointly operated or singly by the parent/guardian.
2. Pehli Udaan: Minors above the age of 10 years and who can sign uniformly. This account will be opened in the sole name of the minor. This account is singly operated by the child.

 NO Monthly Average Balance is required for SBI Saving Account for the minor.

Visit the bank website for more details.

HDFC Bank

HDFC Bank has Kids Advantage Account which can be opened till your child is a minor (less than 18 years of age) and you have a Savings Account with HDFC Bank. Needless to say that you will have to open a Savings Account with the Bank in your name, if you wish to have the Kids Account with HDFC Bank.

A minimum Monthly Average Balance of ₹5000/- is to be maintained in the Kids Account or you will be penalized.

Cheque Book, ATM card and Passbook facilities are provided.

Cash Withdrawal of upto ₹2500 at ATMs and shopping of upto ₹10000 is allowed per day.

Visit the bank website for more details.

ICICI Bank

ICICI Bank has Young Stars Account for minors (age < 18 years) and Smart Star Account (age between 10 -18 years). For the parents, having an account with the bank is not required.

A minimum Monthly Average Balance of ₹2500/- is required to be maintained in the account. Cheque book, ATM-cum-Debit card facilities are provided.

Daily spend limits on the debit card is upto ₹5000/-

Visit the bank website for more details.

Source: The details above regarding each bank are as displayed on the respective websites of the banks as on 05-Feb-2023. For any updates, you need to check the website of each bank.

Documents Required

Parent:

For HDFC Bank, your account details will be required (if you have an account with the bank).

Commonly for all the banks, 

1. Identity Proof: PAN/Aadhar/Driving License/Passport
2. Address Proof: Aadhar/Driving License/Passport etc
3. Photograph of Parent/Guardian - Carry 3 with you.

Also carry photocopies of the documents, which you can self-attest in the bank branch.

 

Kid:

 

The Date of Birth certificate is the only requirement. Carry photo copy of it too.

 

 

Conclusion

Opening a savings account will prove to be the first right step towards making a successful financial life for your kid. Not only you will be able to make some useful saving for him/her, but also during the process your Kid will be exposed to the finance, budgeting, saving, spending which will make him much better placed to face the world as compared to us.

Best Wishes.

 

FAQs

Is it a Joint or Single Account?

For most of the banks, it will be a joint account between you (Mother/Father/Guardian) and your child till the child is minor. For SBI, the Pehli Udaan Account is in the name of the child. 

Is Debit Card Issued?

Yes. ATM-cum-Debit card is issued with the withdrawal limits different for every bank.

Can minor withdraw money?

Yes. The minor can withdraw money and spend at merchant locations too but some limits are imposed on both type of transactions.