What are the Features and Benefits of Minor Bank Account?

Having a minor bank account helps your children become financially responsible adults. It teaches them about effective saving and managing techniques and helps them achieve their future financial goals.

But before opening a bank account for your child, it is important to consider the features and benefits of minor bank account. This will help you decide better whether opening such accounts will be beneficial for your child or not.

Have a glance at some of the most exclusive features of a minor account that distinguish it from other savings accounts:

• This bank account is only applicable to children below 18 years of age. However, if the child is below 10  years, then their account can be opened, but the child won’t be able to operate it until they reach age 10. Till then, the account can be managed by their legal guardian or parent.
• Minors will have access to a passbook, cheque book and ATM card. But usage of each comes with its own set of restrictions. Like, they can only get access to these with parental consent.
• To safeguard this account and prevent its misuse, each bank has set some limits on ATM cash withdrawals and POS transactions. Thus, a kid will not be able to spend more money on a particular day than the estimated balance set by the bank.
• Often bank provides a login ID and password to the child for operating Internet banking. But this is only issued if the child's parent or legal guardian provides a signed mandate to the bank.
• One of the essential features of minor account is that this account becomes inoperative as soon as the child becomes a major. However, the account holder will be provided with an option by the banks to convert their minor account into a regular savings account.
• Whenever a transaction is performed in the minor bank account, the bank sends an SMS to their legal guardian or parent. This is done to maintain control.
• Like a savings account, minor bank accounts also have a specific minimum account balance. This differs from bank to bank, and the bank charges a penalty if this minimum balance is not maintained.

These features of a minor bank account make it a perfect choice for your child.

A minor bank account can make a real difference to your child’s way of looking at finances. These are designed specifically for children and helps in teaching child about fiscal responsibility.

Let’s take a look at the various minor bank account features that your child can avail of.

1. Zero Balance Account

2. Free Education Insurance Cover

3. Learn to Manage Own Finances

With a minor bank account, kids will learn how to budget, plan, and manage their finances in everyday life. 

They will receive first-hand knowledge of banking activities like depositing a cheque, online banking, and withdrawing cash from an ATM. Also, they will understand how they can leverage some saving tools like recurring and fixed deposits.

4. Get Financial Education at a Young Age

It is important for children to begin their financial education at an early age. You can also encourage your child to make small financial decisions from an early age. If possible, they can even contribute a little from their savings. 

This completely depends upon your child’s age, how much they save, and what decisions they can take. Thus, a minor account can take your child’s financial education one step ahead.

5. Respect the Value of Money

One of the major benefits of a minor bank account is that it will make your child understand the value of money. Nowadays, as most parents eagerly fulfil every child's wish, children often fail to understand its value. 

They even fail to realise the importance of earning. So, if you teach them how to deposit their allowances into a savings account and utilise them when needed, they will respect the value of money. Also, they will appreciate whatever you do for them.

6. Inculcate in Them Goal-specific Saving Habits

To become financially stable and secure in the future, the child must learn how to save for their life goals.

A minor bank account lays the foundation for your child to help your kids start small. It will teach them how they can save for their different life goals. Their goals might include purchasing gifts for family and friends, school trips, shopping expeditions, etc.

7. Avail of Tax Benefits

8. Appreciate Delayed Gratification

This account imparts in your child the value of delayed gratification, which they can hold throughout their life. 

This will help your child in knowing what’s important to them. Also, they will get to decide what they can sacrifice to earn a better reward later.  This will help your child to resist the temptation of spending impulsively.

9. Learn the Power of Compounding

When your child sees that the amount they saved in the bank is accruing interest and increasing, they will experience the power of compounding. This will benefit them a lot when they grow into an adult. 

Also, it will motivate your child to create wealth in the future by saving more dedicatedly.

10. Streamline Your Savings for Your Child's Education

To provide your child with a good college education, you must start saving for your child’s early age because it’s expensive. So, one of the features of a minor account is that it helps streamline your savings for your child's future educational needs.

These benefits, in a way, provide wings to your child’s dreams and make them a reality in the future.

As per the May 2014 notification by RBI, minors of any age can open their bank accounts with the permission and guidance of their legally appointed guardian. This is why many banks have already launched these services. 

But, there are also several cons associated with minor accounts. They are as follows:

• Children are vulnerable to bank fraud and financial losses. So, if any loss occurs, the parents or guardians must incur this financial loss.
• Minors are not even mature enough to understand various transaction details and financial structures.
• RBI itself highlights the need for a guardian’s assistance in managing the minor bank account. This suggests that minors are not sensible enough to make independent decisions in various financial matters.
• Instead of opening minor accounts, it would be more beneficial if some chapters related to financial education were added to the minor’s textbooks. This will make them financially literate and more secure.
• In this account, RBI has left the monetary limits of the account and transactions to the bank’s own discretion. These minor account features hamper the RBI’s uniform objective behind opening these bank accounts.
• Also, if minors violate any contractual obligations or in case of fraud made by them, the bank will be restricted from taking any action against them under the IPC section.

The eligibility criteria for opening a minor account will tend to vary across banks. Some of the common ones are:

• Age: The individual must be aged between 10 and 18 years 
• Documents: Minor should have a PAN card and a birth certificate
• Nationality: Indian

So, to make your child understand the value of money and make them familiar with banking services, you can open a minor bank account for your child.

This will lay the foundation of savings for your child. Also, with the added benefits that come with opening a minor savings bank account, you can ensure added financial security for your child’s future.