How to Open a Minor Savings Account for Kids?

Becoming a parent comes with a lot of joy as well as responsibilities. Parents do their best to inculcate good values and ensure their child gets a good education. Educating your children about healthy financial habits is equally important. 

Generally, parents do this by making their children aware of the importance of savings. In this regard, opening a minor savings account can be a good start. Continue reading this guide to learn more about the same.

Parents can open a minor savings account for their children under eighteen. Once opened, children can deposit and withdraw money from this account just like a normal savings bank account. The children and the parent or guardian are joint holders of a minor savings account. After a child turns ten, they can become the sole owners of this bank account.

After ten years of age, the child will get a bank chequebook and a debit card to withdraw money. Nevertheless, the guardian/parent can set an upper limit for the withdrawal amount. Further, after eighteen years, one can convert it into a regular savings account or completely close it.

The interest rates and minimum required balance for a minor savings account vary from bank to bank. However, the interest rate generally ranges from 4% to 6%.

Before you open a savings account for your kid, there are some points that you should know about. They are:

• Interest Rates: It is advisable to compare the rates of the different banks to determine which is best for you.
• Minimum Balance Requirements: Compare the general and account-specific requirements and determine whether the account has low or no minimum balance charges.
• Charges: You need to observe any maintenance, transaction, or other charges that will affect the balance on the account.
• Access and Control: This section discusses how one can gain control of the account, including banking through the Internet and other issues concerning the parent's control of the account until the child attains a certain age.
• Additional Features: Find debts that provide functions like automatic transfers to repay those loans, materials, concepts about new ways to save, and incentives for better saving.
• Interest Compounding: It is thus important to select the accounts where the interest rates accord is compounded.
• Tax Implications: It may be charged to the parent’s income. Take time to learn the tax laws regarding interest earned.
• Conversion to Adult Account: The client shall learn what will happen should the child become 18 years old or older and the account agreements or conditions.
• Safety and Security: Make sure that the bank you are offered is reliable and has adequate measures to secure the money you save.

One can follow either of the two methods for opening a savings account for a minor:

Follow the below-given steps for opening a child savings account online:

• Step 1: Visit the official website of a bank with which you have a regular savings account.
• Step 2: Fill out the minor savings bank account application form properly with all the necessary details.
• Step 3: Enter your child's name as the primary account holder and the guardian's name as a joint account holder.
• Step 4: Submit all the documents as asked by the bank and submit the application form.

After successfully verifying all the details and the documents provided, the child savings account will be opened.

Follow the below-given steps for opening a child savings account offline:

• Step 1: Visit the nearest bank branch with which you already have a regular savings bank account. 
• Step 2: Carefully fill out all the details of the minor savings bank account application form. Specify your child as the primary account holder and the guardian as the joint account holder. 
• Step 3: Submit all the child's documents, as asked by the bank. 
• Step 4: You must complete a separate form as the parent or guardian. 
• Step 5: Following this, you must provide proof of the minor's address. 
• Step 6: Finally, the bank representative will ask you to provide your signature for all future transactions. 

After the bank verifies all the information and documents, a bank account will be created, and you will receive all the bank account-related documents and a chequebook.

Here are the documents required to open a child bank account in India:

• Birth certificate of the minor (to assess the relationship with the joint holder)
• PAN card details of parent
• Minor’s address proof
• Parent/guardian’s signature (for future transactions)
• Parent/guardian’s photograph

However, these documents can vary from bank to bank.

The rules of a minor bank account are as follows:

• Children (both Indian residents and NRIs) under eighteen years old can apply for an account.
• If a minor is below ten years of age, the parent or guardian shall be a joint holder of the minor's bank account.
• Children over ten years of age can open an account solely in their name and operate it independently.

The goals that you should set while setting up your child’s account are:

• Educational Expenses: This way, you are setting aside money for future expenses such as tuition fees, books, and stationery.
• Emergency Fund: It is possible to attempt to establish an emergency fund.
• Teaching Financial Responsibility: Make sound saving and spending practices from the young age you find yourself in.
• Long-Term Financial Security: Your strategies should create a solid base for your child’s financial planning.
• Special Purchases: This section covers what to save for, money management, and lessons on saving for specific items such as a bicycle or a computer.
• Extracurricular Activities: This includes sponsoring activities such as sports, music, any lessons, and other special interest classes.
• Higher Education: When planning to meet the costs of college or university education, saving should begin early.
• Travel and Experiences: This involves compressing household savings for educational purposes, focusing on improving learning and having fun.
• Future Investments: These are savings for future purposes, such as when one wants to start a business or buy a house.

Some of the beneficial aspects of opening a minor savings bank account are as follows: 

• With the help of this savings account, children can understand the importance of saving and utilising the funds when needed. They can deposit their gift money and allowances to save money for the future.
• A minor savings bank account enables a child to understand the importance of managing finances at a young age. With an account, a child learns how to plan a budget and handle money efficiently.
• The urge to spend money impulsively reduces when a kid learns to save. This good value will help them in the later years of their life.
• Further, a bank account's interest and growing principal amount helps kids understand compounding. Hence, kids will try to save more money dedicatedly and gather wealth as they grow older. 

Following all the information mentioned above, parents can teach good financial habits to their kids and open a minor savings account. This will allow them to understand the importance of managing and saving money, which will benefit them in the long run.