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Choosing the best bank for your kids’ future

By Alexandra Sheehan

Reviewed by

September 3, 2019

5 minutes read

Entrepreneurship

With school season ramping up, every busy family is transitioning from carefree summer schedules to structured routines around classes and extracurriculars.

There really is no better time to open a bank account for your children.

Maybe they’ve saved up money working a summer job the past few months, or they’re just entering their school years and you want to give them a head start on their college fund.Whatever the reason, teaching money management even at a young age is critical to helping your child understand and feel comfortable with finances now and in their adult lives.

And it’s one area we’re seriously undereducated about.

One survey found that more than half of students feel that money-management classes are missing from high school — and that’s the one thing they’d add to their schedule to benefit their personal lives.

Below, we’ll go over what to look for when helping your kids navigate their first bank account:

Two types of bank accounts for kids

“As you compare financial institutions, you can further narrow the options by looking for those that are kid-friendly,” says Deacon Hayes of Well Kept Wallet. “Look for banks that provide kid-friendly accounts and services.”

Generally speaking, you’ll probably be looking at two types of savings accounts:

Youth savings account
Custodial savings account

Youth savings account

A youth savings account is aimed at educating children about the basics of personal finance, designed specifically with them in mind. As such, they typically come with low fees, low minimum balances, and the option to add a parent or custodian to the account. Many can also be transferred to a full-on “adult” savings account as your kid gets older, so they can have full ownership. These accounts also often come with lower withdrawal limits.

Custodial savings account

A custodial savings account gives you, the caregiver, more control. Caregivers open these on behalf of their children. The account is locked to your child until they reach adult age (or 21 in some cases), when they’re granted full ownership and access to the funds. These types of accounts are great for saving for college. Note that if you contribute too much to this account, you might also have to pay a gift tax.

What to look for when choosing a bank for your kids

When choosing a bank for your kids, a good place to start is by searching for institutions that offer the above account types.

Beyond that, you want to find a hands-on bank that’s ready to guide your child and be available for support. “Find a bank with great customer service, so if your child has questions they'll be easily answered,” says David Bakke, personal finance expert at Money Crashers. “You might also want to make sure that there is a bank branch close to where you live for convenience purposes.”

Look at the following considerations too:

Compatibility with your bank

Chances are, you already have a relationship with at least one bank for your personal or business finances. Bakke recommends looking here first. “Some banks offer special perks and benefits for children who want to open a savings account,” he says. “You might be able to score yourself a free bank account to keep your children’s change in.”

Your current bank may not offer an account that suits your needs. In that case, make sure your child’s bank has compatibility with yours. In other words, you’ll want to be able to transfer and manage money from your own accounts, and keep an eye on the new savings account, too.

Educational tools

Remember, one of the goals here is to get your children acquainted with money management. Their bank plays an important role in this. “Choose a bank that allows you to set up financial goals and track the progress toward them online,” says Robert Farrington, creator of The College Investor. “This visually helps kids grasp financial concepts, rather than just having money in the bank somewhere.”

Look for banks that go the extra mile. “Some will offer a tour,” says Bakke. “This is a great way to get your child introduced to the world of money, saving, and how banks work.”

Online and mobile banking

One mistake Farrington advises caregivers against making is “choosing a bank that isn’t easy to view and use online.”

Younger generations continue to be more comfortable with online banking (nearly three-quarters of consumers use online banking). And more than 57 million Americans use mobile banking — a user base that skews younger. In the same way there should be educational tools available virtually, online and mobile banking need to be available as well.

Parental and spending controls

Though it’s pretty much a given that any account you open for your child will have some sort of parental oversight, you’ll want to consider your specific needs and how each bank stacks up. “One mistake is giving kids access to a bank account where they have too much freedom in how and when and where they spend their money,” says Farrington.

Hayes echoes this advice. “Talk to the bank about setting debit card limits before turning your child loose with one,” he says. “That way they can't charge way more than they have in their account or can afford to pay back.”

Some banks take it a bit further. “You can connect prepaid debit cards up for kids to be able to spend online,” says Farrington. “This gives them freedom in their purchasing but prevents them from going into debt.”

Interest rates and fees

It’s always important to closely examine interest rates, fees, and other conditions of the account. You want to avoid any options that come with lots of fees and charges. Look out for ATM fees, minimum balance fees, overdraft charges, and monthly service fees.

“You can typically find one that is fee-free,” says Bakke. “And although it’s unlikely that you’ll find an account with a high-interest rate, do your homework and get one that has the best one so your child’s money will grow.”

Choosing the right bank

“One of the most convenient places you can begin your search for a kid-friendly bank account is at your own bank,” says Hayes. But your bank isn’t always going to be the right choice for your kid. Evaluate your options to find out what’s best for their needs both now and in the future.

“It's also a good idea to talk to your kid about where they’d like to do their banking,” says Hayes. “Including them in this decision helps them feel in control of their own money and financial decisions right from the start.”

Banks and credit unions to check out

Moving forward with your kids’ bank account

Take your time with this important decision. “Don't make snap decisions,” says Hayes. “Consider all of the options. If you don't, you could end up with the hassle of closing an account and transferring funds elsewhere.”

What banks are you considering for your child’s account? Let us know!

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