In India, you do not have to wait for your kids to be 18 to open a savings account in a bank. Reserve Bank of India (RBI) allows parents to open their kid’s saving account once they are more than 10 years old under their own name besides allowing them to operate themselves. Do not miss such an opportunity offered by the bank which can teach your child about the banking system, money-saving matters and more while transacting online. You can teach your child how to use passwords, pin, mobile OTP and others through it more easily, provided you need to keep a low balance every time to avoid crises. Read below to find some interesting facts, conditions and precautions associated with the minor’s saving account before you consider opening one for your brood.
Facts you need to check before opening kid’s saving account in India
- India has many banks that offer separate saving account options. One option is for kids under 10 years of age, and the other is for adolescents between 10 and 18 years old. Parents can operate such savings account jointly under the name of the child who is below 10 years of age. If the child becomes a major, the account gets in-operatable So, it has to be converted into a regular saving account thereafter.
- When considering a bank for your kid’s saving account, check if they provide with standing instructions facility. This means, taking permissions before debiting money from the child’s parents or providing an SMS alert every time a child does a transaction. You must also take your child to the bank to make him/her understand the ways money is transferred or received.
- Usually, banks do not provide many benefits in kids saving accounts as they offer in the general saving accounts. They restrict features such as issuance of cheque book, ATM card, internet banking or online money transfer to safeguard your child’s money.
- You can get facilities like internet banking for your kid’s saving account but may have to go through certain criteria. The bank will ask for details like permission from the child’s legal guardian before issuing a banking password and id.
Conditions applicable for opening kid’s saving account in India
Government-issued document stating your kid’s age
A government-issued document showing the applicant’s age would be the first thing a bank would ask for when opening a savings account in India. The type of savings account your child can have will be confirmed here, i.e., accounts for children below 10 or between 10-18 that can be operated by your child. If your child is below ten, you can give your name jointly and manage your child’s account until he or she turns into an adult or turns 18 and the account turns into a normal saving account after completing the KYC process.
Limited online transactions
Although kid’s saving account get internet banking facility, but with strings attached. When applying for online banking, banks seek mandatory permissions from parents or legal guardians for issuing passwords and id. With the id and password, your child will be able to make online transactions as per banking rules. Once parental permission is given, all the indemnities are deemed to be made by the person giving permission to the bank. However, many banks do not provide online banking facilities at all, so check them before opening a kid’s saving account.
Banking communications and protections
Check out how your child’s bank communicates with you once your child does any transaction. You should only choose banks that will communicate with you via SMS or email whenever a transaction takes place. Many banks would provide monthly statements reflecting the number of banking transactions done in that month.
A debit card or ATM facility
Many banks in India provide debit-cum-ATM cards with photos printed on them whereas others may print your child’s or parents’ names on the card. Ensure that you ask for an SMS alert facility every time the card is swiped or used. You must also ask for an OTP facility to make sure your child withdraw money safely.
Managing money spending limits
Make sure you know which limits apply to withdrawals and spending on a daily, monthly and yearly basis. Many banks provide spending limits ranging between one and two thousand while others may provide a five thousand rupees limit. You may keep it like twenty thousand limits without consent and fifty thousand limits with consent.
Minimum balance and cheque book facility
Almost every saving account in India requires keeping a minimum balance to keep the account operational. So, you need to check them before to avoid any penalties. You can also ask for a personalized cheque book for kids to teach them the banking system. Show them how to write a cheque and manage monthly statements.
Precautions to be taken before and after opening a kid’s savings account in India
- Many contemporary banks offer transaction details online or through mobile apps which makes us easier to manage bank accounts without visiting the bank physically. However, you will still have to visit in case of locker or cash deposits in bank branches. It is here where you should be cautious and choose only those banks that offer prompt service with minimal fees.
- Internet banking or online transactions done in your kid’s saving account must be protected by enabling OTP in your registered mobile number. Show the kid how chequebook or banking id can be used or misused due to online scams and make them read monthly statements to verify all the transactions done are true.
- To maintain your kid’s account, you will have to link your bank account with theirs for transferring money or other reasons. You must ask for a standing instruction facility to deposit money into the minor account, particularly when the transferring process goes through quick NEFT mode. Likewise, your kids must also be aware of it.
- Keep a pre-set limit for daily and annual spending in your kid’s bank account. This will safeguard your kid’s account from malicious sites or overspending by the kid.
- Always check if your kid’s account has a minimum balance failing which bank may impose penalties in the form of charges from your capital returns.