Can a Teenager Open a Bank Account?

Adam Rust

If you are under eighteen, then you will need to have your parent or legal guardian apply for the account on your behalf.

The government calls such accounts “Custodial Accounts

and refers to young persons as minors.

While involving your parents sounds like a drag, the rules exist for good reasons.

First, these rules protect young people. They put a speedbump on the chance that someone will steal your personal information and then use it to set up a bank account in your name for their purposes. Don’t pretend that this would be a “no harm, no foul” kind of event. It can create big headaches. For one, an identity thief could use the account to write bad checks. If your name was on the account, then people might come after you for those debts. They could use the bank account to receive payday loans. Again, that would be bad for you. Not only would you be at risk of owing money for things you never purchased, but such a person could also destroy your credit.

Criminals like to prey on young people. It is much easier to do so. Whereas an adult with a full financial life might notice if something was wrong with their credit report, it is doubtful that a young person would discover foul play. Indeed, it might be years before you applied for a credit account or used your social security number on a utility application.

On two occasions, NetSpend has sent my daughter an unactivated prepaid debit card. She fills out online polls. The polling companies provide between 10 and 50 cents of compensation each time she does it. She doesn’t have a bank account. I believe that when the polling company suspects this, and they have decided to turn that situation into a revenue opportunity by selling her information as a lead to NetSpend. I don’t have proof to support this, but I cannot point to a more likely explanation for why those cards keep arriving in the mail.

This rule makes it impossible for her to open the account. In my mind, that’s good because I doubt she would read the fine print to discover that NetSpend would tap her account for an $8.95 maintenance fee every month. She’d never make enough from those pulls to pay off NetSpend. Ergo – the protections make a positive difference.

Picture of card
young person banking

Secondly, these rules exist to smooth the processing of paying taxes. Some kids are lucky enough to have parents who can afford to make substantial financial contributions to their accounts. In doing so, the account might create enough interest to make it necessary to file a tax return. If an adult receives more than ten dollars in interest in one year, then the bank has to send that information on to the IRS. With custodial accounts, the minor gets a certain amount of room to receive income tax-free. If the amount goes above a certain level, then some of that liability will fall to the parents. Not to go too deeply into the weeds, but some people may benefit from knowing that these rules also apply dividend income as well.

I believe that minors can benefit from having a bank account. You should develop a habit of saving early on in your life. Hopefully, you will continue that practice on for the rest of your life. Take advantage of the time value of money. If a 16-year-old set aside $100 for 25 years in an account that grew by 5 percent per year, it would be worth $338 when he or she turned 41 and $1,146 upon retirement at age 65.  

Don’t worry that you will need to have an adult help you to open the account. The reasons I mentioned earlier are there for good reasons. Besides, it is unlikely that you could keep your parents in the dark about your new bank account. They would notice when you took your card out to buy stuff at the register, right? You might find that your parents are more likely to remember to pay your allowance if you have a bank account. Indeed, an enterprising youngster might convince them to pay an allowance with an automatic recurring transfer. That will add one more protection to your life because there will be less risk that you won’t get paid if you don’t do your chores!

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