Savings Bank Accounts for Kids | Pehli Udaan | Pehla Kadam
Today kids are getting smarter and smarter. What they can do at their age is something we couldn’t even think of when we were of their age. Well, there’s a lot behind this dramatic shift in intelligence and one of the primary factors being the availability of high-end technology with super simple user interface. Today children are aware of almost every new trend in national or international markets. This current generation is way ahead of us.
Is that a good sign? Of course it is! However, teaching kids only about technology and social media and computer related stuff, it is also important to teach them the importance of finances. Why so? That’s because at point in time, they need to become financially independent and make important life decisions. So, they must grow wise when it comes to dealing with money. One of the best ways to introduce them to the world of finances is to create savings bank accounts for them and allowing them to operate the same on their own or jointly with either of the two parents or a guardian.
The Big Question: What Factors to Consider While Opening Savings Bank Accounts for Kids?
Just because you want to introduce your kid to the financial world doesn’t mean that you should treat him or her as a grown up like yourself. Remember, he or she is just a kid and no matter how intelligent he or she is, the kid is yet to reach a certain level of maturity where he or she can make wise financial decisions. The whole idea here is to take one small step at a time and make him or her acquainted with the complex world of finance. So, here are a few factors that one should consider before opening savings bank accounts for kids:
- Minimum Balance is a NO NO: We are dealing with kids here. They don’t understand the complexity of financial world. Even though they are kids, they will have a lot on their platter. They will have their studies to deal with. They will have to focus on their interests. They will need time to play and to socialize with friends in person in through social media. Giving them the additional burden of maintaining minimum balance in their savings bank account is something not acceptable. They might just forget. So, when you are looking for opening savings bank accounts for your kids, you need to make sure that you select a bank which is not putting up minimum balance as a requirement.
- Online Operations Must Be Present: Don’t forget that kids today are far more computer savvy and they are far more accustomed to less of paper work. They prefer the digital world over the conventional paper documents. Thus, it is important to select a bank which offers internet banking even for savings accounts that they have designed for kids. Providing an online interface for kids will allow them to quickly operate the account without much of hassle. So, this becomes very important.
- NO Hidden Charges At All: There are many banks that have several hidden charges that are often levied on the savings bank accounts. These charges are mentioned in fine prints that we usually do not read. However, for grownups it is pretty easy to understand those charges once they show up. For kids, this won’t be that easy. There should be absolute transparency.
Examples of Savings Bank Accounts for Kids
Now that we know what to look for while opening savings bank accounts for kids, it is time that we take a quick look at a couple of examples. For this purpose, we will take the example of two different accounts that are offered by one of the most popular banks in India – State Bank in India. SBI currently offers only two schemes – Pehli Udaan and Pehla Kadam. Let us go through a quick comparative study of the two account and find out whether they fulfill the selection criteria as we mentioned before:
|Features of the Account||Pehli Udaan||Pehla Kadam|
|Online Banking||Available with features like Demand Draft, NEFT transactions and Bill Payments||Available and offers the same set of online banking features as Pehli Udaan|
|Maximum Allowed Balance||No more than 500,000 Indian rupees can be kept in the account.||No more than INR 500,000 is allowed.|
|Age of Child||Minors are allowed but it is absolutely important that the child should be above the age of 10 years. The child can operate the account alone. Joint account with a parent is not necessary.||Minors are allowed but it is absolutely necessary that the account should be a joint account with the joint holder being one of the two parents.|
|Account Operation||Child will operate the account alone. Parents not allowed.||Both child and parents will operate the account.|
|Option for Mobile Banking||Available and the daily maximum limit is set to INR 2000.||Same as in case of Pehli Udaan.|
|Debit Card Feature||Card available and designed only for kids.||Card available and designed only for kids.|
|Signature Requirements||Only the kid is allowed to sign.||Since it is a joint account, both the kid and his or her parent can sign.|
|KYC||Proof of birth date of both kid and parent is to be provided.||Proof of birth date of both kid and parent is to be provided.|
|Interest Rate||Calculated on daily balance at the rate of 4% each year.||Calculated on daily balance at the rate of 4% each year.|
|Charges for Transactions||No such charges.||No such charges.|
|Passbook||Available for free.||Available for free.|
|Account Transfer||Transferring account to a different branch is allowed.||Transferring account to a different branch is allowed.|
|Nominee Appointment||Feature available.||Feature Available.|
What is the Age Requirement for Savings Bank Account for Kids?
As per the mandate of Central Bank, savings bank accounts for kids should be above the age of 10 years to be able to operate their accounts individually. This means that they can also operate their accounts jointly with their parents. That’s the reason why SBI has come up with two options of individual as well as joint account operation. Any other bank that offers savings bank accounts for kids will have the same age requirement and restriction but product features may vary slightly. Make sure that you go through all the features properly before opening an account.