A minor savings account offers many benefits. Keep reading to know more about these types of bank accounts, how they work and how to open one.
A minor’s savings account is just like a regular savings bank account specifically designed for children below 18 years of age. The guardians/parents of the child are joint holders of the account and also control the account to a great extent. Depending on the age of the child, the purpose of the account can change. For instance, guardians can use this account to build a corpus for children below 10-years of age. And above 10, parents can use the account to educate children about the banking system and, most importantly, the importance of savings. Some accounts allow children above 10-years to issue cheques, make withdrawals and more. Thus, it serves a dual purpose.
How Does it Work? Ref Link
The account works like a regular savings account, earning interest on the deposits. The interest earned is taxable at the hands of the parents. However, parents are eligible to get a tax concession of up to Rs 1,500 per year on the interest earned on a child’s savings account. Moreover, you get access to internet banking, debit card, etc., which you or the child can use to carry out day-to-day transactions from the account. Moreover, banks offer specific services on the account to suit the specific needs of the parents and the child. Some of the key features offered are.
- Auto-debit from Guardian’s Bank Account: Guardians or parents can set up auto debit from their accounts into the child’s savings account. This helps them grow the savings in the name of the child steadily and with ease.
- Cheque Book, Debit Card, Net Banking: In some cases, the child can issue the cheques up to a certain limit, whereas in others, only the parents or guardians can issue cheques. Some banks also offer accounts that require parents’ consent for the child to withdraw any money from the account.
- Transaction Limit: Most child savings accounts have a limit on the transactions such as withdrawals or shopping per day. Moreover, there is also a yearly limit, and the account is frozen if the transaction crosses this limit. This is usually for accounts where the child is operating the account and does not need parents’ consent.
Advantages of Minor Savings Account
A minor savings account offers many benefits to both the parents and the child as well. Three key benefits are;
- Build a Corpus for Child’s Future: As mentioned before, the account helps parents in building a corpus that can be used for funding higher education or into the future of the child.
- Inculcate a Habit of Savings in the Child: A savings account that the child can operate helps inculcate a habit of savings from an early age.
- Acquaint them with the Banking System: The banking system is an essential pillar of our economy. When the child learns to operate a savings account from a young age, they learn about the banking system’s intricacies, such as issuing a cheque, making withdrawals, crediting the account, etc.
Types of Minor Savings Account
Depending on the bank you choose, there may be different versions of a minor’s savings account. For instance, ICICI bank offers Young Start and Smart Star account. While one’s primary purpose is to build a corpus for the child, the other provides more control to the child (under the guidance of their parents) to learn better how a bank account works.
How to open a Minor’s Savings Account
To open a minor’s savings account, you need to submit a few documents depending on the type of account you choose.
If you want the child (above 10-years) to operate the account:
- Child’s ID and address proof
- Guardian or parent’s declaration
- Guardian or parent’s ID proof and photo
If you will be operating the account on behalf of the child (usually for children below 10-years
- Guardian or parents’ ID and address proof
- Child’s proof of birth and photograph
Open a savings account for your child today and enjoy its benefits.