A reader named Ann recently published the following question on the Dough Roller Facebook page:
Why are banks not opening checking accounts for teens, even though their parents are on the account? My 16 year old granddaughter has only the option of her salary being direct deposited into a checking account or receiving a card with her salary loaded. However, whenever she takes money from the card she is charged $3.00. Are there any better options to control her savings, spending, and not having to be charged repeatedly? Thanks.
Ann’s question couldn’t have been more timely for several reasons. First, my brother recently started a new job that required payment via direct deposit. His employer will not cut a paper check. He ended up getting a no fee prepaid card and set up direct deposit for free. Second, our daughter who is 17 just started her first job, and she and I will be opening a checking account for her. I’m excited because it gives me an opportunity to work with her on managing money. We’ll be working on everything from an emergency fund to a ROTH IRA.
So back to Ann’s question. How do you find a good checking account alternative for a teen? As easy as this question may seem, there are two hurdles we have to clear. First, a bank won’t open an account with a minor unless a parent or guardian is also on the account. Contracts with minors are not enforceable (they are voidable by the minor is most states), so a parent or guardian is a must.
Second, many banks don’t have products designed for teens. Because teenagers generally don’t have a lot of money to put in the bank, some financial institutions have made the business decision that these types of accounts aren’t worth their time and effort.
So for many banks, while you can always open a checking account, you may get hit with unnecessary fees. If I were going to choose a prepaid card for my teen, I’d go with the American Express prepaid card. It’s free, has excellent benefits (e.g., free roadside assistance, and currently offers a signup bons). But if you want a checking account, I have two suggestions.
The first option is to use the same bank used by the parent or guardian. They may not cater to minors, but if you have a good relationship you may be able to open a no fee checking account with a minimum deposit. I like this option because I think it’s helpful for a teenager to know their way around a bank. I like the idea of my daughter learning to interact with bank tellers. It may seem simple, but for a teenager, these things can be very intimidating.
The second alternative is a checking account from ING Direct. ING has online checking accounts specifically designed for teenagers. There are no fees, the accounts actually pay interest, and the website is terrific. And they are regularly running signup bonuses for new accounts.
There are other options, including some very attractive offers. We maintain a list of bank accounts for kids that is worth checking out. And if you know of other great banking alternatives for kids, please let us know.
Published or updated July 3, 2012.