Bank accounts and prepaid visa or debit cards can be a good way of teaching kids about managing their money. You might think of it as dangerous to give an under-18 year-old a bank account or debit card, given the opportunities for overdrafts and debt but there are accounts designed for this that have their safeguards and advantages.
What is a teen bank account?
We’re referring to teens as those aged 13 to 19. In most cases, once a teen reaches the age of majority in their province they’re eligible for an adult bank account. A teen bank account is usually geared towards students or children and they don’t require a minimum balance to be maintained. The minimum age requirement for most teen accounts is 16 years old up to the age of majority in your province. If your teen is younger than 16, learn more about bank accounts for children here.
Compare bank accounts for teens
Compare both chequing and savings accounts below for teenagers. These accounts don’t require any minimum balance to be maintained but make sure you check the minimum age requirement of the account you want to apply for to make sure it’s right for your teen.
Prepaid visa and debit cards
These cards are like a mix of a gift card and a regular debit card. A prepaid card can be topped up and used like a debit card, but once the balance reaches $0, it can’t go any further. Any transactions attempted at that point will be declined, so your teen can’t end up in debt.
What features are on offer for prepaid cards?
- See the transactions. You can see where your teen is spending their money.
- Set limits and allowances. You can set up a monthly allowance, freeze the card and set spending limits for your teen. With some, you can control where they spend, and bar cashpoint withdrawals.
- No direct debits. Your kids can’t set up a direct debit.
- Text message alerts. Most providers pop you a text message or notification when your teen spends.
- Age-restricted vendors. Your teen won’t be able to use the card to gamble, go to the pub or pay to see adult sites.
KOHO Prepaid Visa card
You can load money onto a KOHO Prepaid Visa card, which you can then let your child use like they would a regular debit card. The KOHO app tracks and analyzes spending, so you can easily monitor your child’s spending. A nice perk for parents is that you’re eligible to receive cash back rewards on most purchases made with the card. Use promo code FINDERCODE and receive a bonus of an additional 1% cash back for the first 90 days after activation (on top of the regular 0.5%, for a total of 1.5% cash back).
Is a prepaid card right for my teen?
These cards are more suited to a younger teen than an older one. As your child starts to work part-time and earn their own money, you both might find it better for them to open and maintain one of the basic teen accounts above.
How to choose the best bank account for teens
- Talk to your teen. It seems obvious, but start by discussing the features you want and choose an account that has these features. If you choose to go with a prepaid card, consider choosing a date in the future to reassess and move them to a proper bank account.
- Think about fees. Prepaid cards usually have fees associated with them so work out how much it will cost for the use your child will get out of it.
- Interest. When it comes to teen savings accounts, there’s not much between them except for the interest they offer. This isn’t going to make a huge difference to your child, but it can help them learn about how interest works.
Pros and cons of having a bank account for teens
Pros
- Freedom. Your teenager doesn’t need to pester you for pocket money and they can spend their money how they like.
- Education. Having a bank account as a teenager can provide a huge amount of education in money management.
- Privacy. At last, you can receive a birthday present from your child that’s a surprise! Your teen might feel that they have more privacy, which can improve feelings of trust between you.
Cons
- Letting go. Your teen will always be your baby, but you might have to overcome that feeling and let them go out into the world.
- Fees. Some prepaid cards have fees to use them.
Bottom line
Getting a bank account as a teenager can be an exciting step into the world of handling your personal finances. Make sure you look at any minimum age requirements before applying. If you’ve reached the age of majority in your province, you can compare regular chequing and saving accounts to find the best one for you.
