Is It Relevant to Give Minors Their Own Bank Accounts?

The question of providing minors with their own bank accounts is often considered by parents and guardians due to the various benefits associated with financial literacy and independent handling of finances. Giving minors their own bank accounts is indeed relevant and beneficial, as evidenced by the numerous advantages it offers.

Developing Financial Habits and Awareness

Having their own bank accounts teaches minors important financial habits and awareness that are crucial for their future. Developing a habit of saving is one of the key benefits. By managing their own funds, minors can learn the basics of budgeting and the value of saving, which can greatly influence their financial behavior as adults. Additionally, learning about banking through firsthand experience can provide practical knowledge and a better understanding of financial transactions. This includes the use of alternate channels for monetary transactions, such as online banking and mobile banking platforms.

Legal and Practical Benefits

In many countries, including India, minors have the legal right to open and operate accounts. For instance, the Reserve Bank of India allows minors who have attained the age of 12 years to open their own accounts, provided they operate them under their authenticity. This is a significant step towards financial literacy and independence. It is important to note that while minors can open deposit accounts, they cannot be given loans, as per the Indian Contract Act 1860. This means that minors can derive benefits from their accounts but cannot take out loans in their names.

Providing Practical Financial Experience

Another significant benefit is the practical experience children gain with their finances. When minors receive prize money, scholarship amounts, or gifts, having a dedicated bank account allows them to manage these funds effectively. For example, if a child receives 11 rupees as a prize, taking them to the bank to deposit the money and even giving them 50 rupees to do the same can be an incredibly educational experience. This hands-on learning can instill a sense of responsibility and financial discipline from an early age.

Real-Life Examples

To further illustrate the benefits of giving minors their own bank accounts, here are a couple of real-life examples:

Example 1: During my school days, in the 8th standard, I won a prize and received 11 rupees. My father took me to the Indian Bank to deposit the money. He taught me how to fill out forms, create a pay-in-slip, and deposit the money at the counter. From that day forward, I knew the basics of banking and have retained that account and the passbook. Example 2: For my son's thread ceremony, he received cash gifts. My son and I went to the State Bank of India, and following the same steps as in Example 1, he learned to manage the funds. My son has the habit of updating the passbook every three to four months.

These real-life experiences not only provide minors with practical knowledge but also build a foundation for responsible financial management. These accounts serve as the first step in their journey towards financial independence and literacy.