Children’s and teen bank accounts: learning to handle money responsibly

Kathleen Altmann

Pocket money helps children learn to handle money responsibly. They learn that different items cost different amounts, what they can afford and what they can save up for. For many parents, setting up a children’s bank account is the next meaningful step in supporting their children as they learn to handle money responsibly. 

Current account with no overdraft

You can open a bank account for minors, also known as a children’s bank account, for free at most banks. Of course, your child cannot open the account on their own. Their parents or legal guardian will have to give their permission. Protecting minors is a top priority. As such, the account can only be used by the child based on specific rules laid out by both legal provisions and the child’s parents or legal guardian. Parents can then transfer pocket money each month, for example via a standing order, into their child’s account.

A children’s account offers, in essence, all the functions available in current accounts for adults. Kids can deposit and withdraw money, set up standing orders, transfer money and use their bank card and PIN to get cash from ATMs. It’s a great way to teach children to handle money responsibly.

Children’s accounts do not have an overdraft, and of course children are not allowed to take out loans – not even if their parents or legal guardians agree to them doing so. That means that the bank will only transfer money or put through direct debit transactions if there is enough money in the account to cover them. The same is true for cash, which the child can only withdraw if the money is present in their account. 

Parents decide what features are available

The child’s legal guardians, usually their parents, are authorised to make decisions about the account until the child comes of age. Parents may act together or individually. They also decide how their child can access the money in the account, for example whether or not they will receive a bank card. Despite that, it is important to understand that the money in the account belongs to the account holder – the child. The parents have no right to use the money on themselves. 

Girocard or credit card?

In Germany, children generally receive a girocard or other type of debit card when they open their account. But their parents might also allow them to get a credit card – a prepaid one. They can transfer a certain amount of money onto the card in advance and then spend that money. Minors cannot be issued ‘normal’ credit cards, which prevents them from going into debt. Prepaid cards, however, can make a lot of sense in some situations, such as if the child goes abroad temporarily on a school trip or exchange. Once the balance on the card is used up, their parents can simply transfer more money onto it.