Best Bank Accounts for Teens in 2024 -

Unlocking financial freedom

Teen bank accounts are created for those over 16 without parental oversight. They provide young adults more independence with the tools and structure to learn the basics of handling money. Thus, they act as a stepping stone to complete financial responsibility and control.

This comprehensive guide will walk both teens and parents through the process of selecting, opening, and managing the best teen bank account.

Searching for bank accounts suitable for 11 to 15-year-olds? Consider our kids bank account guide

#Account Requirements

A significant distinction is that individuals aged 16 or over are generally able to open an account on their own. However, certain circumstances might necessitate the participation of a parent or guardian. This is largely dependent on the regulations of the specific bank.

Usually, to become an account holder, one needs to be a resident of the UK and must show valid identification at the bank.

#Restrictions and Limitations

Bank accounts for teens are similar to adult accounts but lack certain features. For instance, overdrafts are not available to account holders. Additionally, credit-related products such as loans or finance agreements cannot be accessed.

These accounts may also restrict purchases from providers deemed unsuitable for the age group, such as gambling establishments or off-license stores.

#Exploring Alternatives

There are two primary options for young people - prepaid cards and bank accounts for teens.

Prepaid cards are a more easy-to-understand choice and offer a basic understanding of managing money. Although this guide does not cover, nor is it included in the list mentioned.

On the other hand, bank accounts for 16 and 17 year olds provide more independence with detailed information on spending and budgeting, helping to develop financial skills.

#Advantages of Early Banking

A bank account introduces teenagers to more advanced financial concepts, which are beneficial for later life. Financial education is an added perk of some accounts, providing resources to educate about budgeting, saving, and managing money responsibly.

Young account holders have the opportunity to start saving early by setting up Junior ISAs. These accounts offer a beneficial saving strategy for teens, allowing accumulation of savings tax-free until the age of 18. The interest rates are typically better than those of regular accounts; however, the money might remain locked until then.

These accounts come with a contactless debit card without needing a parent or guardian’s approval. The card allows users to shop both online and in physical stores without needing cash. It’s also possible to withdraw money from ATMs using this card.

Worries about the early accumulation of debt can be laid to rest. All children’s accounts (including accounts for teens) are designed to prevent debt accumulation.

It’s generally recommended to start with conventional banks. This approach helps set up a banking relationship and customer record, opening up opportunities for extra benefits and services in the future.

#Highlighting Risks

We don’t want to scare anyone but teen banking is full of warnings, from the allure of targeted ads to the worrying lack of financial education everywhere.

Some parents worry that giving their teenager a bank card, even one with restrictions, could result in the teen spending money too quickly on impulse purchases.

The problem is that there hasn’t been much progress in teaching kids about money, with only 10% getting lessons both at home and school - according to a recent Young People’s Financial Wellbeing Survey by Money & Pensions Service. This could make it harder for kids to manage money well and worsen differences in financial knowledge, especially for vulnerable groups.

We never see or psychologically feel the money leave us, and this can easily lead to uncontrolled spending on short-term whims. This is a problem for all of us, but likely to be exacerbated in teenagers, for whom impulsivity is often higher, and focus on long-term habits lower. - says The Guardian

Teaching children about finance is essential. A crucial aspect of this education is providing teens with controlled environments to learn money management skills safely.

#The Account Opening Process

Many banks offer an online application process. To apply, individuals will need to provide proof of identity, like a UK passport, and proof of address. Proof of address can be a school letter or a statement from an existing bank account. They may also request proof of your address for the past three years.

If the bank can’t verify the identity online, it’s possible to visit a bank branch with the ID and address documents. There’s an option to apply with a parent or guardian’s documents on their credit score and credit history.

#Understanding Taxes

Typically, teen’s bank accounts don’t incur taxes as it’s highly unusual for them to earn enough interest that’s taxable.

Tax-free allowances are granted, which includes a beginning savings rate of £5,000, a Personal Savings Allowance of £1,000, and a Personal Earnings Allowance of £12,570 for the 2023/24 tax year. Taxes only apply if these allowances are surpassed.

#18 and Over

Normally, a teen’s bank account becomes a normal current account when they turn 18, but this isn’t always the case. This might differ from bank to bank, so it’s a good idea to confirm with your bank.

This could also be a chance to upgrade the account with additional features such us travel insurance. More information about these enhanced accounts is available in our detailed guide on packaged bank accounts.

Keep in mind, at 18, everyone is legally allowed to access credit products, like an overdraft. However, it’s not guaranteed that these will immediately become available.

#FAQs