Youth Savings Accounts

Opening a bank account for the first time is an important milestone for children and young Canadians. The account gives them the practical benefits of banking like an adult, and is the start of an education in how to manage their finances. While young people’s balances may be small, banks offer attractive savings account products in order to get their business early. After all, the child of today might be turn out to be a lifelong customer. Here’s what you should know about youth savings accounts, before opening one for your child.


What are youth savings accounts?

Youth savings accounts are savings accounts that are generally restricted to Canadian residents under the age of 18. In some cases, the age range is slightly different. For example, the CIBC Advantage for Youth Account is for anyone under the age of 18, whereas RBC’s Leo Young Savers Account is for anyone under the age of 19. National Bank, on the other hand, caps their youth savings accounts at age 17.


Why open a youth savings account?

Practically speaking, a youth savings account comes with very few, if any, fees normally associated with savings accounts maintained by adults. Among the benefits of having a youth savings account are a large (if not unlimited) number of included transactions per month, as well as free record-keeping, often in the form of account passbooks. If you are thinking of opening a savings account for your child, one specifically geared to youth is very cost-effective.

Many youth savings accounts also come with the benefit of having no minimum balance; this allows a child to start with a very small amount of money and not see it disappear by way of significant transactional fees.


Do youth savings accounts earn interest?

Interest rates on youth savings accounts are not very significant, but if you shop around you can find a rate that is approximately the same as that for an adult savings account (roughly 0.30%). The reason that the interest rate is so low for youth accounts is twofold: first, a child’s balance is not likely to be large, and second, the bank is providing many services, such as debit transactions, for free. Nevertheless, a youth savings account does generate some interest and a child gets to see their money grow as a result.


What influence do parents have over youth savings accounts?

In almost all cases, banks will not open youth savings accounts without the presence and consent of a parent or guardian. For these accounts, the adult is a joint account holder who can withdraw or deposit money as they see fit, and will be sent regular bank statements as well. One notable exception is RBC, which permits children over the age of 12 to open youth savings accounts by themselves, so long as they have two pieces of valid identification.

Depending on the financial institution, parents and guardians may be able to set some of the terms associated with their child’s savings account. Specifically, they may have the ability to only permit deposits and not withdrawals, limit daily withdrawals to a certain amount or decide whether the child is permitted online access.


Youth of different ages have different needs

All youth are not equal in their banking needs. A very young child may make few deposits and withdrawals each month, whereas a teenager might use their debit card every week; this difference is important because some youth accounts come with unlimited transactions, whereas others only have a specified number of included transactions, such as 15, per month. It’s wise to choose the account that best suits the needs of the age group of your child.


What happens when the child turns 19?

It’s important for children to learn how to manage money at an early age; this helps them gain confidence, and knowledge that will serve them well at the time and as they grow older. Opening a savings account is one way to start this process.

Upon their 19th birthday, however, children become adults and, therefore, will no longer qualify for youth savings accounts. At this time, the account is usually converted into an adult savings account. It is important to be aware of this conversion, and to ensure that the account is the most appropriate one for the person’s needs.