Banking made easy for kids

For generations, minors have been encouraged to save a part of their earnings (pocket money in most cases) in piggy banks. The concept became quite popular with children pooling their 'savings' in these 'banks' and 'withdrawing' the sum when needed.

But over the years parents have realised that though piggy banks do inculcate a habit of savings they do not provide any returns (that is, there is no interest to be earned). Hence, they preferred to open accounts for their kids with banks.

While most banks allow minors to open accounts with guardians operating the account on their behalf, today several banks are offering customised accounts for children.

Incentives vary from personalised cheque books, debit cards and a host of freebies. The minimum balance in most cases is Rs 500 and the accounts are under a guardianship, who must have an account with the bank.

"Such accounts encourage healthy banking and educate children on the working of a bank," says Sasha Ray, head, marketing, at Development Credit Bank (DCB), which launched its Junior Saver account a couple of months back.

"Our account offers various savings and investment options to the parent, along with teaching the child to manage his/her money in a more responsible and independent manner," says an official with ICICI Bank which is offering Young Stars accounts.

Young Stars and Junior Saver accounts come with a personalised cheque book and a domestic debit card with a prefixed limit of Rs 1,000. Citibank's Suvidha Junior account allows the guardian to set a monthly spending limit on the child's debit card. Banks also send quarterly statement of accounts and offer internet banking facility.

To attract children to open accounts, some banks offer token gifts. "Children love getting free gifts, even if they are simple things such as a box of crayon colors or compass boxes," says Sunil Manjrekar, senior manager, Saraswat Bank, which offers Cubs accounts. Many accounts also offer discounts on purchases of goods.

Some banks also offer insurance cover for the guardian. They also guide the guardian on various investment options for their child.

ICICI Bank and DCB offer special recurring deposit schemes under which the guardian can put in a desired amount to be earned at the end of the tenure of the account. The bank, based on the prevailing rates, calculates the instalments to be deposited periodically till maturity.

Parents are also extremely glad with these accounts. "My child gets very excited to see the interest added to his savings account. The account has helped him learn a lot about the working of a bank," says Mumbai-based MNC executive Uday Deshmukh, who recently opened an account for his son Ninad.

NO KIDDING! Some banks offer free gifts to open accounts. Kids also get gaily printed personalised cheque books and debit cards. The best part is, it inculcates the savings spirit in children, and they can literally see their money grow!