Can I Open a Savings Account at 17?

Navigating the world of personal finance often begins with establishing a savings account. For a 17-year-old, managing their own money in a bank is an exciting step toward financial independence. Specific rules and options govern how minors can access banking services. Understanding these guidelines helps aspiring young savers and their families make informed decisions.

Legal Age and Independent Account Opening

In most parts of the United States, individuals must be 18 to independently enter into a legal contract, including opening a bank account. This means a 17-year-old cannot open a savings account solely in their name without adult involvement. Financial institutions require this legal capacity to ensure account holders are responsible for the banking agreement’s terms and conditions.

Savings Account Options for Minors

Two primary avenues allow minors to hold savings accounts: joint accounts and custodial accounts. Each option offers distinct characteristics regarding ownership, control, and potential tax implications.

Joint accounts are established with an adult co-owner, usually a parent or legal guardian. Both the minor and the adult have equal access and control over the funds. This arrangement allows the adult to supervise the minor’s financial activities and provide guidance on money handling. However, because both parties have full access, funds in the account are accessible by either owner.

Custodial accounts operate differently. The funds are irrevocably owned by the minor, but an adult acts as a custodian, managing the assets for the minor’s benefit until they reach the age of majority, which can be 18 or 21 depending on state law. The custodian controls investment decisions and distributions from the account. Any unearned income generated by these accounts, such as interest or dividends, is reported under the minor’s Social Security Number for tax purposes.

A common consideration for custodial accounts is the “kiddie tax” rule. The first $1,300 of a minor’s unearned income is tax-free. The next $1,300 is taxed at the minor’s own tax rate. Any unearned income exceeding $2,600 is taxed at the parent’s marginal tax rate. This structure aims to prevent higher-income individuals from sheltering investment income in a child’s name to avoid higher tax brackets.

Information and Documents Needed to Open an Account

Opening a savings account for a minor requires specific documentation for both the minor and the accompanying adult. For the minor, a Social Security Number is always required. Proof of identity can be provided through a birth certificate, a student identification card, or a valid passport.

The adult co-owner or custodian will also need to provide their Social Security Number. A government-issued photo identification, such as a driver’s license or a passport, is necessary. Proof of address for the adult, such as a utility bill or lease agreement, is also requested. Banks provide application forms for this information.

Steps to Open a Savings Account

Applications can be submitted in person at a bank branch or through an online portal. For in-person applications, both the minor and the adult co-owner or custodian must be present to sign documents.

Most savings accounts require an initial deposit to activate the account. This deposit might range from $0 to $100 or more, with many banks requiring $25 to $100. Confirm the specific minimum deposit requirement with the chosen bank beforehand.

Account Transition at Adulthood

When a minor reaches the age of majority, typically 18, changes occur regarding their savings account. For a joint account, the now-adult account holder can convert it into a sole ownership account. This requires both parties to sign new documentation at the bank to remove the adult co-owner.

For custodial accounts, the funds legally transfer to the now-adult beneficiary upon reaching the age of majority, which could be 18 or 21 depending on state law. The custodian’s role in managing the account ends. This transfer of control involves the adult beneficiary providing updated identification and signing forms to assume full individual ownership.