Yes, that is correct. It has been proved in the eighth edition of Cartoon Network’s research study, New Generation, on kid’s lifestyle had estimated that Indian children earned as much as Rs. 664 crore as pocket money (including gift money) compared with their earnings to the tune of Rs. 478 crore in 2008. (The survey took a sample size of 3,431 kids in the age group of 7-14 years.)
This is the time when you can inculcate in your child the right saving and spending habits, teach them about misfortunes of getting into a debt like a home loan or a car loan etc. You could also teach them how to be patient if they do not have enough funds to finance purchase something they like as in save rather than go for EMI payments on their desired product for purchase.
Understanding the capabilities of today’s young generations earning capacity, most banks have come up with unique solutions for kids where they can park their funds and avail various other banking facilities such as recurrent deposit, combination accounts, debit cards and Internet banking to name a few.
There are various types of accounts that can be opened for your children if they are minors.
Most banks allow you as the parent to transfer a required amount to your child’s account allowing him/her to spend as they wish but require to maintain a minimum balance .For example, Andhra Bank’s Kiddy bank account is available at a minimum balance of Rs. 100, ICICI Bank Ltd’s Young Stars account and ING Vysya Bank’s Zing account requires Rs. 2,500. If you hold the smart privilege account with Axis Bank Ltd, your kid can have a zero balance minor savings account and the same applies to Punjab National Bank as well.
Sole or Joint account:
Having a joint account helps you to monitor your child’s spending from the account. If your child below 10 years of age will have his account jointly with parents or under guardianship, but those between 10 and 18 years of age can open a sole account. For older kids, sole account gives them a sense of ownership and responsibility and it also allows the parents to monitor the spendings.
Banks also let your minor open a recurrent deposits account, wherein the child can invest a specific amount every month for a fixed interest rate and fixed tenor. These accounts help the child with savings with a specific target or goal in mind for a specific tenor, even while earning a higher interest rate than a savings account.
Another good way to encourage savings is by using a combination account. The child is encouraged to save every month. The amount the child saves is transferred to a recurrent deposit, which can mature on a date of choice, for instance a child’s birthday. Some banks offer a savings account which can be linked to a swipe-in fixed deposit. For example, with HDFC Bank Ltd’s account, once the balance in the Kid’s Advantage Account reaches or exceeds Rs. 35,000 the amount in excess of Rs. 25,000 is automatically transferred into a fixed deposit of one year in the child’s name by signing for such a facility.
Though most banks offer debit cards to kids above 10-12 years of age, HDFC Bank also offers them to children above 7 with parents’ permission. Some banks let you choose daily or monthly spending limits on shopping and cash withdrawals while others may come with pre-set limits. While most banks give detail of debit card usage via account statement, some banks also offer this information in real-time via an SMS to your mobile.
While most banks allow you to monitor your child’s account using the Internet banking facility, some have gone a step ahead and offered net banking facility to kids as well. For instance, UCO Bank offers Internet banking facility wherein the child can monitor the account online.