What do you do when your children have moved beyond piggy banks but aren’t old enough for a fully fledged current account? The good news is that there are a number of “youth” bank accounts on the market that can help teenagers, and those fast approaching their teens, obtain their first debit card, learn about budgeting and take their first steps towards financial independence.
However, which provider you choose will depend in part on how much financial freedom you want your offspring to have. Are you happy for them to have their own debit card which they can use in shops and online? Or would you rather they were limited to a cash card that can only be used to withdraw money from ATMs?
Aside from the youth accounts offered by high street players, there are also a growing number of products available that combine a prepaid debit card with a smartphone app. These are likely to appeal to parents keen to retain control over what their children do with their cash – for example, they want to be 100% sure they are not buying things that they shouldn’t be, or spending too much on iTunes. But the downside of these card-app combos is they all involve a fee.
“By getting used to running their own financial affairs youngsters will hopefully adopt money-management skills that will stand them in good stead later in life,” says Andrew Hagger of financial website MoneyComms. “Teenagers are far more tech-savvy than their parents these days, and they’ll have no qualms about banking online and by smartphone, and using the likes of Apple Pay or Android Pay as a means of payment.”
Standard youth accounts
Many banks offer these. Typically they are available to children aged 11 and above, making them a good home for pocket money or cash earned from jobs.
They work in a similar way to adult current accounts, but do not offer an overdraft facility, so a youngster can only spend what they have in their account and won’t get any nasty surprises, says Charlotte Nelson at financial data website Moneyfacts.co.uk. And there are usually no fees or charges.
Many of these accounts pay in-credit interest, though some may take the view that a table-topping interest rate isn’t their main priority because they will only be keeping relatively small sums in the account.
One account that might appeal to Guardian readers is the FlexOne offered by Nationwide building society, which has mutual (as opposed to plc) status, which means it is owned by and run for the benefit of its 14 million-plus members. FlexOne is aimed at those aged between 11 and 17, though it can be held up to the age of 23. There is a promise from Nationwide that it won’t charge anything for using the account, and customers can choose either a cash card for taking money out of ATMs, or a contactless Visa debit card that can also be used in shops, online and over the phone. The account can be managed via Nationwide’s mobile app and pays 1% credit interest on balances up to £1,000, plus offers a linked regular savings account paying 3.5%. (I should disclose that both my teenage daughters have had a FlexOne account for almost two years and they have been a success.)
Santander offers the 123 Mini Current Account for those aged between 11 and 18, where again there is the choice of a cash card or a Visa debit card. You earn interest once you have £100 or more in the account.
Meanwhile, both Lloyds Bank and TSB offer an Under 19s Account, paying 1.5% and 2.5% interest respectively on balances up to £2,500. These accounts can be opened by those aged 11-17 and 11-18 respectively, and both offer the choice of a Visa debit card or a simple cash card.
HSBC’s offering is called MyAccount and is for children aged 11-17. A Visa debit card is automatically provided, though the bank says that if for any reason this is not wanted, it can stop one from being sent out.
Meanwhile, Barclays has an account for those aged 11-15 paying 0.25% interest, with a choice between a contactless debit card and a cash card, as well as one for 16-19-year-olds.
Halifax has Expresscash for 11- to 17-year-olds which pays 1.51% interest and comes with a Visa debit card, as does NatWest’s Adapt account for those aged 11-18, which pays 1%. The Co-operative Bank does not have a youth account, but people can apply for its current account once they turn 16.
The opening requirements for these accounts vary, with an adult sometimes needing (or wanting) to be involved. Nationwide’s FlexOne, for example, can be opened online or in branch, though an adult must be present to open the account in branch for children under 16, while applications can only be made online for those aged 14 and over.
Nelson says that when choosing a youth account, “it’s always important to shop around and not necessarily stick to the same provider as the parent or guardian”. Hagger adds: “These current accounts aren’t marketed particularly aggressively by our banks and building societies, which is a shame as they are a must-have for today’s 11- to 17-year-olds who seek financial independence and the chance to pick up some valuable money-related life skills along the way.”
Card and app products
There are several of these and they all work in a similar way, with a prepaid Mastercard or Visa for the child alongside a mobile app. Typically, parents put money into their child’s card account, and the app enables them to monitor transactions. Three of the main providers are Osper, which is aimed at eight to 18-year-olds and their parents, and which has been endorsed by TV presenter Davina McCall; goHenry, for those aged between six and 18; and nimbl, for eight to 18-year-olds.
These offer quite a few advantages – for example, you can often “lock” the card if it has been lost or stolen, set spending limits etc. But these parental controls come at a cost: Osper is free for 30 days, then costs £2 per child per month, billed annually; goHenry is free for two months, then is £2.49 per child per month; and nimbl is free for three months, then £10 per card per year. In some cases there are even extra fees on top of this – for example, nimbl charges 49p per ATM withdrawal in the UK (the first one each month is free).
