A child’s bank account: a good introduction to the world of money

Most parents consider opening a bank account for their child very early on. Banks everywhere, including in Luxembourg, have recognised this and offer a variety of accounts with preferential terms for children and young people up to the age of 18 (or older). Of course, many wonder whether it is a good idea in principal to open an account for children.

In general terms, there are two good reasons to open a special account for your child: firstly to build up some capital, and secondly to teach your children how to manage money in the most practical way possible. In this context, it is important to know that in Luxembourg minors cannot simply open an account and use it as they please. Only from the age of 12 can children open a bank or savings account for themselves at a Luxembourg bank without the involvement of their legal guardian. And up until the age of 16, children need the agreement of their parents to access the cash in their current or savings account. From 16 years old, they can then access their money independently, providing there are no express objections from their legal guardians. Parents are responsible for the account until the child reaches the age of majority, but they cannot simply use the cash as they please.

Two options

If you want to open an account for your child, you have the choice of two different types of account: a savings account or a current account. A savings account is the ideal solution if the aim is to finance your child’s education or make a contribution to their first property in the future. The money cannot be accessed until the child reaches the age of majority. This is an account offering security, a preferential interest rate, free account management and an opening bonus of few euros. Once the account has been opened, parents, relatives and friends – and from a certain age the child too – can deposit money on the account. Once the child reaches adulthood, they have full access to the money.

Banks let you open a savings account in a child’s name from birth. This gives you some time to build up some capital. Even if you only pay in a small amount each month, you can accumulate a handsome sum over 20 years.

A child or young person can manage a current account into which you transfer pocket money or gifts for themselves. Children need to have mastered basic arithmetic, addition and subtraction, to be able to manage their money. Pocket money is therefore a good means of financial education only once your child has started school. It is also a good time to open a current account when your child makes the transition to secondary school. Banks are aware of this too, and often have special packages for children of this age. This mostly includes a bank card, which opens up new horizons for a young person, but also involves greater responsibility.

A child’s bank account can also form part of more extensive preparations for the future.

Opening a bank account for a child can also form part of broader financial planning for the future. There are insurance policies and home savings schemes specifically for children and young people, which also offer tax incentives. The important thing here is to find out precise information about these products.

Money is not a toy

Pocket money is the first step towards financial independence for children. It means that the children themselves, not the parents, decide what should be bought, at least for some things. But it also means that your son or daughter will suddenly become aware how quickly money can disappear.

When you should talk about money for the first time with a child depends on their personal development. However, as a general rule, as soon as children have an understanding of figures, they can also grasp the value of money.

Children must have the possibility to find things out for themselves in order to learn about responsibility. That is exactly what pocket money is for. You will quickly see how differently children manage money: some will save up for something they want, others will spend their money straight away. Even if it’s sometimes difficult for parents to accept, children should be able to do as they please with their pocket money. That is the only way to learn for yourself that you can only buy something if there is money left over.