Having a savings account as a teenager can help young people get into the habits of saving money and setting financial goals. Even if an account is opened with a very small amount, your teen’s money can grow quickly as they add funds over time and earn compound interest. What’s more, those who work can build up their balance by transferring a portion of each paycheck from checking to savings.
Best features to look for in savings accounts for teenagers
- High APY: The annual percentage yield (APY) of an account is its rate of return, factoring in the effect of compound interest. The higher the APY, the more interest you’ll earn on your money.
- No minimum balance to open the account: Many teens aren’t starting out with much, which makes it important to find an account that can be opened with either no minimum or a very small amount.
- No minimum balance to maintain the account: It’s often best to go with an account that doesn’t require you to stay above a certain balance.
- No monthly service fees: It’s better to learn banking without having to worry about maintenance fees depleting your savings. Some savings accounts that normally charge fees will cancel them for those who are under the age of 18, or who link a checking account from the same bank.
Best savings accounts for teenagers
Best for the highest APY on all balances
- Capital One Kids Savings Account
- $0 minimum opening deposit
- 0.3 percent APY
Capital One is an online bank, but it also has a brick-and-mortar presence. Its Kids Savings Account, which is available to teenagers until they turn 18 years old, offers the same yield on all balances. You don’t need to make a deposit to open the account, and you won’t be charged a monthly service fee.
What to watch for: This is a joint account that needs to be opened with an adult.
Best for the highest APY on a limited balance
- BECU Early Saver Youth Savings Account
- $0 minimum opening deposit
- 4.07 percent APY on the first $500 (0.02 percent APY on balances $500.01 or more)
Boeing Employees’ Credit Union (BECU) has more than 50 locations in Washington and two in South Carolina. BECU doesn’t require a minimum opening deposit for the Early Saver Youth Account. The account is available to teenagers until they turn 18.
What to watch for: This high APY is only available on balances up to $500. Balances above that amount will earn 0.02 percent APY. You can’t apply for this account online, either.
You’ll need to meet certain criteria to be eligible to open an account at BECU. Living, working, worshiping or going to school in Washington state or select Idaho counties are some ways. Also, living or working in select counties in Oregon or belonging to certain associations are other ways to be eligible.
Best for older teenagers
- Bethpage Young Adult Savings
- $5 minimum opening deposit
- 2 percent APY on the first $1,000
Bethpage Federal Credit Union was founded in 1941 for people working at Grumman Aircraft Engineering Corp. Now, it’s open to anyone who opens a savings account, with a minimum of $5.
The credit union’s Young Adult Savings gives those 18 to 20 years old an opportunity to earn a competitive APY on the first $1,000 deposited in their account.
Bethpage also offers a Youth Savings Custodial (NYUTMA) account that’s available when either the custodian or the minor is a resident of New York. This account is for kids up to 17 years old, and it requires the custodian (a parent, guardian or grandparent, for instance) to control the account. When the minor reaches the age of majority, the custodian is responsible for distributing the funds to the minor.
What to watch for: You’ll need to open a $5 savings account to become a member of Bethpage Federal Credit Union. Also, the high APY only applies on the first $1,000 that you have in your Bethpage Young Adult Savings.
Minors usually need an adult to open an account
Teens under age 18 will probably need a parent or guardian to open a savings account, and this adult will be designated as a joint account holder.
The best savings accounts for young people can feature a competitive APY, require no minimum balance and charge no maintenance fees. The right savings account, combined with a checking account and the use of a debit card, can help teens and young adults develop healthy money habits and save for future goals that may include college and homeownership.