Every child needs to know how bank accounts work to understand money. That is why today, in this financial literacy for children series, we are going to talk about ‘what is a bank account’? We will also cover some frequently asked questions about it. Are you excited? Let’s go!
We know that a bank deals with money. We can keep our money safe in the bank and make it grow instead of keeping it in a drawer or in a piggy bank.
The bank needs to know how much money someone put in the bank and how much of that money they took out from the bank. One of the easiest ways to keep track of all of these deposits (put in money) and withdrawals (take out money) for anyone who wants to keep their money in the bank is to open a bank account.
When a person opens an account at the bank, they receive a passbook linked to its number. People need to update their passbooks regularly to check the latest bank balance.
For example: Meena (Age 20) recently received ₹100 from her grandmother and wants to keep it safe in the bank. The bank opened an account for Meena. Now, Meena can put money in the bank and take out money from the bank through it. The bank also gave her a passbook, which has a unique number, to keep track of the money that is put into or taken out of the account.
Meena’s passbook (updated on 1 February 2022)
Bank Account Number: 0082163135646785314
|Date||Credit (money put in)||Debit (money taken out)||Balance (money left)|
|1 January 2022||₹100||–||₹100|
|6 January 2022||–||₹20||₹80|
|15 January 2022||₹10||₹70|
|20 January 2022||₹30||–||₹100|
|27 January 2022||₹40||–||₹140|
|31 January 2022||–||₹30||₹110|
|Money in the account at the end of January 2022||₹110|
Exercise: Ask your parents if they have any bank accounts. If yes, ask them why they opened these.
Sometimes two or more people want to open an account in the bank together. So, they open a joint bank account. A joint bank account allows anyone with their name on it to use it. It is mostly used by family members and business partners.
Some joint accounts only let you take out money if everyone agrees. So, one person cannot do it alone without other’s permission.
Exercise: Why do you think people open these? Discuss the reasons with your parents.
For children under the age of 18, parents can open a children’s bank account. It has to be linked to the parent’s bank account. Like all other accounts opened at the bank, this one also comes with a passbook.
Generally, a child’s account has more security features than a grown-up’s account. For example, there is a limit on how much money can be taken out each day. When the child turns 18, the account turns into an account for grown-ups, and all the rules and limits applicable to a child’s account are taken away.
Exercise: How would opening one benefit you as a child? List three reasons.
Disclaimer: This post has been overly simplified to make it easy for children (Ages 5–8) to read and understand. Parental discretion advised.
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