What is a Bank Account? A Comprehensive Explanation for Children

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!

What is a bank account? 

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

Exercise: Ask your parents if they have any bank accounts. If yes, ask them why they opened these. 

What is a joint account?

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. 

For example:

• Seema (Age 20) and her mother (Age 48) recently opened a joint account in the bank that they both use. In this joint account, both Seema and her mother need each other’s permission to take money out. However, anyone of them can put money in it.

• Seema (Age 20) and her father (Age 50) have another joint account in the same bank, which is a little different. In this account, Seema and her father do not need each other’s permission to take money out or put money in it.  

Exercise: Why do you think people open these? Discuss the reasons with your parents.  

What is a children’s account?

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.

For example:

• When Chinu was 11 years old, her parents opened one for her. It was linked to her mother’s account. Chinu used to put all the money she received as gifts or as a prize in it. 

• Chinu turned 18 years old last month, and her account is no longer a children’s account. It has become a regular bank account that grown-ups use. 

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. 

Download the worksheet here.