Bank account for a minor: The best way to optimize your children's savings
MUMBAI: Avir Tiwari's wallet was so full that it couldn’t take it anymore. For the six-month-old boy, it wasn’t particularly a bad situation.
However, his dad, Ekansh Tiwari,associate vice president of currencies at Natwest Group, certainly had a task on his hands.
For, Tiwari had to find a way to lock the surprisingly large amount the newborn received during his mundan—a Hindu ritual that involves shaving off a baby's first hair or birth hair.
The solution, though, was simple.
Most major banks offer minor bank accounts that the parents can open on behalf of their children. Think of it like a piggy bank with additional perks like online banking.
One can also let their money grow by investing in instruments such as fixed deposits, stocks, and mutual funds.
“Opening an account was quite a straightforward process since my father worked in Punjab National Bank (PNB)," said Tiwari.
His daughter Asmi has ₹1 lakh in fixed deposit (FD) and ₹25,000 in her bank account.
The Tiwaris also opened an FD for their son. They put ₹50,000 in the FD, and ₹15,000 is lying as a balance in the account.
PNB sent them a debit card, but they returned it because they wanted to avoid the temptation of withdrawing money from the account.
Prakash Hegde, a chartered accountant, said if parents start FDs or mutual funds, etc., when the account holder is still a minor, then whichever parent has the higher income is liable to pay tax on it. Account holders start paying taxes on their own after turning 18.
A minor bank account has many advantages over a traditional piggy bank. One can invest in FDs, mutual funds, stocks, the public provident fund (PPF), and the Sukanya Samriddhi Yojana.
In today’s digital world, children above a certain age will also
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