Youth Account: 10 tips when opening your first account

1. Right time: Regular pocket money or first wage

“It is up to the parents to decide when the right time is for their children to set up their first bank account. Regularly transferring pocket money there once they turn ten or start earning their first wage are good opportunities to open an account for the child”, says Lorenz Schöne, Head of Product Management at Erste Bank.
The spark7 account offered by Erste Bank und Sparkassen is a free account for 10 to 19-year-olds. Children aged 10 to 13 can only open it with a legal guardian; from age 14 onwards, they can open it on their own, provided they have their own income or regular pocket money.
 

2. Comparing and getting an overview

A Youth Account is generally a free, credit-based current account, though fees sometimes need to be paid for various services (transfer, money withdrawal, etc.). The banks also provide various gifts when the account is opened, as well as additional services and benefits. “Go through the various services with your child to get an overview”, says Schöne.
 

3. No overdraft facility

Money can only be withdrawn from Youth Accounts if they contain the adequate amount. There is no overdraft facility, so as to prevent debt from building up. This restriction helps young account holders to be careful with their money right from the outset.
 

4. Explaining the value of the ATM card

ATM cards are absolutely essential for modern-day payment transactions. While 484 million transactions were recorded in Austria in 2016, this figure had risen to 550 million in 2017. And it’s a trend that continues to grow. “Right from a young age, children are clearly seeing their parents increasingly paying with bank cards. But they need to be told that the money doesn’t come out of the ATMs just like that”, says Schöne. Most Youth Accounts include an ATM card – but only with the legal guardian’s consent. The children must be made aware that an ATM card is to be treated like cash. They need to be taught to be careful with the card and code right from day one. This also includes teaching them that, if lost, the card must be immediately stopped or, in the event it is stolen, must be reported to the police.

5. The legal guardian has authorisation

Until the child turns 14, a Youth Account may only be opened with a legal guardian, who has authorisation. This enables them to set a limit for the child’s cash withdrawals, for example. “The young account holder can thus be supported and, if necessary, controlled when it comes to their money matters”, says Schöne.

6. Discussing account transactions

Bank statements are important for keeping track of your income and expenses. Today, that is usually done through mobile apps or online banking on PCs or tablets. Parents should help their children practise reading this account overview correctly. “Discuss the incoming and outgoing payments with your child. That’s how he or she will learn that expenses for rent, power and insurance make up most of the living costs – which is something he or she may not have expected”, says Schöne.

At Erste Bank und Sparkassen, spark7 account holders can either print out bank statements at the branch or log into their Youth Account anytime in George via digital banking.

7. Understanding the money pathway

Having their own Youth Account for pocket money or earnings can help children understand and follow the path their money takes. “Adolescents and unrecorded cash are easily parted. The account gives them a good sense of better planning their own finances”, says Schöne.

George makes money matters more interesting and fun – the account can be fully personalised with colours, names and photos to make it easier and more streamlined to use. The integrated Finance Manager automatically categorises and analyses income and expenses, though the children can also do this themselves. Watchdogs, meanwhile, inform account holders of important events, including in relation to incoming and outgoing payments, and transactions with specific parameters, such as amount, sender or recipient.

8. Noting the switch-over date

When children turn 18, they gain full legal capacity, and are able to do their own banking and sign contracts themselves. The bank then often automatically converts the Youth Account to a current account, and the legal guardian must be deleted from the current account. “Parents should keep this cut-off date in the back of their minds, because that’s the date from which the account can be switched over and thus overdrawn” says Schöne.

At Erste Bank und Sparkassen, spark7 account holders and legal guardians are informed in writing before the switch.

9. Prepaid credit cards as practice

Credit cards are not issued for Youth Accounts. The reason? Children and adolescents do not have a legal credit standing. In this way, they cannot get into debt through reckless spending. “It’s easier for kids to understand the value of cash if they hold it in their hands. Credit-card payments at this young age harbour the risk of quickly resulting in a debt trap”, says Schöne. One way of practising involves prepaid cards which operate on a credit basis. Parents can pay a certain amount into the card, which the child can then access. Payments are made at shops simply using the card and code – until the credit has been used up. There is no overdraft facility.

The s Prepaid Cards offered by the Sparkassen Group can be quickly and easily topped up, including when on the go, using George digital banking or the CardControl app, and may be stopped at any time if lost or stolen. The cards are particularly ideal when teenagers go travelling without their parents, for example.

10. Age-appropriate lessons in money

Parents should teach their children how to handle money right from the time the children are young – in an appropriate manner. “The earlier children learn how to responsibly handle money and bank accounts, the better equipped they are to become independent” says Schöne. In the early years, the focus is on understanding the concept of monetary amounts and saving for a particular goal. Once the children turn six, they should start to be taught the purpose and aim of saving, how to estimate needs and monetary amounts, and how to think critically about consumption. And once they become teenagers, they should also start learning things like the relationship between money and work, and how to independently handle their own money.
In addition to “money education” by parents, public institutions also focus on the importance of finance for personal life planning. One place where financial knowledge is taught innovatively is the Erste Financial Life Park, known as “FLiP” for short. Interactive tours show visitors the effects financial decisions have on their personal future.