Can we give minors bank accounts?
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Sudeep Reddy has a story today about the latest attempts to try to get bank accounts for the unbanked. Such attempts are always well-intentioned, and nearly always doomed: this is a very tough nut to crack.
But the fact is that the single most important part of banking the unbanked has already been done, with the passage of the Dodd-Frank bill. Pretty soon, overdraft fees are going to be tightly regulated, and much harder to rack up inadvertently. They have historically been the biggest reason why people close their bank accounts, and if they go away that will be a huge help in terms of getting the unbanked back into the system.
There’s also an intriguing idea at the end of the story:
Another novel approach: pushing consumers into bank accounts when they are young, as New York City started doing this year with its summer youth work program. If workers didn’t have a bank account, they could create one on the spot—branded as an “NYC First Account”—in order to get paid through direct deposit.
Of the 9,000 eligible young adults over age 18 offered the account, the city’s Department of Consumer Affairs says, more than 2,000 signed up.
The problem here, of course, is that the “when they are young” bit doesn’t really square with the “over age 18″ bit. Is there any way to relax the legal requirement on parents having to open accounts on behalf of their children?
It’s quite sad, I think, that minors aren’t legally allowed to have their own bank accounts. It would be great to give a bare-bones, no-overdrafts-allowed, no-fees savings account to all schoolkids, just to get them used to banking. They’re allowed to open joint accounts with their parents, and write checks on those, so I’m not sure what the problem would be by giving them an account of their own. But I’m sure the lawyers can think of something.