Question: Is there a law that protects minors from paying fees on savings accounts? I have heard that there is, but I am trying to find out the truth. For the past four years, our bank has been taking a $7-per-month service charge out of the savings accounts of our two 10-year-old sons. The bank manager said that they add service charges if an account balance is less than $2,500.
I was under the impression that state law does not allow banks to assess service charges on the savings accounts of minors. To avoid the charge, the bank manager linked my husband's and my checking account to our sons' savings accounts. But the manager said that they keep only three months' worth of records, and I would need to bring in all our past statements for the bank to reimburse the boys' accounts.
My sons have faithfully deposited money over the years, hoping to watch their accounts grow as they earned interest, but they've been disappointed. Should I take all our accounts out of this bank?
Answer: As fast as you can. That's the best way to demonstrate your dissatisfaction with the bank's policy, which, unfortunately, is common.
There is, however, no law, state or federal, that prevents banks from charging fees on accounts for minors. Each bank is free to set its own policy — and, as your situation shows, banks are not always friendly to kids.
Banks would argue that fees help cover the cost of small accounts, which are expensive to maintain. But it's counterproductive to charge exorbitant fees on children's accounts that by definition are going to be small. That's no way to encourage kids to save, or to win future customers.
Fortunately, not every bank has such punitive policies. Many community banks, credit unions and national institutions offer special programs for kids, such as Wells Fargo's Stagecoach Kids Savings Club. Inquire at other financial institutions in your area, or shop at an online bank, such as ING Direct; www.ingdirect.com, which offers its Orange Savings Account with no minimum balance and no fees.
If none of your local banks roll out a welcome mat, you may open an account at the kids-only Young Americans Bank (1-303-321-2265, www.theyoungamericans.org. Young Americans is headquartered in Denver, but it accepts accounts by mail from all 50 states.
Have a question about kids and finances for Dr. Tightwad? Write to Dr. T at 1729 H St., N.W., Washington, D.C. 20006. Or send the good doctor an e-mail message (and any other questions for this column) to jbodnar@kiplinger.com.