The Indian Contract Act, which governs transactions for consideration between two entities, deals with the following: Minor as null and void. Transactions with any person under the age of 18 are not valid under the law. Therefore, while Nandini A. can enjoy the benefits of bank account, she cannot enter third-party transactions herself. The bank will also not allow overdrawal of the account, as it amounts to a credit transaction.

What Nandini will learn from her bank account is that she can deposit and withdraw money, track her account, transact online and understand how the banking system works. It also makes it possible for him to save and Investment his money. Her parents will continue to be the guardian for all her transactions till she turns 18 and is able to transact on her own merit. A sense of responsibility and control will help him manage his money.

Gupta should take steps like setting alerts for transactions to guide Nandini and monitor her movements. An important lesson about money is allocation to multiple uses. With a bank account, Nandini will make the actual choice with the given amount and will be able to see how to decide between different options. She will also see how a small amount can add up to a lot. She will also understand how banking operations are set up and how money moves in the system to ensure security. These lessons have good practical application in his adult life.

Banks have limited the amount up to which minors can be allowed to operate deposit accounts independently. Hence, the risks will also be limited and the account can be operated under parental supervision.

Content on this page is courtesy of Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Aarti Bhargava and Labh Mehta.