youthmoney

No one is born knowing how bank accounts work. Young people can appreciate someone non-patronising making the effort to explain terminology and key features of the banking system. Worth covering, if only to check there are no gaps in knowledge are:

• The basics of what a cheque is, the mechanics of the banking system and the length of time it takes for a cheque to clear.
• How to write a cheque, including the stub.
• How to keep a record of current balance and check statements.
• The system of direct debits and standing orders, and the practical difference between them.
• The different functions of a cash card, a debit card and a cheque guarantee card. And the difference between them and a credit card.
• What overdrafts are, and the costs involved.
• Joint accounts, the basics.
• PIN numbers, using them, keeping them safe and forgetting them
• Basic security and the procedures following a lost or stolen card or cheque book.

There is, generally speaking, no minimum age for opening a bank account – though the facilities offered to young children will be limited. The youngest age for obtaining a cash card is 11.

Some 16 and 17 year olds have debit cards. An overdraft is a form of credit – so is usually available only to 18 year olds and older.

To open an account, a young person needs ID. Banks must verify customers’ identity. They can be fined if they breach strict regulations, including laws designed to track movements of money by terrorist and criminal organisations. Banks have to take ID seriously.

Some bank staff may insist that a potential new customer must produce a driving licence, a passport, a recent utility bill in the customer’s own name or other types of ID that are not readily available to all young people.

Many young people are discouraged at this first hurdle. This is a shame, because the banks may well have more flexibility than it seems at first. Their obligation is to verify identity and there are other ways to do it.

Youth support workers or other adults can help act as broker to smooth this process. For instance:

• Make personal contact with a manager of a local branch, explain the problems that young people are having, and try to agree a work round. This may be to draw up a list of “alternative but acceptable” ID for young customers. This could include Benefits Agency correspondence, and a letter of verification on headed notepaper from hostel, foyer, school or college or other institution.
• Get into the habit of offering to write and sign a testimonial letter for a young person to use for ID verification.
• In cases of prolonged difficulty, seek out the financial institution’s senior member of staff who is authorised to deal with exceptional cases. There will usually be one.
• Help young people understand the logic behind ID checks. A good start is the leaflet, Proving Your Identity, which can be ordered or downloaded from the FSA.

It can be a serious setback for a young person to be refused a bank account. That’s particularly so since payments such as Education Maintenance Allowance must be made through a bank account. Reasons for problems opening an account include not having acceptable ID, having a low credit rating or a criminal record.

Alternatives to consider are a basic bank account, a savings account or a credit union. If it is to receive benefit payments, a Post Office card account may be suitable. All these are easier to obtain than a full current bank account.

One simple thing to help a young person improve their credit score is to suggest they register to vote. It is now possible to join the electoral register at any time of the year. A fixed address is not necessary. Homeless people can give details of where they spend a substantial part of their time on a form called a “Declaration of local connection” obtainable from the local electoral registration office. See About my vote.