Finance and Economics Discussion Series (FEDS)
Does Access to Bank Accounts as a Minor Improve Financial Capability? Evidence from Minor Bank Account Laws
J. Michael Collins, Jeff Larrimore, and Carly Urban
Banking the unbanked is a common policy goal, but should this include access to bank accounts for minors? This study estimates how teenagers' access to bank accounts affects their financial
development. Using variation in state laws, we show policies that permit access to independently-owned accounts increase account ownership at age 16 through age 19, although by age 24 those
young adults are banked at similar rates to teens who grew up in states that do not allow minors to own accounts independently. Teens who had access to independently-owned accounts use fewer high-cost alternative financial services (like payday loans) through age 20—but are then more likely to use AFS, particularly check-cashing services, from age 21 through 24. Using credit records, we show that access to non-custodial accounts has no effects on credit scores in the short-run, but lower credit scores and more loan delinquencies at ages 21 through 24. While these state laws promote financial inclusion for teenagers, the young people who take on accounts may experience negative consequences in the longer run.
PDF: Full Paper
Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment.
The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.