Current account or similar if you have savings but no income

[Saracen]

My daughter is about to turn 18 and gain access to her £40k Child Trust Fund. She has never had a bank account in her name because the responsibility of looking after money frightens her; however, she does need one now. She has a moderate learning disability but has capacity: I will help her manage her money but I am not her appointee.

At a minimum she needs an account of some sort in her own name for the CTF money to be paid into: it cannot be paid into an account in somebody else's name (maybe it could if I were her appointee, but that isn't the plan). Ideally she'd also have a cashcard and the ability to set up direct debits, standing orders and make online payments. I intend to get her to start paying for all her activities and outings directly.

She isn't employed or on means-tested benefits in her own right or at university - she is still in non-advanced education, so I don't think she'd qualify for a student account. The only income she has is PIP, which is about £5k per year.

Will she have trouble qualifying for a standard current account with such a low income? If so, what other options might suit her?

Thanks for any advice!

Look at Chase, which is an online app based bank. There's a few of these (also Starling, Kroo, Monzo). If you're going to help her run it you could possibly open a joint account but be aware that will mean you are financially associated which will cause issues if either of you miss payments or get into bad debt with any accounts.

None require an income to run and all provide full banking facilities like direct debits. But the advantage of Chase is that she can open a linked savings account that pays 5.1%. and keep her savings in there.

Kroo also pay interest on the current account itself, at a slightly lower rate so is a good 'all in one' option which may or not be a good thing if she's at risk of spending until the money in the account runs out.

My Son’s both opened Accounts with Barclays, neither were working at the time but were over 16 years old. You don’t have to be earning to open a bank account.

Anyone can have a current account. Starling are great and do everything you want.

Does she really want the £40k in a current account though? Why not use a savings account and transfer a smaller amount for her day to day?

Anyone can have a current account, they don't require an income (Except for some premium accounts) however it would be unwise to keep the £40k in the current account, set up a savings account and keep it there, a LISA would be wise if she plans to buy a home in the future, however she can only put £4 a year in, with a £1k bonus from the government on top.

I’d set up a current account and savings account with same bank. Keep the majority of the 40k in the savings account and transfer in what’s needed. Our personal criteria was using a bank with a branch in our town (increasingly difficult) as although we do the majority of banking online nowadays, sometimes it is so helpful to just be able to go to the branch.

You don’t need an income to open a current account.

She's might find something like Monzo easy to use, you can separate money into pots and name them and you can have linked savings pots, the rats for those is pretty good.
I opened one just to use abroad (fee free) but have ended up using it for my day to day spending and savings. It gives lots of notifications, and clear visuals alive hope much Issy you've earned, what you've spent your money on that month etc which might be helpful for her

Not the question asked, but have you got enough time before she turns 18 yo convert the CTF into a JISA which will in turn convert to an ISA when she turns 18?

I agree with a PP about not having £40k in a current account.

Thanks for all your advice! Yes, the plan is to move most of the money into some investment which will pay better interest and just keep enough in the current account to pay her expenses.

@Chasingsquirrels genius idea to move the money into a JISA now so it converts to an ISA! Her 18th birthday is in three weeks, so that should be enough time if I'm quick. That way she won't be restricted by maximum contributions into an adult ISA as she would if she first puts the CTF money into a current account and then moves it to an ISA.

I've been looking at MoneySavingExpert, and I see that some people do have trouble opening a current account if they have bad or nonexistent credit history, because banks are taking a risk on honouring cheques which you might not have enough money to cover. Apparently one solution is a "basic bank account" which lets you do most things but comes without a chequebook, and they don't make payments if you lack the funds to cover it (i.e. no overdraft facility whether authorised or unauthorised). I like the idea of those, but so far the ones I have looked at pay poor interest or no interest.

Another recommendation for Chase and there is a linked savings account that pays decent interest. They don't allow you to pay cheques in, don't know if that's a problem. They also do not issue chequebooks.

Most current accounts will not pay credit interest so don't term that out you off. Instead as others have said she is best ti just use the current account for daily expenditure. Keeping savings separate

My 2 kids got santander accounts at age 11 when they obviously had no earnings. It's a current account with debit card. I'm not sure cheque books are ever given as standard these days and they certainly don't have one.

I really wouldn’t worry about cheques- who uses cheques?

Starling pays interest, you don’t need a credit history (ds opened an account with them at 16 or 17) and will do everything you want.

Well, it seems my worry was not entirely unfounded. We applied for a Starling account today and it was declined. It's their policy not to give a reason. I think it must be to do with her age or low income or lack of credit history. I'm sure everything else will have been in order. She's on the electoral register and provided a passport as ID.

I liked the look of Starling because it does pay interest and also you can access it via a browser as well as an app on your phone. I think banking entirely on a mobile phone is fiddly! Chase is app only.

We'll have another look at some of the others which you folks kindly recommended.

I opened a Nationwide Flex account.

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My daughter has just applied for a Nationwide FlexOne account. You have to be under 18 to open it, so I hope the requirements will be less stringent. As long as she can get it approved before her 18th birthday in a few weeks, she should be okay. Then she can keep it until she's 23, when they would move her onto a Flex account.

Looking here: What to do with a maturity Child Trust Fund - MSE (moneysavingexpert.com)

I think you should check with whoever her CTF is with, whether it can convert directly to an adult ISA, before worrying too much about where to put it. And then you and your daughter can think jointly over time how it should be invested, what should be available vs what can be put away for longer term savings.

Hope the bank account works out ok.

Where does her PIP get paid into?

Could you open a simple joint account with her, then take yourself off it down the line? Her PIP can be called income.

Most simple current accounts wont pay interest these days.

Do you manage her PIP then? In which case an appointee account might be the way forward although i know its not what you ideally want. That won't help with the 40k though as they won't allow that much i don't think.

Her PIP goes into my account and I look after it for her with her consent. When she was 16 and moved from DLA onto PIP, she found the idea of being responsible for money too daunting. But I have now persuaded her that she can do it, and reminded her that I (or other trusted relatives) will always be happy to help her with advice and practicalities. I don't think it's appropriate for me to be her appointee because she is able to understand her options and make choices if things are explained to her.

We could have a joint account, but I think it's better if she has her own, even if it doesn't have all the features we might like.

Not sure from your original post whether you have days, weeks or months before your DD's birthday, but I would suggest helping your daughter to apply for a Nationwide Flex account - she should be able then to hold the teen one until she's 23 - they do pay a tiny bit of interest on current account balances on that account I think. If you don't have time before she turns 18, apply for a Nationwide Flex account - you can tick no to an overdraft. (I opened a secondary current account for myself but did this). Either way, she gets a card which acts as an ATM and Visa debit card.

You can fill out an application online, though they may want you to go in to a branch with ID. I did most of the application form completion for the kids, and recently I opened the linked savings account for DS1 who had a current account. I want to do the same for DS2 but he never wants to do it right now (which I find weird as I'm proposing to give him control of over £100 in an old passbook savings account with my name on it (opened when he was a baby). We were never asked to go in with ID for the kids or myself, but we had various savings accounts etc previously so they have records of us.

One of my reasons for choosing Nationwide is knowing that we can easily visit a branch if and when we need to as well as online and telephone support. There are more branches closer to me than there are now of the Big Four bank where I have my main current account, and for you and your daughter if you would like to be able to visit the bank/BS in person and make appointments, it's probably worth looking at local availability to you of branch services when needed as a back up.

The teenage account has a linked savings account offering 5% pa interest but only up to £3,000. When your DD turns 18 there are various savings accounts including an unlimited access one (3.25%) and a limited access ISA - 3 withdrawals a year (4.25%). I don't know whether you can convert from a CTF to a JISA or ISA and whether this way you can put all the money into tax free accounts - otherwise £20K can go into the ISA and the rest would need to go into other accounts.

Whatever accounts you choose, she will get correspondence but you and your DD can always sit down together to log in and manage her accounts online. Having current and savings accounts together at one building society or bank (whether or not that's the Nationwide) would mean that you can look at everything regularly on one screen. Or you can go for a better ISA rate elsewhere but keep a current account and linked access savings account together.

She could apply for a basic current account as the criteria are less stringent and less for her to get stressed about as they don't have an overdraft facility.

She can also apply for an ordinary current account but without an overdraft facility, at 18.

@elkiedee "If you don't have time before she turns 18, apply for a Nationwide Flex account - you can tick no to an overdraft." Wow, that's great, I didn't know that was possible. Maybe it would be easier for her to get accepted. She doesn't want or need an overdraft.

It's only a few weeks until she turns 18 and we are now waiting to see if she's been accepted for the Nationwide FlexOne (teen) account. It's a race to get to the bank with ID too, as we are on holiday for part of that time.

Thanks for all your thoughts.

Nationwide Flex is great - I encouraged my 15 year old DD to switch from her TBS child account because of the savings account that has an interest rate of 5%. They also still have a branch locally. DD was very tickled to get a letter a few weeks ago, saying that she would be getting a 'fairer share payment' of £100. The money was quickly paid into her account without her having to do anything.