Baby bank accounts

Opening a bank account in your child’s name can be a good idea for a number of reasons. It can provide an easy way to save towards university expenses, offer bonus interest and help to teach your child about saving early in life.

What is a bank account for a baby?

Some banks and credit unions provide accounts especially for children less than 18 years of age. You can open any such account in your baby’s name, provided you and your baby meet some basic eligibility criteria.

A typical baby account provides some level of interest, with some accounts letting you earn bonus interest as well. Baby bank accounts tend not to charge ongoing account keeping fees. However, they may come with some depository requirements along with restrictions on withdrawals.

How do I open a bank account for a newborn?

In Australia, children under 18 years old don’t have the legal right to sign documents such as those required in opening a bank account. Most banks require you be over 18, or in some cases 14 or 16, to open an account in your name. The good thing is you, as a parent or legal guardian, can open an account in your baby’s name, with your name listed on it as well. This is because financial institutions require some assurance surrounding the child’s legal responsibility. When your child turns 18 (or sometimes younger, depending on the bank) you can get the bank to remove your name from the account permanently.

To open a baby bank account you’ll have to provide details from your child’s birth certificate. You’ll also need to verify your identity, which you can do using a valid identification document such as your driver’s license or passport.

You can check with your existing bank to see if it offers baby bank accounts. If it does, and if you have access to its Internet banking platform, you may be able to apply for the account online. Applying by visiting a branch should be simple and quick as well.

Can I open an account before my baby is born?

Unfortunately, you cannot open a bank account for your baby before they're born. To open a baby bank account you’ll have to provide your baby’s birth certificate. You get this document only after your baby is born.

Are there any Government regulations or taxes on baby bank accounts?

One of the key regulations that surrounds children's savings accounts is who should declare tax on the interest earned. This essentially depends on who owns and uses funds in the account.

You, as the parent, would own the money if you’ve added funds in the account and spend it as per your liking. In this case, you’ll have to include the interest earned in your income tax return. This is also the case if you open a trust account in your child’s name, where you control its income and expenditure.

The funds in the account can come in the form of pocket-money, birthday presents, Christmas presents and savings from part-time earnings. In this case, if nobody other than the child uses these funds then the interest earned becomes the child’s income. The child does not have to lodge a tax return if his or her only source of income is interest not exceeding $416. If the bank withholds pay as you go (PAYG) tax, the child should file for a refund.

If the Australian Taxation Office (ATO) considers the money deposited in an account to be excessive it may carry out further investigation to establish the source of the funds. In case of a joint account held in multiple names, the division of interest happens equally among all account holders.

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How do I choose a bank account for my baby?

When comparing accounts for your baby pay attention the following aspects.

Requirements for opening the account

You’ll have to provide your baby’s birth certificate and you’ll also have to go through a legally required identity verification process. In addition, you may have to make a minimum initial deposit to open the account.

Ongoing account keeping fees

While savings accounts for babies tend not to charge ongoing account keeping fees they may attract other kinds of fees and charges. With some accounts, you can get fee-free banking provided you meet some depository requirements or maintain a minimum monthly balance. Before you open any baby bank account, review the terms and conditions carefully because these give you a clear indication of all applicable fees and charges.

The standard variable interest rate

The interest earned depends on multiple factors. The financial institution you choose plays an obvious role. While credit unions tend to offer better interest rates than mainstream banks, know that this is not always the case. Some baby bank accounts let account holders earn bonus interest if they make deposits each month and don’t make any withdrawals.

Location of branches

The proximity of a branch to where you live is important when opening a bank account for a child. While online banking might be perfect for adults, banks give children limited access to these platforms. As your child grows older, visiting a branch to make deposits and withdrawals will enter the picture.