Almost every bank or credit union in Australia has special accounts that are structured for children.
Technically you are not permitted to gift this type of account to a minor in Australia, but a child will certainly benefit from one that is opened by a parent or legal guardian.
Gift savings accounts are available in countries such as the United States, where these types of accounts can be used to help cover the costs of a child’s ongoing education. Switzerland also allows for gift savings accounts, but in this case there is no limit on what the balance may be used for.
What is a gift savings account?
In Australia, a parent or legal guardian is permitted to open an account in the name of their child. These gift savings accounts are managed by the adult until the child reaches an age where they are mature enough to take on the responsibility themselves.
The money in the account is earning interest, and in order to be considered a child’s account, cannot be used for normal child rearing expenses. Depending on the account balance, the child named on the account may be subject to tax on their interest earnings.
How does a gift savings account work for my grandchild?
Loretta has decided that this year for Christmas she is going to open a savings account in the name of her grandchild Brian with Suncorp Bank. As his legal guardian, she realises that she is permitted to do so as long as she can provide Suncorp with a copy of his birth certificate. With this account, her grandson can earn bonus interest when a monthly deposit requirement is met, and electronic deposits can be set up from her own bank account or from anyone else.
Since Brian is named as the primary account holder and is still a minor, there is no need to worry about having to pay taxes on the interest earned, so long as that amount does not exceed $416. If it does, then the child account holder will need to lodge a return with the Australian Tax Office at the conclusion of the tax year.
You may also be interested in
MyState Bank Bonus Saver Account
Earn up to 2.60% p.a. on this high interest savings account each month you deposit $20 and make 5 Visa Debit card transactions. Read more…
HSBC raises interest rate on Serious Saver account to market-leading 3.10%
Is this increased rate the sign of a bigger trend for interest rates on cash deposits? Read more…
AMP Bank term deposit $100,000+
Earn a competitive interest rate on deposits over $100,000 and enjoy flexible term lengths with the AMP Bank term deposit. Read more…
Grandparents can save parents $6,344 a year in childcare costs, per child
Almost half of Australian parents believe grandparents should be paid for babysitting. Read more…
Suncorp Growth Saver Account
You could reach your savings goal sooner with a Suncorp Growth Saver account thanks to the competitive bonus interest. Read more…
What are some other great financial gifts for children?
If you want to give a financial gift to a child that is not a basic savings account, you could think about a high interest savings account or a term deposit. Of course the same rules would apply in terms of tax on interest earnings and parental access, but a child will learn at a young age how to determine how much time and money is needed to help reach a financial goal.
For really young kids, start them off with a simple piggy bank where they put their spare change away for a rainy day purchase. With this type of financial gift for children, you can show them the cost of something they want to have, and then help them to see how quickly it can be purchased just by inserting a few cents a day.
An insurance bond can also be established in a child’s name and work like a managed fund towards savings toward educational or other large expenses. There are also tax advantages to opening this type of gift savings product that make holding onto it for an extended period of time worthwhile.
Is Christmas the best time to give these gifts?
Gift savings accounts and other financial gifts for children can be given for any occasion, including Christmas. While a passbook with some numbers printed inside may not seem like a good substitute for the latest video game at the time, kids will quickly learn that a savings account is a gift that keeps on giving. Once the child has an established gift savings account, you can help make it grow with monetary gifts for birthdays, graduations and other special occasions.
I would like to save some money for my grandson.
Bank accounts / term deposits have low interest rates
Can I open a share account for him?
Hi Tricia,
Thank you for your inquiry.
Application requirements can vary between different international share trading account providers. Generally, the age requirement for personal applicants would be over 18 years old. This guide on International Share Trading might provide more insight.
It would be best to check this directly with the Share Trading Provider so you can confirm on what they can offer you based on your preferences.
I hope this helps.
Best,
Maria
Sorry, I mistakenly posted the first part of my email before I had finished. My question is this – I was thinking of sending £600 to £1000 once a year to my Australian grandchild directly to his bank account. Of course, the exact $AUD amount depends on the currency exchange at the time. Is there a maximum that can be deposited/gifted by a grandparent? Thank you.
Hi Itsivm,
Thanks for your question.
This will depend on which bank the child’s savings account was opened, best to confirm this with the bank. While most banks do not have a maximum deposit limit, there is, however, a maximum interest that can be earned by the child account for the financial year that is considered tax-free, as mentioned in the case study above.
I hope this has helped.
Cheers,
Liezl