Introduce your kids to the world of saving by getting them to open a bank account.
Teaching children about the importance of banking and how the system works can never start too early, and what better way than for them to actually open and use their own bank accounts. Fortunately, many Australian banks provide bank accounts especially for kids, and more often than not, these accounts offer interest.
Search and compare kids bank accounts below
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How do kids bank accounts work?
A kids’ bank account works like a conventional bank account, but with little differences. For example, most accounts come with age limits. Kids' bank account holders should be under 18 years of age. Some kids’ bank accounts offer bonus interest, and to earn this interest account holders have to meet certain criteria. These can include making minimum deposits each month and not making any withdrawals.
Some such accounts offer competitive standard rates, and with these accounts your kids stand to earn interest without having to meet any deposit or withdrawal requirements. How your child can access funds depends on the chosen account.
Back to topHow do I compare kids bank accounts?
Accounts meant for children can vary in terms of features they come with, so pay attention to the following factors when comparing your options:
- Interest. The standard variable rate these accounts offer can vary noticeably. Most such accounts let account holders earn bonus interest if they meet certain conditions, and this bonus interest rate varies from one account to the next.
- Bonus interest conditions. Children who start earning through part-time jobs can benefit by opening accounts that offer bonus interest, provided they meet certain conditions. To earn bonus interest account holders typically have to make deposits regularly, and they should not make any withdrawals.
- Banking programs. Some banks offer programs for children to help them learn about saving and finances. These programs can also offer rewards and freebies.
- Access to funds. This factor plays an important role if your child needs to access funds in the account from time to time. Access to funds can come via a debit card, phone banking and online banking. Some offer account access via branch banking and Bank@Post outlets, and some allow direct debits and direct credits as well.
- Fees. Kids’ bank accounts tend not to charge any ongoing account keeping fees. Fees you may have to from time to can include card replacement fees, over-the-counter withdrawal fees, overseas ATM fees and cheque dishonour fees, and these can vary from one bank to another.
- Age requirement. The age requirement of these accounts can vary as well. While some accounts are for those up to 18 years of age, the maximum age in some cases is 15 years and 16 years.
Why should I open a kids bank account?
Pros
- Interest earning potential. Most kids’ bank account let account holders earn interest through standard variable rates, and many even let them earn bonus interest by meeting some basic requirements. Such accounts give children simple means to make the most of their money.
- Fees and charges. Banks tend not to charge any ongoing account keeping fees for the kids’ accounts they offer, and they also try to keep other fees and charges low.
- Easy access to funds. These accounts offer access to funds in different ways, so you or your child can pick one in accordance to individual needs.
Cons
- Taxes. If any such account earns $416 or more as interest during a tax year, it is subject to tax, and the account holder will have to file an individual tax return.
- Bonus interest requirement. Most such accounts require that account holders should not make any withdrawals in a month to earn bonus interest, which is not easy for kids who want access to money in their accounts.
What are the risks?
It's not so much a risk, but account holders stand to lose out on earning bonus interest each month they don’t meet the required criteria. Children don’t have to worry about losing money in their accounts because the Australian Government guarantee for deposits of up to $250,000 applies on these accounts.
Parents should not think about using these accounts to hide their own money because the Australian Tax Office (ATO) has very strict guidelines about the operation of such accounts. If you’re worried about your child accessing funds in the account more often than requited, you can consider opening an account that offers access to funds in limited ways.
Search and compare childrens' bank accounts
| Product name | Age limits | Maximum variable rate |
|---|---|---|
| Bankwest Kids' Bonus Saver | 0 - 15 years | 4.75% |
| CUA Youth eSaver Account | 10 - 17 years | 4.00% |
| Bankwest Children's Savings Account | 0 - 15 years | 2.50% |
| CommBank Youthsaver Account | 0 - 18 years | 2.30% |
| People's Choice Young Saver Account | 0 - 18 years | 2.55% |
| Suncorp Kids Savings Account | 0 - 18 years | 2.75% |
| Westpac Reward Saver - Under 12 | 0 - 12 years | 1.50% |
Have more questions about kids bank accounts?
Q. Does a child under 16 years of age have to provide a tax file number?
No, this is not a requirement, but make sure you get the account marked as an 'Under 16 - TFN Exempt' account.
Q. My child is less that 12 years old so should I open an account as a trust?
No. You can open the account by adding yourself as a signatory, which you can later transfer to the child.
Q. Can I use my child’s account to benefit through the tax-free threshold?
Any money you transfer to your kids bank account, you have to declare in your tax return, so taking this route will lead to no benefit on the taxation front.
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