There are a few things to consider once your child reaches the maximum age for their kids' bank account. Learn more about the options and what you should consider here.
Kids’ bank accounts are specially designed to help children save money and learn how to manage their finances. There’s a wide range of accounts available, but all of them have a maximum age limit, and your child must be under the age specified in order to open one.
It’s important to find out what happens to the account when your child reaches the cut-off age. If you’re not careful they could be left with a sizable dent in their bank balance.
What age limits apply?
Kids’ bank accounts come with a variety of age limits depending on the terms and conditions imposed by the bank. Popular age limits include:
- 18 years of age. This is the most common age limit quoted and is the maximum cut-off age available. Accounts with this age limit include the Commonwealth Bank Youthsaver Account and the Suncorp Kids Savings Account.
- 17 years of age. The CUA Youth eSaver Account carries this age limit.
- 15 years of age. Accounts with a cut-off age of 15 include the Bankwest Kids’ Bonus Saver and the Bankwest Children’s Savings Account.
- 12 years of age. This limit applies to accounts specifically designed to act as first bank accounts for younger children, and includes the Westpac Kids Reward Saver and the Bendigo Bank PiggySaver Account.
Your child’s bank account may have a limit that is not listed above, so check the fine print for full details.
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What happens when my child reaches the maximum age?
Depending on the terms and conditions of your account, either of the following could occur:
1) The kids’ bank account converts to another type of account
This is the most common outcome. Banks obviously want to retain your child’s business, so their kids’ account could automatically convert to an adult account when they turn 18, or a different children’s account if the maximum age is lower than 18.
2) The account is closed
Some banks will automatically close the children’s savings account and “sweep” all funds into a linked transaction account.
Once again, it’s important to check the terms and conditions associated with your child’s account to make sure you’re aware of what will happen to their funds.
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Traps to avoid
A common trap Aussie kids face when they reach the cut-off age is that their children’s account automatically converts to a different type of account that has a monthly fee. This ongoing charge can quickly start to eat away at their balance without them even realising it.
Other account conditions may also come into play, such as minimum balance requirements and limits on the number of withdrawals, and not abiding by these new rules may incur fees.
Changes to interest rate
Your child’s new account may have a different interest rate from what they enjoyed previously. Children’s savings accounts often offer better interest rates than the rates available on adult accounts, due to the fact that kids generally have smaller bank balances. Check what the interest rate will be on the new account. It might be worth shopping around to see if you can find a better rate elsewhere. Remember, as with all variable interest rates offered by banks, it can move up and down in line with the RBA Cash Rate.