Setting up a bank account for your child is a great way to encourage them to save, as well as learn about the art of managing their money electronically in an increasingly cashless society.
Many retail banks, building societies and credit unions offer savings accounts that have been specifically designed for children and don’t charge transaction or monthly account fees. Many offer different tools that help with managing the account and savings.
You will need to decide what the purpose of the bank account is, as this will affect the type of account or accounts you open.
Types of account
If you want an account your child can use for long term savings with very few withdrawals, look for an account that has features that will help your children’s savings grow including no fees, a competitive interest rate plus “bonus” interest paid into your children’s savings if there are regular deposits and no withdrawals during a month.
Your computer-savvy child will also likely want to be able to check their balance and statement online so take the time to sit down with them and explain the terminology that’s used. Use simple language to explain words like deposit, withdrawal, account balance, transaction and interest.
These accounts are used for day to day spending accessed online or via a card. The minimum age for an EFTPOS card varies depending on the bank but is usually around 7-10 years old. Your child is unlikely to earn much, if any, interest on the money in this account.
What you need to open an account
In the past you would need to go into a bank to open an account for your child but this is changing rapidly. Check with your chosen bank – you might be able to do it all online now.
Children under 13 years old will need their parent/guardian’s permission to open an account. Banks will usually ask for identification for both the child and the parent, ie passport, driver’s licence, birth certificate as well as proof of address. Check with your bank for their requirements.
If you are opening an account in a bank that you do not have an account with, you will need to also provide documentation about yourself. Also consider that if you want to transfer money from your account to your child’s it may not appear immediately if you are with two different banks.
Keeping their money safe
First up, before deciding what sort of account you will need, decide what access you would like to give your child to the money in their account. As the parent/caregiver you can decide exactly how you want this to work. For younger children or children just setting out on their money management journey, you will likely want them to be able to see their money online, and that’s about it.
If your child has savings, you might want to get them an EFTPOS card linked to a transaction account only and leave them unable to touch their savings without your approval until they are a bit older and wiser. This would mean you would need to be a signatory or joint account holder.
If your child is an online purchaser, a debit card might work better for them.