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Financial literacy is a very important issue and it pays to start young. Smart parents can start their children off on the right path by introducing their children to banking at an early age by signing up for a Childrens Bank Account. Most banks offer special bank accounts specifically for children. A few of them even have special websites to help the education process.
Having a bank account will help children learn:
- the concept of interest
- understanding fees
- savings goal setting
- reading a bank statement
- interacting with the bank – making deposits and withdrawals via phone, online or in person
This article provides a run down on some of the childrens savings accounts available from the major institutions.
Childrens Bank Account Summary Table
| Name | Suitable for Ages | Interest Rate % | Other |
|---|---|---|---|
| ANZ Progress Saver | < 18 | 0.01% + 4.25% | Earn bonus interest when you make one deposit of $10 or more and no withdrawals in that month |
| Commonwealth Bank Youthsaver | < 18 | 0.01% + 4.00% | Make at least one deposit and no withdrawals to earn bonus interest each month Childrens website |
| NAB Smart Junior Saver | < 18 | 1.00% + 3.00% | Bonus interest paid when at least one deposit and no withdrawals are made in the same month Free money box |
| Westpac Kids Reward Saver | < 12 | 0.75% + 3.40% + 1.55% for 4 mths (up to 5.70%) | Standard rate is 0.75% Bonus interest is 3.40% Special offer for new accounts 1.55% p.a. fixed rate for 4 months on accounts opened between 9 March 2010 and 11 April 2010 |
| Westpac Youth Reward Saver | < 21 | 0.75% + 3.40% + 1.55% for 4 mths (up to 5.70%) | Standard rate is 0.75% Bonus interest is 3.40% Special offer for new accounts 1.55% p.a. fixed rate for 4 months on accounts opened between 9 March 2010 and 11 April 2010 |
| Bankwest Children's Savings Account | < 15 | 0.25% < $5,000 1.25% $5,000 < $10,000 2.25% > $10,000 | Link it to a Bankwest Kids' Bonus Saver |
| Bankwest Kids' Bonus Saver | < 15 | 7.00% | Must be linked to Bankwest Children's Savings Account Bonus interest paid each month when $25-$250 is deposited and no withdrawals are made |
| ING Direct Savings Maximiser | 13+ | 4.50% + 1.35% for 4 months | Not a child savings account per se but an ordinary savings account open to children 13 years and older |
| St George Incentive Saver Account | < 18 | 0.01% + 1.50% | Bonus interest paid monthly when you make at least one deposit and no withdrawals per month Childrens website |
| Suncorp Kids Savings Account | < 18 | 1.25% + 3.75% | Earn bonus interest each month where you deposit $20 or more and make no more than one withdrawal Childrens website |
Warning
Before you start you should be aware that children have special tax rates (see ATO website) and if you are considering trying to “save tax” by holding large amounts of money in your child’s name then you would be in danger of attracting undue attention from the ATO. The ATO is well aware of this issue and you would not the first to think of doing it. Banks routinely report all transactions of a large size to the ATO. If you do want to save tax then there may be better options open to you. It all starts with your goal. If you want to starting a savings plan with the intention of funding education costs, a house deposit or even funding their retirement needs then there are specific tax enhanced savings vehicles probably more suited to these needs (eg: Savings Bonds, First Home Saver Accounts and Superannuation). If any of these are your intentions it would be wise to see a financial planner.
Tax Issues
Some issues you need to be aware of when it comes to tax on childrens savings accounts are best answered by the ATO including:
Does a child have to quote a tax file number (TFN)?
Who declares interest earned by the child’s savings account?
Does the child need to lodge a tax return?
Childrens Savings Account Details
ANZ Progress Saver
For children under 12 years of age ANZ require the account to be opened in the name of an adult in trust for the child. The Progress Saver account offers bonus interest if you deposit $10 or more and have no withdrawals or debits each month.
The standard interest rate is 0.01% with bonus interest of 4.25%.
Other features include:
- Minimum opening and ongoing balance $10
- No monthly account service fee.
- You can deposit cash directly into your account through branches
- You can track saving progress with a savings graph on each statement.
- Automatic savings plan
- Receive one free ANZ Transaction as defined in the ANZ Personal Banking Account Fees and Charges (PDF 324kB) booklet
Commonwealth Bank Youthsaver Account
The CBA Youthsaver account is suitable for children under 18 years of age. It offers standard interest of 0.01% with bonus interest of 4.00% if you make one deposit and no withdrawals each calendar month.
Other features:
- No monthly account fee
- No withdrawal fees when you use Commonwealth Bank ATMs and branches
- Primary school students can bank at school if their school participates in the Commonwealth Bank School Banking program.
The Commonwealth Bank run the well known Dollarmites Club program with a dedicated website with games, activities, downloads as well as material for parents.
NAB Smart Junior Saver
The NAB Smart Junior Saver is for children under 18 years. It offers a standard interest rate of 1.00% with bonus interest of 3.00% payable when at least one deposit and no withdrawals are made each month.
Other highlights include:
- A free money box
- No minimum or opening balance requirements
- No transaction or account keeping fees while they are under 18 years old
- Quarterly statements with a savings graph to monitor your progress
- Access at any NAB branch, or through NAB Internet Banking or NAB Telephone Banking
Westpac Kids Reward Saver / Westpac Youth Reward Saver
Westpac has two childrens accounts, the Kids Reward Saver for children under 12 and the Youth Reward Saver for those under 21.
They offer a standard interest rate of 0.75% with bonus interest of 3.40% if you make a deposit and no withdrawals each month. They also offer a special incentive of extra interest for new accounts opened between 9 March 2010 and 11 April 2010 of 1.55% for 4 months. Total interest if you meet these requirements is 5.70%.
Both have similar features including:
- No monthly service fee
- Free withdrawals each month (when a withdrawal is made the standard bonus interest rate won’t apply)
- Deposits into the account can be made by visiting a branch or via Online Banking by providing the BSB and account number.
- Monthly statements
Bankwest
Bankwest have two childrens savings accounts one is a transaction account and the other is a high interest savings account. The transaction account is a requirement before you can open the high interest savings account.
Bankwest Children’s Savings Account
This account has a tiered interest schedule:
- balances less than $5,000 the interest is 0.25%
- balances of $5,000 to $10,000 the interest is 1.25%, and
- for balances greater than $10,000 the interest is 2.25%.
Features include:
- Suitable for children under 15
- No monthly fees
- It can be linked to the Bankwest Kids’ Bonus Saver
Bankwest Kids’ Bonus Saver
This account pays a whopping 7% bonus interest when deposits of $25 to $250 are made each month and no withdrawals are made. There are also no account fees and access can be made by the parent or guardian via phone or online.
St George Incentive Saver Account
This account is open to all children of any age. It offers standard interest of 0.01% with tiered bonus interest. For amounts from $1 to $50,000, the bonus interest is 1.50%, while amounts greater than $50,000, attract a bonus rate of 2.50%.
To gain the bonus interest at least one deposit and no withdrawals have to be made each month.
For children under age 13 St George offer membership to their Happy Dragon Club with access to special games, puzzles and other educational material and you can download colouring-in sheets to keep them occupied.
For parents they offer some tips and lessons to help children learn good money habits and these six simple money lessons explaining what money concepts kids can understand at their various developmental stages.
Suncorp Kids Savings Account
The Suncorp Kids Savings Account offers standard interest of 1.25% and bonus interest of 3.75% for every month where a deposit of $20 or more is made with no more than one withdrawal.
The account features include:
- No monthly account keeping fee
- No Suncorp Bank transaction fees
- Monthly statements with a savings graph to track progress
Suncorp also has a childrens website called Suncorp Kids, which provides educational material for for children including goal setting, worksheets and games as well as information for parents.
Alternatives Options for Older Children
ING Direct Savings Maximiser
Whilst not specifically for children the ING Direct Savings Maximiser allows children as young as 13 years to open an account. The Savings Maximiser is a popular online high interest savings account that pays a standard interest of 4.50% with new accounts currently an extra 1.35% for 4 months.
It features:
- No monthly fees
- A high standard interest rate
- Does not require any regular monthly deposits, and
- Has no minimum balance
Disclaimer: Product features including interest rates change without notice. Please check all details with the product provider before taking any action. It is highly recommended that you consult a tax adviser before starting any of these types of accounts as there may be unintended taxation consequences due to the different taxation rules for minors (children under the age of 18).