Best bank account for children

It’s never too early to learn one of life’s hard lessons – that money doesn’t grow on trees.  In this article we’ll be looking at the different types of bank accounts for children.

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What do you want from a child’s bank account?

Bank accounts designed for children have many of the features of adults’ bank accounts.  The children’s market is huge so with a bit of research you should be able to find a few bank accounts that suit your purpose.  At this stage, it’s worth taking a step back and considering what you want the bank account to do for your child.  Are you looking for an account that will:

• Give your child the best return on the money saved in the account.  You will be looking to do some serious saving and perhaps want an account that you can make regular contributions to.
• Help your child to develop long-term saving habits.  You’re aiming for an account that makes it easy and exciting for your child to deposit pocket money and gifts, and offers rewards for consistent saving patterns.
• Help your child to learn about money management.  You want an account that gives your child access to the funds in the account so that your child can take responsibility for managing the account independently.

The best bank accounts for children

Knowing what you want to achieve from your child’s bank account will make it easier to research the best accounts because you will be able to eliminate at an early stage any type of account that doesn’t satisfy your general criteria.

• Accounts offering good returns.  If you want your child to learn the value of money, a high interest savings account that lets you control the activity in the account might be your best option. High interest savings accounts are normally linked to transaction accounts and often have lower age limits With a high interest savings account for your child linked to your own transaction account you can easily set up arrangements to make regular transfers out of your account into your child’s.  To maximise the returns on your child’s account you will be looking for a fee-free account or one with a good balance between account fees charged and interest earned, and it’s worth considering a children’s bonus savings account where regular deposits of a set amount, typically $50 or more, qualifies your child to receive a high rate of interest.  
• Accounts that encourage the habit of saving.  With this type of account the focus is on deposits, and the amounts deposited don’t have to be large as long as they’re regular. You’ll be looking for an interest-bearing account so your child is rewarded for saving, and a fee-free account so the savings aren’t eroded by account charges.  An account that makes it fun for your child to use the bank would be ideal – look for one has a kid’s club or a school banking program that operates at your child’s school.
• Accounts that your child can control.  If your focus is on your child learning all the aspects of managing money – spending money responsibly as well as saving it – you’ll be looking for an account that an older child can operate independently (and learn from the consequences of poor decisions).  If this is your aim, you’ll be looking for an account that allows withdrawals and also allows internet access and online transactions.

Handling and managing money are basic life skills we all try to pass on to our kids. In this article we’ll be looking at some of the different types of savings accounts designed for young children.

Purpose of your child’s savings account

When you’re considering a bank account for your child it’s important to be clear about what you want you and your child to achieve from operating a bank account. Your aims could be:

• Helping your child to save. If this is your aim, you’re probably thinking about opening a savings account that both you and your child contribute to: your purpose is for the account to accumulate as much cash and interest as possible.
• Helping your child to learn to save. If this is your aim, the amount of cash in the savings account is not a major consideration because you see the savings account as a way of teaching your child about the importance of adopting good long-term savings habits. For you, features of the account such as fees and interest rates will be as significant for their educational value as they are for their financial costs or benefits.
• Helping your child to manage money. If your aim is to help your kid to learn how to manage money, you might be most interested in accounts that encourage children to be actively involved in running the account independently.

Features of savings accounts for children

If you’re clear about what you want the account to achieve for you and your child, let’s move on to considering how different types of savings accounts might help you to realise your objectives.

• Helping your child to save. If your focus is on doing serious saving for your child, you might want to consider a child’s savings account that is linked to your personal transaction account, with a contribution set to come out of your account into your child’s account every month. You might also consider a standard high interest savings account to ensure a good return on savings – but remember that these accounts often have a minimum age limit for account holders so, for example, some banks don’t offer high interest savings accounts to children under the age of 12. You’d need to consider the tax implications of opening an account in your own name on behalf of your child.
• Helping your child to learn to save. If you’re prepared to forgo some return on savings for the sake of teaching your child about good savings habits, you have a few more options when it comes to finding a suitable savings account. Some of the features you might look for are: accounts with low opening balances and accounts that your child can operate online, so that your child gets used to taking immediate action when there is an opportunity to save; accounts that offer bonuses for saving, or accounts that don’t allow withdrawals, or penalise withdrawals with reduced interest, might also help to foster your child’s savings instincts. Some banks operate school banking programs that make it easy for a child to save, so it’s worth considering any bank that has a program at your child’s school.
• Helping your child to manage money. If you want your child to find out at first hand about the delicate balance between earning, saving and spending money, being able to independently operate an account that allows withdrawals as well as deposits will teach your child many lessons about all the facets of money management. For an older child, why not start by involving your kid in the process of finding a suitable account? Sharing with your child a project to research online the different accounts and compare their age restrictions, interest rates, account fees, transaction fees, required opening balance and other features could be very educational for both of you.

It is important to choose the very best savings account for your kids because this will be one of their first experiences with money and finances and you want to make sure it is a positive and easy to understand process. To choose the best kids savings account for the littlest member of your family, you need to know which features are the best to help your child save, and how the different children’s savings accounts differ according to your child’s needs and age.

Best Features for a Kids Savings Account

Your kids are not going to have the same savings goals or deposit schedule as you, so you can’t simply sign them up for the same savings account you use. Instead, you need to choose the best features in a high interest savings account which will make saving fun and easy, not to mention effective.

The best kids savings accounts:

Have low or no fees for their transactions and deposits. Your child may not be making a lot of internet transfers and even if they are already quite technologically savvy, they are still going to need to access their savings account in a branch to deposit their pocket money or birthday gifts from grandparents. Therefore, make sure you choose a savings account for your child which won’t penalise them for the way they use the account.
Send out regular statements which explain all the features and balances. Teaching your children to carefully read their bank statements is an important skill for protecting their finances from fraud in the future. Reading the statements with your child also helps them see where their money is going and what it is doing so that they understand why they are putting their money in the account and just how much extra interest they earned for doing that.
Ongoing high interest rate. Once you explain about interest calculations your child is going to be very interested in watching their balance grow from their own contributions as well as from those added by the bank. Therefore, don’t choose a kids savings account which has a high promotional period as the standard rate is likely to be quite a bit lower and your child will notice the drop in their interest. Instead, since your child is investing in their savings for the long term, choose a kids savings account with an ongoing high interest rate.

Types of Kids Savings Accounts

For each stage of your child’s life they are going to have different savings needs, therefore you need to know about the different types of kids savings accounts available and which one best suits your child:

When you’re saving for your child. If you are starting a savings account for your unborn or very young child then they are not going to have any input but you still want their funds to be growing. Therefore you may choose to create a sub-account from your own high interest savings account for your child and label it with their name, their due date, their birthday or something similar. In this way you can make regular deposits and build up a healthy fund as your healthy baby develops too, but the account is easy to manage and doesn’t take a lot of time to use and check. When you are ready to start your child on their own financial journey of independence, you can transfer the funds out of your account and into theirs via your linked account.
A kids savings account with training wheels. As your child becomes more aware of their finances you want to let them go out on their own and explore, while still making sure they are safe. Therefore you may choose to open a kids savings account in trust for your child, as high interest savings accounts can’t generally be opened by anyone under 12 years old, you can be the guardian of the account.
Tweens, and thinking about the future. If you can get your pre-teen or teenager to think about their future you will help them leap ahead of their peers when it comes time for them to move out or buy a house or car. Most teenagers are thinking about turning 18 and finally being able to drink and party, but you can use a high interest savings account to help your child both have fun and plan for the future. Help your tween or teen open a high interest savings account in their name which allows for sub-accounts too. These sub-accounts can be labelled one for ‚ ‘board’ to cover their expenses to live at home, one for ‚ ‘entertainment’ to give them spending money for weekends and holidays and one for ‚ ‘future’ to help them build funds for life after school. Showing your kids that it is possible to both save for the future and have fun now will help them build a financially secure future, as well as develop good saving and spending habits.