When should you open a kids bank account?
7 January 2019
A lot has changed since the simple days of piggy banks and pocket money. For starters, the 10 cents you used to be given to go down the block and buy yourself a treat probably won’t get your young one very far (thanks, inflation). Secondly, there’s a lot more expectation on the next generation to be responsible with money, especially with technology making it super easy to spend.
The benefits of starting them young
There are a number of advantages to opening a savings account for your child, including:
- They’ll learn about responsibility and money management. While that seems like a bit of a dry topic for a 10-year-old, the ability to develop these skills early can really benefit them later in life. It doesn’t mean they have to be balancing complex budgets and bank statements, but a savings account can give them the opportunity to start learning the basics
- Their money will earn more interest sitting in a savings account than a porcelain pig. It may not necessarily be heaps, but it’s almost definitely going to be more than they would earn if their money wasn’t in a bank. This will also teach them how interest rates can decrease if they withdraw their money, encouraging them to be smarter with their savings goals and habits
- Speaking of, starting young with a kids savings account can be a great way to establish healthy money habits early on. A lot of the time, teenagers or young adults get their first job, open a bank account for the first time, and start their money/saving habits from there. Starting them a bit earlier – and with a more manageable income – might stop bad habits forming that may only get worse with age
- Starting young means your kid is more likely to have savings when they’re older. That’s definitely something they’re going to be thankful for!
- Money can be a bit of a taboo topic in our society, but that isn’t always necessarily the healthy way to view it. By opening a bank account for your child, it creates an opportunity to talk about money in an honest, healthy, and transparent way. This can nurture a better attitude towards money as kids grow older, and even make it less of a secretive point of stress
Learning about the dangers of online spending
The Financial Basics Foundation recently surveyed 1,000 Australian parents, and found that more than half of them (54% to be specific) have had to unexpectedly foot a bill because of their children’s secret spending habits. This is largely due to that fact that most of our devices, from mobile phones to smart TVs, are hooked up to our credit or debit cards, making it easy for young ones to purchase something with a click of a button.
Findings from the Financial Basics Foundation’s parent survey
Is your child ready for a savings account?
Understanding the benefits of opening a kids savings account is one thing, but how can you be sure your child is old enough or ready for one? This is often a very individual question, and one only you can truly answer, but there are a couple of things you can consider.
Let’s start with age limits. Most banks don’t have a minimum age, but they will often require a parent or guardian to give consent if the child is under a certain age. For example, Suncorp’s Kids Savings Account is available to all people under the age of 18, with parental permission needed for those under 11 years old.
In terms of if they’re ready, that really depends on how much money they’ll be managing in their account, and how much assistance you’ll be providing. From very early ages, you always have the option to manage their account for them, until they’re ready to take the reigns.
There are also tools that can help kids prepare for their bank account. Like ESSI (Earning, Spending, Saving & Investing) Money, an online game created by Financial Basics Foundation designed to help Australian high schoolers learn about financial issues in a fun and interactive way.
The earlier you open a kids savings account, the earlier you can start to potentially reap those benefits.
What to look for when choosing a kids savings account
Once you’re ready to get your child’s savings account going, there’s still one more important decision to make: which bank to use? Like choosing your own bank account, there are certain factors to consider, such as fees, interest rates, and other potential benefits.
Or, if your child is over the age of 11 years old, they can potentially open one of our Everyday Bank Accounts. This would allow them to have a debit card for making purchases, giving them even more freedom with their money. Of course, fees may apply with this bank account, so it’s important to find out all the information before making a decision on whether it’s best for you.
Teaching children about saving and budgeting can not only be hugely beneficial, but also fun. Money management is an essential skill that your kids will likely need to be able to tackle one day; why not begin them on that journey today?
Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Disclosure Statement or Product Information Document before making any decisions about whether to acquire a product.