Educating children about being responsible with money, for many parents, is a necessary and ongoing process to equip them for the adult world.
And one of the most popular ways to introduce them to the world of finance and establish a platform to learn many of those lessons is to set up a kids’ bank account.
So where do you start with a kids' bank account?
Most banks and financial institutions offer bank accounts specifically designed with kids in mind. These kids’ bank accounts will vary slightly on a range of common features and allow you to eventually choose one that best suits your needs.
Depending on your child’s age, they will generally need a parent or guardian to help them set up their account online or at a branch, and the parent to retain a level of control.
Some institutions, however, will also have a minimum age limit over which a child can open a bank account themselves.
The individual policy of the particular bank or financial institution you use will detail all the documentation you need to open the account, so you can go along to the branch prepared. However the basic requirements you will usually need to open an account are:
- Proof of the child’s ID – i.e. a birth certificate
- Proof of parents ID – i.e. birth certificate, passport or driver’s licence
- Proof of home address
Getting your child involved in the process of setting up the account from the very beginning can be a wise idea, so that depending on their age they have an appropriate level of understanding in relation to the process, the benefits and the responsibilities that go with having a bank account in their own name.
How do kids’ bank accounts differ from each other?
If you compare accounts based on the following features, it will allow you to make a more considered decision based on all the costs and benefits associated with each product offering.
- Age eligibility – Some financial institutions may have a certain age limit on who can apply for kids’ bank accounts, but in general terms the child should be under the age of 18. Check the eligibility criteria for each account you’re looking at.
- Fees – Generally, there aren’t ongoing fees attached to kids’ bank accounts, but there may be a number of one-off fees that are applied for certain transactions, such as over-the-counter withdrawals. Check under which circumstances an account holder may incur a fee; and if that is likely to happen, you will need to factor that into your cost calculations.
- Interest – There can be a significant discrepancy on interest rates attached to kids’ bank accounts. There may also be additional monetary incentives for children to reach particular saving levels in an account. Read the fine print to see if there are any caveats or restrictions on when an interest rate or bonus payment applies.
- Accessibility – Investigate each provider’s service offering and to what extent you can obtain information, make deposits, transfer funds and make withdrawals through ATMs, online and on a mobile. Each provider will offer different access to their retail network.
- Cards and statements – For regular users, check to see if there is a transaction card offered with the account and also how often account statements are provided.
- Deposit conditions – There may be a minimum monthly amount of money required to be deposited into the account to receive all the benefits.
- Financial literacy and education – Some account providers offer special education programs and support initiatives for children to help them learn about saving and finances. This can be invaluable, particularly if the support is non-commercial in nature and complements the lessons you teach them.
How you can encourage your kids to grow their money
Aside from parents just arranging for the regular transfer of money to be deposited into a kids’ bank account, there are several ways you can encourage children to grow their own balance:
- Piggy bank – If they have a piggy bank for loose change or money given to them by family or other sources, this can be emptied every few months and deposited into their account. Some banks and financial institutions will not take random bags of coins over the counter; instead, they will ask you to bag them with their bags, which are designed to take specified denomination amounts and then weight-checked.
- Pocket money – If you’re already giving regular money to your children, you could encourage them to deposit some of the funds each week or month into their bank account and watch it accumulate over time.
- Part-time work – Whether they have a part-time or holiday job while still at school, using the bank account to deposit their hard-earned money will give them, and you, a sense of satisfaction. Rather than having cash in their hand, if it’s locked away into an account, it’s a little harder to spend.
Other considerations for kids and money
If you’re looking to establish a kids’ bank account, there are a range of common-sense tips parents should be conscious of in relation to influencing a child’s attitude to money and educating them.
You are their first role model – How you treat money will consciously or sub-consciously impact how they treat it as well. If you’re generally disciplined with your own finances, you’re getting them off to a great start.
Income and expenses – Keeping money lessons simple by talking about the two sides to the financial ledger allows children to visualise the need to have balance with what they earn and what things cost.
Needs and wants – This is a critical element of spending that will carry a child well into adulthood and allow them to prioritise whether they need something or whether they just want something. It’s a simple but effective question to ask them early in life, so they realise they cannot have it all.
Pocket money – There are so many different approaches around what age is best to start an allowance, how much should be given and what tasks should be attached to children being given pocket money. However, it all comes down to individual families and how you align it with your specific values and lifestyle.
Credit – Once children reach their teenage years, the concept of credit and how it works should be particularly understood so they are aware of its role.
Online research – Encourage teenage children to carry out their own research online for any significant items they may be considering purchasing, so they can start to understand the financial value of comparing the range of offers from different providers. By shopping around, they will understand the savings that can be made on popular items such as phone plans, electronics, sports merchandise and fashion. These savvy dollar-saving habits will serve them well when they’re responsible for independently managing their own finances.