The short version
- Kids' savings accounts usually have no fees and a higher rate for under 18s.
- Many pay bonus interest for growing the balance each month.
- Children need a TFN, or a declaration, to avoid tax being held back.
How kids' savings accounts work
Kids' and youth accounts are for children and teenagers, usually up to an age between 12 and 25. Most have no fees, and many pay a bonus rate in months when the balance grows, which builds a regular saving habit.
A parent or guardian usually opens the account for a young child. Older children may be able to open one themselves, often with a card for spending.
Pros
- Teaches saving, with a balance kids can watch grow.
- Usually no fees and no minimum deposit.
- Rates are often higher than standard adult accounts.
Cons
- The best rates often need a deposit, or no withdrawals, every month.
- Balance caps can limit the bonus.
- Children's interest above $416 a year can be taxed at high rates.
What to compare
- The rate on the balance your child will have, and any balance cap on the bonus rate.
- What it takes to earn the bonus: often one deposit and no withdrawals each month.
- The age limit, and what the account becomes after it.
- Whether the child can check the balance in an app, which helps them learn.
Tax on children's interest
Children who earn interest need a tax file number, or the bank withholds tax. Above $416 a year of unearned income, special higher tax rates for minors can apply. The ATO's rules on children's savings explain who is taxed on the interest.
Alternatives
- A term deposit, which locks your rate for a set time. It suits money you won't need, and protects you from rate cuts.
- A savings account in a parent's name, if the parent pays less tax. Keep in mind the money is then legally the parent's.
- An investment account for kids, such as micro investing, for longer term goals.
How to open one
Most banks let you open a kids' account online in about ten minutes.
- Have your ID ready. A driver's licence or passport, and your tax file number so you're not taxed at the top rate on the interest.
- Link an everyday account. Most savings accounts move money through a linked transaction account, often with the same bank.
- Set up a regular transfer. An automatic transfer on payday makes saving the default, and helps meet any deposit condition.
- Bring your child's details. A parent or guardian usually opens it, and some banks need the child's birth certificate or Medicare card.