Setting Up Your Kids' First Savings Account: What Australian Parents Should Know

If you're keen to learn how to open your kids' very first bank account, then you're in the right place. This article will delve into detail all the things you need to know before opening up and setting your child's first savings account in Australia. Let's jump straight into it!

Why Should You Open a Savings Account for Your Child?

While it may seem like you're letting your kid grow up too fast by exposing them to an adult responsibility, kid-geared savings accounts like Westpac savings accounts can do a whole lot of good in both a practical and educational sense for them.

Here are some reasons why opening a savings account for your kid can be beneficial for them and the entire family:

1) Teaches Your Kid About Financial Responsibility

Opening a savings account for your kid allows them to practice financially savvy habits at a young age. This is a great opportunity to help them become more disciplined and understand the true value of money.

While you can do the same thing by handing them a piggy bank, a savings account jumps a few extra hoops and comes with the added benefit of allowing your kid to gain some passive interest and securing the money in a storage dedicated to it. 

This lays the framework for them to develop a healthy relationship with money. As they age, they'd already have the knowledge to navigate a banking partnership, as well as perform various positive money habits like saving, budgeting, and setting financial goals. This makes them a much more thoughtful individual later in life as they handle more serious money matters.

2) Encourages Healthy Savings Habits

Another perk of setting up your kids' first bank account is the ability for them to practice healthy saving habits. 

Here, you, as their parent, can enter the picture and hand them some microgoals to work towards. You can even reward them if they manage to hit these targets"which can incentivise them to continue following these positive savings habits over time.

Some healthy habits you can encourage them to do with their bank account include setting aside a portion of their weekly allowance, tracking their savings, and resisting the urge to withdraw money to make a rather unnecessary purchase. 

In any case, giving your child the floor to practice good saving habits can grant them an easy head start when they become older. This is, of course, on top of the extra money they may end up saving by following these habits.

3) Grants Them Independence

Lastly, and perhaps most importantly, having a bank account can grant your child a sense of independence. While you may teach them the basics early on, they'll eventually have to manage their bank account by themselves in due time. 

Bank accounts are fairly straightforward to understand, with money being stored and passively growing. By granting your child a bank account, you can play a role in building their confidence in being able to handle things by themselves. This makes them more resilient and self-reliant in the future.

What Parents Should Know Before Opening A Kids Bank Account

If you're keen to open a bank account for your kid but don't know where to begin, here's a step-by-step guide on helping you do just that.

1) Type of Savings Account

Before opening a bank account, you should be aware of the different types that your chosen financial partner offers. Each type has a specific set of standards and rules, and it's vital to know the differences to ensure that you're picking the right one for your family.

For instance, Westpac offers a Choice Youth account and a Bump savings account for children and teens under 18. The former is dedicated to earning variable interest rates of up to 5.05% p.a., whereas the latter is more geared for everyday transactions.

Other banks have their own scheme as well. Be aware of the different youth savings accounts you can sign your kid up for and pick the one that best suits your financial capability and their future growth pathway. This way, you can enjoy the benefits of a suitable savings account for years to come.

2) Hidden Costs and Requirements

It's also crucial to look into the costs that may be lurking behind the contract or terms and conditions checklist. 

Some accounts may have monthly fees, minimum balance requirements, or conditions that you must meet to qualify for their advertised interest rate. Some may require you to submit IDs and proof of income as well. Look into these things and clarify the terms with the banking provider before proceeding to open your child's bank account.

Moreover, look into the requirements that the bank needs of you and your kid and ensure that you have all this information gathered up. This way, you can select a savings account that's truly right for your kid and not end up regretting it later on.

Furthermore, tax is also considered in these savings accounts. Ensure that you're following regulatory tax laws in your respective territory to ensure that you won't be penalised for misdeclaring earnings or hiding money in this account.

3) Access and Account Features

Lastly, you should also consider the banking account features and perks that you can enjoy by having an account with your chosen financial institution. Some banks have apps that are kid-friendly"consider learning how to use them to ensure you're making the most of the bank's mobile app.

It's also worth checking how much control your child will have over the account. Depending on their age, you may want an account that allows them a great deal of responsibility. Or not, it's totally your call at the end of the day.

We hope that this article will serve you well as you set up your kids' first bank account. All the best in making the best financial decision for your family!

Disclaimer: The information in this article is general in nature and is not intended to be financial advice. It does not take into account your personal objectives, financial situation or needs. You should consider seeking independent advice before making any financial decisions. Any links to third‑party products or external websites are provided for information purposes only.