Low interest rates and high charges can eat into children’s nest eggs. Sadly few parents shop around for a children’s bank account.
The first question an adult should ask is if their child or teen needs a savings or transaction account.Small children usually only need simple deposit accounts. Tweens and teens often need transaction accounts with ATM cards so that they can withdraw money to pay for things such as mobile phone recharges and iTunes downloads.
Some issues to consider when choosing a child’s account include:
- Are there monthly or annual fees on the account? Does the bank offer fee exemptions under 18s or older students?
- At what age can ATM cards be issued? (Not all parents want their children to have ATM cards)?
- Are the children charged to use rival banks’ ATM machines?
- What is the interest rate?
- If the interest rates are on a sliding scale, what are the requirements to achieve the higher interest rate?
- Can the child withdraw their own money (and spend the lot at once), or is a parent’s permission required to withdraw money?
- Does the bank offer internet access (either full transaction functionality or view only access) to the child’s account to enable them to monitor the account?
All parents should make sure that the bank has their child’s IRD number. If not, any interest will be taxed at a “no notification” rate of 45 cents in the dollar instead of the usual rate of 10.5 cents for the first $14,000 of income.