Junior, Youth and Tertiary Banking - November 16th
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A junior bank account or youth bank account is a bank account designed for young people up to a certain age, which usually doesn’t charge any account-keeping fees.
If you want to save for something special, you’ll want a savings account. If you want to access your money with lots of purchases, you’ll want a transaction account.
Youth banking accounts usually come in slightly different packaging for two different age groups:
Juniors and Youth are both learning about how to manage money, but they each use their money for different things, so they have different banking needs. So it makes sense that we look at each of them separately.
Once you turn 13, you can usually operate your own bank account without needing your parent to open it for you, but your parent will often still need to sign a guarantee of indemnity.
According to a Cartoon Network survey in 2015 of 520 children aged 4 to 14, the average Kiwi kid is receiving $4.90 per week in pocket money. A Westpac survey in 2013 showed that 45% of children with pocket money save some of their money each week. Kids should expect to do around 2 hours a week on chores in order to earn their pocket money – and the most common chores are cleaning their bedroom, doing the dishes, and doing the laundry.
But it’s getting harder for kids to deal with “digital” money, since they now spend most of their money using EFTPOS, or debit cards, or shopping online instead of using cash. 37% of children surveyed by Westpac didn’t really understand how money is used to pay for things.
This is why it’s so important that Junior Savers save up to buy things using their own pocket money, rather than asking Mum or Dad for money.
As the leaders of the future, our kids deserve to fully understand how to manage their money and make the most of it. Here at Canstar, we encourage banks to make it fun to learn about money for both Junior and Youth customers. Every year, we give the Junior Banking and Youth Banking Awards to the banks or financial institutions that offer the most outstanding value in junior and youth bank accounts.
Some banks offer youth banking accounts to different age groups – some to Juniors and Youths under 18; some just to Juniors under 12; and some to a specific age range in the middle.
What about if you’re finished high school?
Many banks have youth banking accounts that kids can keep right up until they are 21 or 25 years old, for people who are studying full-time at university, an apprenticeship, or a traineeship. Some of this guide will apply to these tertiary students as well as to Juniors and Youth, but our Savings Account, Transaction Account, and Budgeting & Saving sections would probably be more useful to them.
There are a few basic features to look for in a Junior Saver or Junior Transactor account, depending on your personal situation:
Junior Savers (under 12s) are born when parents help them to build their own money-handling skills instead of just handling money for them. Having their own bank account can help to teach kids how to deposit and withdraw their pocket money, and how to grow their savings. Ideally, kids need a high interest rate so they can see their money growing, and no account fees, so that their savings are protected.
When it comes to Youth Savers (under 18s), saving is still important – because the financial goals are now bigger – but their account ideally needs to also have a good number of free transactions. Accounts need to come with online banking and an ATM card or debit card.
A debit card lets kids make purchases and withdraw cash at ATMs, and you can only spend up to the amount of money that you have deposited into your account. Most banks require you to be a certain age before adding a debit card to your account (e.g. with ASB Bank, you have to be 13 years old).
The Reserve Bank of New Zealand has lowered our official cash rate again recently, so it’s worth keeping a regular eye on the interest rate that you are receiving on your savings.
Kids can also earn bonus interest if they stick to the conditions required by certain savings accounts. But they usually have to deposit a certain amount into your account each month, and make no withdrawals or only a few withdrawals. It definitely pays to check the terms and conditions before you just automatically pick the account with the highest interest rate. If you’re not sure you can meet the conditions, you might be better off with a savings or transaction account with a base rate.
Some common fees to look out for on youth savings or transaction accounts include:
The good news is that most youth banking accounts do not charge account-keeping fees, and many more will waive their monthly account-keeping fee if you deposit a certain amount each month. This fee can be quite small – as low as $5 with some institutions.
It might not seem like the most thrilling of tasks, but writing your own budget from scratch is the most important thing you’ll ever learn when it comes to managing your money.
In fact, you’ll probably end up writing lots of budgets for yourself through the course of your life, from saving your pocket money for a remote-controlled car, to saving your part-time job wages for a real car.
To help you, Sorted.org.nz has some great tools you can use to make your budget, like the Money Planner Budget Calculator, the Savings Calculator. If you don’t know how much you spend each week, write down a “spending diary” to track what you spend for a month before you write your budget.
Here’s a basic list of things to include in your budget:
A statement is a paper or electronic document sent to you from your bank that shows your balance (how much money is left in your account) and your expenses for that month or quarter.
Here are the main things you need to understand on your statement for a savings or transaction account:
You should always, always, always read every statement you get from your bank so that you know if something is not right in the statement. Then you can make a complaint and ask them to fix it.
Here are some things you should always check on your statement:
A common example of something you would need to call your bank to fix is incorrectly charged fees. If the bank has accidentally charged you two lots of ATM fees for making one ATM withdrawal, you will see it on the statement. You can phone the bank and ask them to give you back the money for one of the ATM fees.
If something is not right in your statement and your bank does not fix it after you’ve asked them to, you can make a complaint to the free Banking Ombudsman of New Zealand.
Savings tips for Juniors:
Savings tips for Youth:
Our biggest “money trap” to watch out for would have to be online scams. You can find our best tips for staying safe online and keeping your account information confidential on our Online Banking page.
Here are the best tips from NetSafe‘s recent Smartphone Security Report:
School Banking runs all the way through primary school, and some programs continue into middle school and high school. You usually get a passbook where you keep track of money getting put in and taken out of your account, and you use deposit envelopes to put money into your account. There are usually rewards when you reach certain amounts in savings. Lots of the programs have funny characters who teach you about how you can manage your money and save for the things you want.
Your school also benefits from School Banking because they usually receive a certain amount from the bank for each student who opens an account and for each deposit made by students.
Even your parents benefit from School Banking, because it means they don’t have to schedule regular trips for you to visit a branch to deposit your pocket money into your account.
School Banking in New Zealand first began back in 1926 with ASB Bank, and they had a monopoly on children’s money for a long time. At the time of writing, there are just a few banks in New Zealand that offer School Banking programs, including:
But if you’re not with one of these, you should definitely ask your bank if they are thinking of starting a School Banking program!
Please note that these are a general explanation of the meaning of terms used in relation to youth banking accounts. Your bank or financial institution may use different terms, and you should read your product disclosure statement (PDS) carefully to understand everything that may apply to your account. You cannot rely on these terms in relation to any account you may open.
Account-keeping fees: An ongoing fee charged to cover the bank’s costs of creating and maintaining the account. Look for a good youth banking account that does not charge an account-keeping fee.
Annual equivalent rate (AER): A rate that can be compared between lenders, which shows what compound interest rate would be paid once each year. Savings accounts must advertise their AER so that you can compare the interest you could actually expect to receive from the different accounts on offer.
On-call: “On-call” or “at call” transaction or savings accounts allow you to immediately withdraw your money from the account whenever you like. This is different to other types of savings accounts, where you have to leave your money in the account for a certain amount of time if you want to earn interest.
ATM (Automatic Teller Machine): A machine found in public places or at bank branches, which allows you to withdraw cash from your account. ATMs are usually on 24/7 so that you can use them any time you need cash.
Balance: The amount of money currently in your bank account.
Banking Ombudsman: If you have a dispute with your bank and have not been able to resolve it through the bank’s internal complaints resolution process, you can contact the Banking Ombudsman of New Zealand. It is a free and independent service that helps people resolve disputes with their financial institution.
Basis points: A financial unit of measurement that describes the percentage change in interest rates or the value of a financial product. One basis point is 0.01% or 0.0001 in decimal form.
Bonus savings account: Accounts that give you bonus interest if you deposit a certain amount of money into the account (usually around $50 or $100) and you don’t make any withdrawals in that month.
Branch: The physical building where your bank or financial institution does its business. Branches are only open during normal working hours.
Cash: Money in the physical form of notes and coins.
Cheque account or checking account: A transaction account that allows you to make purchases with your own money by writing a cheque. If you do not have enough money in your account when the other person cashes your cheque into their own account, the cheque will “bounce”, meaning it is not paid and you may be charged a penalty fee.
Compound interest: Compound interest is when interest is calculated on the entire balance of your account, not just the initial amount you deposited when you opened the account. This means that every year, if you don’t withdraw your balance, you will be earning more interest because the balance of the account is getting bigger. All savings accounts should use compound interest.
Consumer: Someone who buys and uses products or services.
Credit card: A card that gives the account holder access to a line of credit, similar to a personal loan. You can spend up to a specified credit limit, but the money must be repaid, otherwise you start paying interest on the balance of the card (whatever you have spent). We do not recommend that youth banking account holders apply for a credit card, because having one can tempt you to go on shopping sprees or to spend more money than you have. When you are young and have a limited income, a debit card is a more sensible choice.
Debit card: A card that is linked to a transaction account and allows the cardholder to make purchases at stores and online, and make cash withdrawals from an ATM. Also known as a bank card or cheque card. This is the type of card we recommend for all youth banking account holders.
Deposit: Money that you put into your bank account.
Direct deposit: When a transaction is automatically removed from an account and received into a different person’s account. For example, you might have a direct debit set up to top-up a prepaid mobile phone or pay a mobile phone plan bill every month.
EFTPOS (Electronic Funds Transfer at Point of Sale): A payment system where you use your debit card to make payment for goods or services, or to withdraw cash. EFTPOS machines are used to process these payments at shops.
Electronic banking: A broad term used to refer to the banking system where you use online banking, telephone banking, ATMs, or EFTPOS to access your account. You can use electronic banking to make withdrawals or other payments, deposits, or transfers.
GST (Goods and Services Tax): The New Zealand tax levy on payments for goods and services.
Income: Money you earn, including hourly wages, salary, interest on your bank account balance, and government benefits such as Student Allowance.
Inflation: The percentage by which the price of goods and services rises each year across the country.
Introductory rate: A promotional, introductory bonus offered by many savings accounts, where you get a higher interest rate to grow your savings for a set period of time. At the end of the introductory bonus period, the interest rate will return to your normal base rate. An introductory rate is a type of promotional rate (see below).
Junior savings account: Savings accounts for children, usually aged 12 and under. A parent or guardian usually operates the account in the child’s name until they reach legal age, but the child also has access to their account.
Junior transaction account: Transaction accounts for children, usually aged 12 and under. A parent or guardian operates the account in the child’s name until they reach legal age, but the child also has access to their account.
Online savings account (OSA): A savings account that is managed primarily over the internet using online banking.
Pay Anyone: A payment system where you can transfer money to any individual or organisation using online or phone banking, as long as you have their account name and number, and their BSB number.
Promotional rate: A higher interest rate which is only offered during a specified promotional period. When the promotional period ends, the interest rate will generally return to the normal base rate.
Reserve Bank of New Zealand (RBNZ): The Reserve Bank is the central bank of New Zealand, and they are responsible for setting the official cash rate. They manage monetary policies such as the official cash rate to stabilise inflation and the economy; maintain a sound and efficient financial system; and supply our national banknotes and coins.
Savings account: Bank accounts that pay interest to the account holder and cannot be used to make transactions. They can be linked to transaction accounts so that you can transfer money from your savings to your transaction account when you have to make a big purchase.
Term deposits: An account with a financial institution where you deposit some money for a set period of time (the “term”) and you receive interest on that money at the end of the term. The interest rate is usually a fixed rate that doesn’t change over the term of the deposit. Term deposits usually give you a higher interest rate than a transaction account, but are not always higher than a high interest savings account. Fees are charged if you withdraw your money before the end of the term. Term deposits are also known as fixed deposits.
Transaction: The movement of money in or out of your account, including deposits, withdrawals, and transfers between bank accounts.
Transaction account: A deposit account that gives you frequent access to your money for transactions. You can use a debit card attached to the account to make EFTPOS transactions at the shops and online, to pay your phone bill, and to withdraw cash at ATMs or at a bank branch. You can also use your transaction account to write cheques when you need to.
Transfer: When you give the bank instructions to move money from one account to another account, e.g. moving money from your savings account to your transaction account. This is different to a “payment” where you send money from your account to somebody else’s account.
Withdrawal: When instructions are carried out to pay money out of your account and it is paid. A simple example is getting cash out of an ATM.
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Dealing with money for Juniors – Under 12s:
Dealing with money for Youth and Students – Under 18s and New Graduates:
Who offers youth banking accounts in New Zealand?
For more information on how Canstar rates youth banking accounts, read our latest Junior Banking and Youth Banking Awards report. These are the providers we have recently researched and rated: