As children turn into tweens and teens their banking needs change. They’ll want to swap their piggy banks and junior savings accounts for EFTPOS cards, debit cards, and to bank online. It won’t be long before they’re using their phones to make contactless payments.

Most banks provide children’s accounts. Some also offer youth banking aimed specifically at tweens and teens.

Accounts pitched at the youth market include: Kiwibank’s Free Up and Now accounts, ANZ Youth Account, BNZ’s Dynamic Money accounts, and credit unions’ Bfree accounts. At other banks the standard children’s accounts can be used for youth banking.

Each bank has different thresholds for giving bigger kids access to electronic money. But as a rule of thumb if children are under 13 they will need parental permission to get an EFTPOS card. Over 13 they can usually open their own account and apply for an EFTPOS card ““ although rules vary at different banks.

The next step is debit cards. Visa and MasterCard debit cards allow teens to buy online, but at the same time have safeguards against them racking up debt. Money must be pre-loaded onto the card and once it’s gone it’s gone. The age at which they’re entitled to a debit card differs, but is generally between 13 and 15 years old.

When they finally “Pass Go” at age 18, teenagers can get their hands on credit cards for the first time! For some this will be a godsend. For others it’s the start of a slippery slope downhill to a lifetime of debt.

The day a child gets his or her first EFTPOS card is a really good time to have that financial facts of life conversation.It’s never too late ““ or too early – to teach your child about savings. Talk to your kids about savings accounts, EFTPOS, interest rates, fees, overdrafts, and other aspects of banking.They may not know, for example, that it’s possible to get fee free banking if they transact online. Nor might they understand that going to the teller could cost them in fees.

They could also benefit by learning about concepts such as “sweep”, which sweeps money into an account before it goes into the red, and the “alerts” that they can set up.They should also understand that withdrawing cash along with an EFTPOS purchase is cheaper than using another bank’s money machine to withdraw cash.

What to look for in a youth account:

  • Parental permission.

Be aware that once your child hits the age of 13 it’s likely that he or she can operate their account without your permission – even though you may be liable for their actions!

  • Fees.

Most youth banking is fee free, but do read the fine print for exceptions.

  • The interest rate.

Transaction accounts don’t tend to attract a high interest rate, so if your child is building up a good balance it may be worth opening a second account, such as an on line saver account, for them to stash their savings in.

  • Smartphone apps.

Most teenagers, as digital natives, have mobile phones.With the increasing trend towards banking via smartphones, it’s worth considering whether the bank you choose has smartphone apps and whether children are allowed to use them.

  • Indemnities.

If you want your child to operate the account on their own, you may still be required to grant a Guarantee of Indemnity.

  • The terms and conditions.

Never open a youth bank account without reading the terms and conditions. EFTPOS cards are a great example: under the terms and conditions of some banks, once your child gets an EFTPOS card the parents can no longer put controls on their spending. If the child wants to empty the account in one fell swoop, they can! It’s sometimes not easy to find this information on a bank’s website, so always ask for a copy of the latest terms and conditions.

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