Choosing a bank account for the kids

Tired of trying to find the cash to dish out for pocket money? It may be time your kids got a bank card of their own. But which bank or service to go with? MoneyHub offers it’s tips for choosing the best option. By Sonia Speedy.

We knew it was time to get a bank account the kids could access when one of our girls lost all her birthday money on the floor of a Warehouse store one day. It fell out as she pulled something else out and she didn’t notice. By the time we circled back it was long gone. There were tears, tantrums and some pretty hard learnings. Meanwhile, I started googling kids’ bank accounts.

Cue MoneyHub. Founder Christopher Walsh says savings accounts are a great way for kids to learn money management skills, but there are a few things you need to consider when you’re working out what account will be best for your child.

Typically, the goldilocks spot for savings accounts is low fees and high interest rates. But with kids there is another important consideration. Access. When and how do the kids get to access their money and how much control does the parent or guardian have over that? Otherwise, there’s a risk ALOT of money could be wasted on sweets or spent inappropriately. The Banking Ombudsman says most of the complaints it receives in this area are around who controls or has access to the account, so it’s important to check this out carefully and set this at the right level.

Who’s got the control?

Walsh says there are a range of access options, and parents have the ability to see the child’s transactions in real-time.

“Having your child’s bank account linked to yours means you can monitor the transactions and track their movements. But, if you approve them to be ‘Independent’, you won’t have any access to their bank account transactions,” he says.

If the account is opened up solely in the child’s name and control, they can withdraw money as they wish, and you won’t be required to give approval. While you may feel this is appropriate at certain ages (children are deemed minors until age 18), you otherwise need to make sure the account has some restrictions on independence, or set yourself up as a co-signatory, Walsh says.

MoneyHub recommends the Co-operative Bank, Heartland Bank, Westpac and TSB as having the best options for kids and offers the following summary of kids’ accounts:

All banks offer a fee-free account. This means no monthly account fees, free New Zealand ATM withdrawals and teller deposits.
Interest rates range from 0 percent to 2.50 percent + p.a., indicating a significant range in benefits and features.
Generally, children under seven years of age won’t be given a debit card or EFTPOS card, and some banks restrict this to those under 12 years of age.
To best protect you and your child from unwise spending, make sure you understand the approval process for withdrawals.

What about financial apps?

There is currently only one pocket money app in New Zealand accepting new customers and that’s SquareOne, which was the first of its kind here.

With this, the child gets a debit card and an online savings balance that the parent can monitor. Paying pocket money is easy and cashless on the app and you can also block the card at any time.

However, it’s not a bank account – it’s a prepaid card. Kids can’t withdraw cash, they can only use the card, so money can only be spent or saved at this point.

Walsh says SquareOne allows kids to get familiar with money and gives them some financial independence.

There are fees attached, however. While joining is free and it’s free to load money, there is a $4.99 a month charge, which covers two parents and five kids. It also doesn’t pay interest on savings.

When they become an adult
Make sure you reassess your child’s banking set-up when they hit 18. Some banks will start charging account holders as soon as they become an adult. Try checking out student bank accounts or look around at the best adult accounts instead.

Information relevant as of August 2024.