Is the interest earned on a bank account simple or compound interest?

Compound interest is earned on savings accounts. This means that the interest earned is added to the account regularly (usually monthly) and is subsequently earned on the previous month’s principal and interest figure. This is why compound interest is sometimes referred to as ‘interest-on-interest’ and can result in an exponential growth in savings.

Are bank accounts for teens completely fee-free?

No – there are still some fees which may be applied. Often kids’ accounts have no account-keeping or monthly fees and no fees for standard transactions. However, fees may be charged to provide a debit card, if a certain limit on withdrawals is exceeded, if the account is overdrawn, or if ATM or EFTPOS transactions are made overseas. It’s worth checking the conditions of your child’s account so both of you are aware of any transaction or withdrawal limits and the fees which may apply. Compare offers with Savvy today.

If I was a signatory to my teenager’s account when they were younger, does that still apply when they turn 18?

No, probably not – when a young person reaches the age of 16, they’re usually allowed to remove parental controls on their account, although the extent of parental control and age of lifting does vary between institutions. By the time a young person reaches 18 years of age, though, they’re considered an adult in Australia and enjoy the full rights that all other adults have.

If I have a joint account with my child, do I have to declare the interest as income?

The Australian Taxation Office (ATO) stipulates the interest on a joint account with a child must be declared by the person who deposits the funds and/or decides how they are spent. When your child is under 16, there’s a taxation exemption rule that income tax won’t be withheld on any interest under $120 a year, and no tax return is necessary for your child. If the interest earned is over $120, no tax will be withheld if the child provides their tax file number. There is no age limit to apply for a tax file number in Australia.

Will my personal account be safe and kept separate from my joint account with my child?

Yes – your teenager won’t be able to see or access any accounts you may hold in your own name, or those you might have with your partner or spouse, if you hold a joint account with them. Passwords you may have for their account will not work to gain access to your personal accounts, so your finances will be kept secure and distinct from the accounts you hold jointly with your son or daughter.