Do youth bank accounts offer a higher interest rate than standard adult bank accounts?

Yes – you’ll probably find that a youth savings account will offer a much higher bonus interest rate to encourage young people to save money. This may even be 1% to 3% p.a. higher than the equivalent adult account, so it’s well worth taking advantage of these benefits whilst your child is still young enough to qualify for bonus interest. It’s important to start the comparison process for accounts with Savvy.

What is the legal age at which a child can have their own bank account?

From the age of 12, a child in Australia is permitted to have a bank account in their sole name, although they will require a parent to accompany them to open the account. Once they reach 14, they’re able to open an account on their own without a parent or guardian present. Similar principles apply for having a debit card. Some banks will issue debit cards to a child as young as 10 if they are accompanied by their parents, but from age 14, a child is permitted to have a card with no parental involvement.

If my child’s bank account earns interest, do I have to declare it as income on my tax return?

According to the Australian Taxation Office, this will depend on whether the joint account you hold with your child belongs to them or you. This comes down to the intent of the account, who deposits the funds and who decides what they’re spent on. These rules are in place to prevent people from avoiding paying tax by holding their own money in the name of their child. If the child is aged under 16 and their joint account earns less than $120 per year in interest, no tax is payable. If interest earned is more than this in one year, you may have to supply the ATO with a tax file number for your child and their date of birth.

Is account ‘sweeping’ a good idea?

This depends on whether you and your child want to actively manage their savings or if you prefer to ‘set and forget’. Having an automatic sweep feature can be useful if you want to build funds in a savings account with very little thought involved. Simply deposit your child’s pocket money (or birthday present money from relatives) into their transaction account, set the sweep limit and excess funds will automatically be transferred into the child’s savings account. However, on the other hand, your child may want to actively manage their savings and get enjoyment out of reaching a savings target and transferring money into their savings account themselves.