A kids’ savings account, also known as a youth or children's savings account, functions in largely the same way as a standard savings account, although it comes with a few key areas that are altered to cater to the needs of children. Firstly, it’s restricted to account holders under the age of 18. In some cases, however, children as young as 14 could become ineligible to hold a kids’ savings account.
Monthly account fees which are often present with standard savings accounts are generally waived when it comes to kids’ savings accounts. Also, you may find that your account provider supplies resources to help educate young account holders about the ins and outs of finance and why it’s important to know about.
Perhaps the most noteworthy difference between this type of savings account and others, though, is that interest rates can be higher for children than adults. Some accounts will offer bonus interest rates upwards of two or three times the standard savings account interest rate, which means that it’s useful for growing your child’s funds as they progress from youth into adulthood.
Additionally, parents can hold some form of control over their child’s account up to a certain age, which can vary between the ages of 13 or 16 depending on your bank or other financial institution. This can grant the ability to place restrictions on your child’s spending habits or their ability to transfer funds.
However, a downside to kids’ savings accounts is that age limits will apply, meaning that your child’s account could be closed or convert automatically to another type of account once they reach a certain age. Depending on your financial institution and the type of account your child has, this could range anywhere between 12 and 18. It’s always important to be mindful of these conditions to prevent an account rolling over into a different savings account that you may not wish to open.
Some accounts of this type will also limit the number of times you can withdraw to five or less, while others may not allow any withdrawals at all without eating into your interest earned. You should try to avoid accounts with such restrictions where possible and stick to those with a higher base rate.
