Bank Account for Kids: The Australian Parent's Guide

Why open a bank account for your child🔗

A bank account makes money real. A balance on a screen, a small interest payment each month, the satisfaction of watching a number grow: these are the building blocks of financial literacy, and the earlier they click, the better. It gives birthday money and pocket money somewhere to accumulate, and that accumulation is motivating. It also means concepts like interest and compounding are already familiar long before a mortgage or pay slip arrives. It pairs naturally with teaching kids about money more broadly.

How kids' bank accounts work🔗

For young children, a parent or guardian opens the account as signatory or trustee: the child is the account holder in name, but the parent controls access until the child is old enough, usually between 12 and 16.

The feature that makes these accounts genuinely useful is bonus interest. Most pay a low base rate plus a much higher bonus rate that only applies when you deposit a minimum each month AND make no withdrawals. That structure rewards regular saving and penalises dipping in, which is exactly the habit you want to build.

Some banks also offer a debit card from around age 10 to 14 for older kids making small purchases, and app access varies from dedicated kids' apps to the standard online banking portal.

What to look for🔗

The base rate alone is usually negligible, so the bonus rate and its conditions are what make an account worth having. A high bonus rate that needs a $200 monthly deposit is less useful for a 7-year-old than a moderate one with a $10 minimum.

How to open one🔗

A parent, guardian or often a grandparent can open the account as signatory. You will need ID for the adult (licence or passport) and for the child (usually a birth certificate, plus a Medicare card or passport). Most banks let you do it online in 15 to 20 minutes; some need a branch visit for younger children.

Do it together. Sitting down with your child, letting them see their name on the screen, choosing a savings goal and watching the first deposit land, creates a sense of ownership. An account opened without the child is just another thing the parent manages; one opened together is theirs.

The tax angle that trips parents up🔗

Good news first: for most kids with modest balances, the tax impact is minimal or zero. But the rules are worth knowing. The ATO looks at who really owns and controls the money, not just whose name is on the account:

• If a parent deposits their own money and keeps control, the interest may be taxed as the parent's income at their marginal rate.
• If the money is genuinely the child's (gifts, pocket money they earned), the interest is the child's income.

Minors face special high rates on unearned income (like interest) to stop income splitting. For 2024-25, roughly: $0 to $416 is tax-free, $417 to $1,307 is taxed at 66% on the amount over $416, and above $1,307 it is 45% on the lot. The thresholds are low, so most kids with typical balances never get near them. Either way, provide a TFN: without one, the bank withholds 47% of interest (children under 16 earning under $120 a year are generally exempt). Verify current figures with the ATO.

Practical tips to make it stick🔗

• Automate pocket money with a regular transfer, so saving happens without anyone remembering.
• Use save / spend / give buckets so kids learn money has multiple purposes.
• Try matched savings: add a dollar for every dollar they save (up to a cap). It is remarkably motivating and mirrors employer super later.
• Involve them in logging in and show them the interest when it lands, explaining why they got the bonus (or did not).
• Celebrate milestones (first $50, $100, $500) and review it together every month or so.

For larger or longer-term sums🔗

A kids' savings account is ideal for accessible short-to-medium-term money. For larger sums or a longer horizon (say a grandparent setting aside a meaningful amount), other structures can be more efficient: investment bonds (earnings taxed at 30% inside the bond, generally tax-free after 10 years, subject to the 125% contribution rule) or shares and ETFs held in a parent's name with CGT implications on sale. For bigger or more complex situations, it is worth getting licensed advice.

❓ Frequently asked questions🔗

Keep reading🔗

• How to teach kids about money (age by age)
• How much should your emergency fund be?
• What is an index fund?

The bottom line🔗

A kids' bank account is one of the simplest, cheapest ways to start a child on good money habits. Open it early, open it together, chase a real bonus rate with zero fees, sort out a TFN, and use the monthly deposit-and-do-not-withdraw rule as the lesson. The dollars are small; the habit is the point.