Credit Cards - September 1st
So you've decided that it's time to get yourself a credit card, but you know that as a student your income is limited, and that credit cards can lead to some serious financial burdens. So …– Read more
Industry - August 31st
A recent white paper released by the Australian Scholarships Group (ASG) week, which surveyed 1,000 Australian parents to understand their behaviours and attitudes towards education in comparison to other life events such as saving for …– Read more
What is a youth banking account?
A youth banking account is a bank account designed for young people up to a certain age, which usually doesn’t charge any account-keeping fees. If you want to save for something special, you’ll want a savings account. If you want to access your money with lots of purchases, you’ll want a transaction account.
Youth banking accounts usually come in slightly different packaging for two different age groups:
Juniors and Youth are both learning about how to manage money, but they each use their money for different things, so they have different banking needs. So it makes sense that we look at each of them separately.
Once you turn 13 years old, you can usually operate your own bank account without needing your parent to open it for you, but your parent will often still need to sign a guarantee of indemnity.
These days it seems parents have done a good job in teaching their kids the value of money – even “invisible” money on cards and online in accounts. According to the 2016 Common Cents Quiz by CommBank, more than 2 in 3 kids (68%) would rather save their money than spend it! (Compared to 47% in 2014.) And 82% of kids are expected to do some chores to earn their pocket money, so they really value what they get.
But there’s always room to grow. This is why it’s so important that Junior Savers save up to buy things using our own pocket money, not just ask Mum or Dad for money.
Some banks offer youth banking accounts to different age groups – some to Juniors and Youths under 18; some just to Juniors under 12; and some to a specific age range in the middle there.
As the leaders of the future, you deserve to fully understand how to manage your money and make the most of it. Here at CANSTAR, we encourage banks to make it fun to learn about money, whether you’re a Junior or Youth customer. Every year, we give the Junior and Youth Banking Awards to the banks or financial institutions that offer the best bank accounts for Juniors and for Youth.
Many banks have youth banking accounts that you can keep right up until you are 21 or 25 years old, for people who are studying full-time at university, TAFE, VET, or an apprenticeship or traineeship. Some of this guide will apply to these tertiary students as well as to Juniors and Youth, but our Savings Account, Transaction Account, and Budgeting & Saving sections would probably be more useful to you.
There are a few basic features to look for in a Junior Saver or Junior Transactor account, depending on your personal situation:
Junior Savers are born when parents help us to build our own money-handling skills instead of just handling money for us. Having our own bank account teaches us how to deposit and withdraw money, and how to grow our savings. We need a high interest rate so we can see our money growing, and no account fees, so that our savings are protected. It’s also helpful if relatives can deposit money into our account as well, for pocket money or birthday money.
When it comes to Youths (Under 18s), saving is still important – because the financial goals are now bigger – but our account needs to have the maximum number of free transactions. You could have a separate savings and transactions account if necessary and transfer money between them. Your accounts need to come with online banking and an ATM card or debit card.
We recommend that young people stick to using an ATM card (for cash withdrawals) or a debit card (a.k.a. bank card) attached to their savings and transactions account. A debit card lets you make purchases and withdraw cash at ATMs, and you can only spend up to the amount of money that you have deposited into your account. Most banks require you to be a certain age before adding a debit card to your account (e.g. with Westpac and ANZ, you have to be 16 years old).
As of August 2016, total interest rates (base rates + bonus interest rates) for Junior Savings Accounts on our database range from 0% to 3.40%.
The average interest rates for savings accounts have dropped slightly in recent months, as the Reserve Bank of Australia has lowered the official cash rate to a record low of 1.50%. But thankfully, the drop hasn’t been very large at all.
Every bank has a different balance of high bonus rates and low base rates for junior accounts, so it definitely pays to do your research and look at a range of accounts before picking an account. You can compare Junior Savings Accounts on our website.
Kids can earn extra in bonus interest if they stick to the conditions required by certain savings accounts. But you usually have to deposit a certain amount into your account each month, and make no withdrawals or only a few withdrawals. Check the terms and conditions before you just automatically pick the account with the highest interest rate. If you’re not sure you can meet the conditions, you might be better off with a savings or transaction account with a flat base rate.
Some common fees to look out for on youth savings or transaction accounts are:
The good news is that most youth banking accounts do not charge account-keeping fees, and many more will waive the monthly account-keeping fee if you deposit a certain amount each month. This amount can be quite small – as low as $0 to $6 with some institutions (at the time of writing).
During the GFC, the Australian federal government introduced the Australian Government Deposit Guarantee Scheme on all bank deposits – including savings accounts – that held up to $250,000. This scheme means that if another financial crisis hits, or your bank goes bust, the government has promised that you will not lose your money because they will pay the bank that money.
Only authorised deposit-taking institutions (ADIs) are in the guarantee scheme, which are approved financial institutions such as banks, building societies, and credit unions. The guarantee does apply if you’re with a foreign bank that has a branch here in Australia, but it will not apply if you’re with an Australian bank but you’re using an overseas branch.
You can check whether your bank is included in the government guarantee scheme by reading the list of Guaranteed Liabilities. For more information about the Financial Claims Scheme, see the government’s website or APRA’s website on this topic.
The Financial Claims Scheme covers a wide range of deposits including:
It might not seem like the most thrilling of tasks, but writing your own budget from scratch is the most important lesson you’ll ever learn when it comes to managing your money.
In fact, you’ll probably end up writing lots of budgets for yourself through the course of your life, from saving up pocket money to get a remote-controlled car, to saving your part-time job wages for a real car.
To help you, there are tools you can use to make your budget, like the CANSTAR Budget Planner Calculator or the MoneySmart Budget Planner. If you don’t know how much you spend each week, try using the MoneySmart TrackMySpend app to track your spending for a month before writing your budget.
Here’s a basic list of things to include in your budget:
A statement is a paper or electronic document sent to you from your bank that shows your balance (how much money is left in your account) and your expenses for that month or quarter.
Here are the main things you need to understand on your statement for a savings or transaction account:
You should always, always, always read every statement you get from your bank so that you know if something is not right in the statement. Then you can make a complaint and ask them to fix it.
Here are some things you should always check on your statement:
A common example of something you would need to call your bank to fix is incorrectly charged fees. If the bank has accidentally charged you two lots of ATM fees for making one ATM withdrawal, you will see it on the statement. You can phone the bank and ask them to give you back the money for one of the ATM fees.
If something is not right in your statement and your bank does not fix it after you’ve asked them to, you can make a complaint to the free Financial Ombudsman Service by phoning 1300 780 808.
Savings tips for Juniors:
Savings tips for Youths:
According to a Commonwealth Bank study in 2014, for the kids who usually spend their pocket money rather than save it, more than one quarter (28%) use online shopping. So our biggest “money trap” to watch out for would have to be online scams. You can find our tips for staying safe online and keeping your smartphone data safe on our Online Banking page.
School Banking in Australia first began back in 1887 in NSW, with teachers keeping ledgers recording all the deposits and withdrawals for students.
In 1921, the Commonwealth Bank began giving kids in the school banking program money boxes to encourage them to save their pennies and pounds. The money boxes were so popular that the Commonwealth Bank started their Dollarmites Club in 1928, which is still the oldest and most well-known school banking program in Australia.
The original Dollarmites received money boxes shaped like CommBank’s headquarters building, which stood on the corner of Pitt Street and Martin Place in Sydney. You literally had to cut the money box open in order to access your savings – so kids were saving up for quite a while before spending their money!
These days, School Banking runs all the way through primary school, and some programs continue into middle school and high school with educational workshops on how to manage money.
You usually get a passbook where you keep track of money getting put in and taken out of your account, and you use deposit envelopes to put money into your account. There are usually rewards when you reach certain amounts in savings. Lots of the programs have funny characters who teach you about how you can manage your money and save for the things you want.
Your school also benefits from School Banking because they usually receive a certain amount from the bank for each student who opens an account and for each deposit made by students.
Even your parents benefit from School Banking, because it means they don’t have to take you to visit a bank branch when you want to put your pocket money into your account.
To find out which financial institutions offer School Banking programs, read our latest Junior Banking Award report.
Please note that these are a general explanation of the meaning of terms used in relation to junior and youth banking accounts. Your bank or financial institution may use different terms, and you should read your product disclosure statement (PDS) carefully to understand everything that may apply to your account. You cannot rely on these terms in relation to any account you may open.
Account-keeping fees: An ongoing fee charged to cover the bank’s costs of creating and maintaining the account. You can generally expect that a good youth banking account will not charge an account-keeping fee.
Annual equivalent rate (AER): A rate that can be compared between lenders, which shows what compound interest rate would be paid once each year. Savings accounts must advertise their AER so that you can compare the interest you could actually expect to receive from the different accounts on offer.
At call: “At call” transaction or savings accounts allow you to immediately withdraw your money from the account whenever you like. This is different to other types of savings accounts, where you have to leave your money in the account for a certain amount of time if you want to earn interest.
Automatic Teller Machine (ATM): A machine found in public places or at bank branches, which allows you to withdraw cash from your account. ATMs are usually on 24/7 so that you can use them any time you need cash.
Balance: The amount of money currently in your transaction account.
Basis points: A financial unit of measurement that describes the percentage change in interest rates or the value of a financial product. One basis point is 0.01% or 0.0001 in decimal form.
Bonus savings account: Accounts that give you bonus interest if you deposit a certain amount of money into the account (usually around $50 or $100) and you meet the conditions, e.g. not making any withdrawals in that month.
BPay: Australia’s electronic system for paying bills. Payment of bills is made through a financial institution’s online or telephone banking facility to merchants who are listed on the register of BPAY billers.
Branch: The physical building where your bank or financial institution does its business. Branches are only open during normal working hours.
Cash: Money in the physical form of notes and coins.
Cheque account or checking account: A transaction account that allows you to make purchases with your own money by writing a cheque. If you do not have enough money in your account when the other person cashes your cheque into their own account, the cheque will “bounce”, meaning it is not paid and you may be charged a penalty fee.
Compound interest: Compound interest is when interest is calculated on the entire balance of your account, not just the initial amount you deposited when you opened the account. This means that every year, if you don’t withdraw your balance, you will be earning more interest because the balance of the account is getting bigger. All savings accounts should use compound interest.
Consumer: Someone who buys and uses products or services.
Credit card: A card that gives the account holder access to a line of credit, similar to a personal loan. You can spend up to a specified credit limit, but the money must be repaid, otherwise you start paying interest on the balance of the card (whatever you have spent). We do not recommend that Juniors or Youths apply for a credit card, because having one can tempt you to go on shopping sprees or to spend more money than you have. When you are young and have a limited income, a debit card is a more sensible choice.
Debit card: A card that is linked to a transaction account and allows the cardholder to make purchases at stores and online, and make cash withdrawals from an ATM. Also known as a bank card or cheque card. This is the type of card we recommend for all youth banking account holders.
Deposit: Money that you put into your bank account.
Direct deposit: When a transaction is automatically removed from an account and received into a different person’s account. For example, you might have a direct debit set up to top-up a prepaid mobile phone or pay a mobile phone plan bill every month.
Electronic Funds Transfer at Point of Sale (EFTPOS): A payment system where you use your debit card to make payment for goods or services, or to withdraw cash. EFTPOS machines are used to process these payments at shops.
Electronic banking: A broad term used to refer to the banking system where you use online banking, telephone banking, ATMs, or EFTPOS to access your account. You can use electronic banking to make withdrawals or other payments, deposits, or transfers.
Financial Ombudsman Service (FOS): Australia’s free and independent dispute resolution service that helps consumers make complaints and resolve disputes with their banks, insurers and other financial institutions.
GST (Goods and Services Tax): The Australian tax we pay when we buy goods and services.
Income: Money you earn, including hourly wages, salary, interest on your bank account balance, and government benefits such as Youth Allowance or Job Seeker.
Inflation: The percentage by which the price of goods and services rises each year across the country.
Introductory rate: A promotional rate offered by many savings accounts to grow your savings at a higher interest rate for a set period of time. At the end of the introductory bonus period, the interest rate will return to your normal base rate. An introductory rate is a type of promotional rate (see below).
Junior savings account: Savings accounts for children and youth, where the balance increases with interest applied. A parent or guardian usually operates the account in the child’s name until they reach legal age, but the child also has access to their account. You can compare Junior Savings Accounts on our website.
Junior transaction account: Transaction accounts for children and youth. A parent or guardian operates the account in the child’s name until they reach legal age, but the child also has access to their account.
Online savings account (OSA): A savings account that is managed primarily over the internet using online banking or a mobile banking app.
Pay Anyone: A payment system where you can transfer money to any individual or organisation using online or phone banking, as long as you have their account name and number, and their BSB number.
Promotional rate: A higher interest rate which is only offered during a specified time period. When the promotional period ends, the interest rate will generally return to the normal base rate.
Reserve Bank of Australia (RBA): The central bank of Australia. It is a government-owned institution that issues our bank notes, sets the official cash rate to meet the inflation target, maintains our financial payments system, and manages Australia’s reserves of gold and foreign currencies.
Savings account: Bank accounts that pay interest to the account holder, and are not used to make transactions. They can be linked to transaction accounts so that you can transfer money from your savings to your transaction account when you have to make a big purchase.
Term deposits: An account with a financial institution where you deposit some money for a set period of time (the “term”) and you receive interest on that money at the end of the term. The interest rate is usually a fixed rate that doesn’t change over the term of the deposit. Term deposits usually give you a higher interest rate than a transaction account, but are not always higher than a high interest savings account. Fees are charged if you withdraw your money before the end of the term. Term deposits are also known as fixed deposits.
Transaction: The movement of money in or out of your account, including deposits, withdrawals, and transfers between bank accounts.
Transaction account: A deposit account that gives you frequent access to your money for transactions. You can use a debit card attached to the account to make EFTPOS transactions at the shops and online, to pay your phone bill, and to withdraw cash at ATMs or at a bank branch. You can also use your transaction account to write cheques if you ever need to.
Transfer: When you give the bank instructions to move money from one account to another account, e.g. moving money from your savings account to your transaction account. This is different to a “payment” where you send money from your account to somebody else’s account.
Withdrawal: When instructions are carried out to pay money out of your account and it is paid. A simple example is getting cash out of an ATM.
Our Ratings & Guides
Articles and Guides
Dealing with money for Juniors – Under 12s:
Five simple steps to raising money smart kids
For more information on how CANSTAR rates youth banking accounts, read our latest Youth Banking and Education Award report. These are the providers we have recently researched and rated: