Why kids’ bank accounts are important

Co-author: TJ Ryan
Despite what some children may think money doesn’t come from a hole in the wall or from the supermarket check-out.

A study by the Commonwealth Bank in 2014 showed that fewer than 1 in 10 (8%) parents feels their child fully understands the value of digital money and a further 1 in 3 (35%) children don’t understand how digital purchases are paid for. Sadly money is real and it has to be earned, since it pays for the roof over your head, food and clothing – and if you’re lucky, there should still be some left over to put towards savings.

One of the quickest ways to teach kids the value of money is to give them regular pocket money and help them open a junior banking account. Teaching them banking language is important because the terminology and their meanings – words like deposit, savings, balance, withdrawal, interest – are often a whole new world to them.


Grant them control over their money

The CommBank study found more than 2 in 3 (69%) modern kids receive pocket money, and children typically begin receiving pocket money at age six and a half. Getting kids to open a bank account so they can manage that pocket money themselves is a great way to help build healthy financial habits.

Australian children who receive pocket money already appear to be savings-conscious, with almost half (47%) saving all their pocket money each week.

But nearly 1 in 3 Aussie kids don’t receive any pocket money, according to CommBank’s 2016 Common Cents Quiz. This means 1 in 3 kids these days aren’t learning where money comes from, how to earn money, and how to save money to buy something they want or need.

Having the appropriate bank account underpins a child’s budgeting skills so they can watch their pocket money grow and allocate savings towards different goals. The eventual purchase of a toy or game or other treat acts as a great incentive for kids to keep going. This helps kids to learn two very important life lessons:

  1. The difference between “want” and “need”
  2. The comparative value of each want
  3. How to save for a “later” reward
  4. How to track money going in and out and control their spending


Compare School Banking programs in our Junior Banking Award


Real money lessons

The social aspect of children’s banking can’t be underestimated. Taking your child into the bank with you to learn the deposit or withdrawal process with a teller helps make the experience real for them, perhaps more so than if they watch you send them an electronic transfer for their pocket money.

The same can be said of School Banking, where saving is a social activity that the whole class takes part in on a particular day every week. There’s a lot to be said for the positive feelings kids associate with money when they’re all working on their savings at the same time.

Better off than Mum and Dad!

Banks attract youngsters to their junior accounts with interest rates that are often higher than the rates their parents can get on their own accounts.


Junior accounts have a maximum age restriction (usually under 12), so it’s good for kids to make the most of these higher rates while they can!

Junior vs. Adult Interest Rates

Junior – Total Interest Rates
Balance Minimum Rate Average Rate Maximum Rate
$500 0.10% 2.13% 5.15%
$1000 0.10% 2.13% 5.15%
Adult – Total Interest Rates
Balance Minimum Rate Average Rate Maximum Rate
$500 1.00% 2.32% 3.35%
$1000 1.00% 2.32% 3.35%
Source: www.canstar.com.au. Interest rates are current as at 15 June 2016.
Total rates are the sum of the base plus bonus rates.

Understandably, junior interest rates are higher because children tend to have less money in their accounts and therefore interest earned will generally be at a lower level. But still, when you compare interest rates between the junior and the adult equivalent, there can be nearly a 2.00% difference!


Compare interest rates on kids bank accounts

Source: BNZ

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