Bank Accounts For Babies

Are bank accounts for babies a good idea? Compare a range of options with Savvy to help you decide and find the best available.

Last updated on May 3rd, 2022 at 10:03 am by Cate Cook

Find the best bank account for your newborn

It’s never too early to open a bank account for a baby in Australia; after all, the longer an account is open, the more interest will be earned.  Take a detailed look at accounts for babies, the special deals available and what features to look out for with Savvy.  We can help you find and compare the best accounts available for your little one.

What are bank accounts for babies?

Children’s bank accounts start from when a baby is born and continue until they’re aged 18. However, some accounts for youth are available until they reach age 21 or even 25 years of age, so not all of them end when the child reaches 18. Research shows the majority of adults stick with the bank they are introduced to as a child, so your choice of bank for your baby is an important decision.

Bank accounts for babies and children in Australia can either be transaction accounts or savings accounts, although many of the best offers are hybrids of the two. They allow banking transactions such as deposits and withdrawals and electronic fund transfers (EFTs) but they also earn interest. As your child grows older, many bank accounts allow a debit card to be linked which can be used for online shopping as well as ATM withdrawals. Transaction accounts for babies and children also come with digital wallets allowing use through PayPal, Apple Pay and Google Pay.

Before the age of 12, a kid’s bank account has to be a joint account with their parent or guardian. Over the age of 12, a child in Australia is legally allowed to open an account in their sole name.

What special offers and features are available in bank accounts for babies?

These accounts come with many different features, so it’s well worth comparing bank accounts with Savvy to find one that’s just right for your child.  The best account for your baby in Australia will depend on how much is being deposited per month.  As they mature, you should also think about how your child may want to spend their pocket money, and what transaction features your child may need.

Features to look out for and compare include:

  • The interest rate – and whether bonus interest is awarded if savings targets are met
  • Fees – many children’s accounts are fee-free, but some may charge fees for ATM withdrawals or card replacements
  • Any minimum deposit or withdrawal amounts required
  • The quality of any mobile phone and online banking tools which are provided as educational material for kids to learn about money
  • Parental controls, notifications and alerts – how much control you have as a parent over your child’s spending in the coming years
  • Safeguards – such as the ability to lock an account if your child loses their debit card, or to set daily or weekly spending limits
  • ATM access – what age is a debit card offered and how many ATMs are available nearby so your child can withdraw cash?

Will I have to pay tax on the interest earned on my baby’s account?

According to the Australian Taxation Office (ATO), that’ll depend on who provides the money and who decides how the money is spent, regardless of who the money is spent on.  It could be argued that a baby has no capacity for decision-making, so therefore all decisions are made by the parent. The ATO says: “If you provide the money and spend it as you like, you must include the interest in your tax return.

However, as a baby grows up and begins to make decisions about how to spend their pocket money, they’ll become responsible for the interest earned on their bank account.

  • If they’re aged under 16 and earn less than $120 a year in interest on their account, the bank will not withhold tax and they will not have to lodge a tax return.
  • If their account earns between $120 and $420 in interest, they will need to provide their bank with their tax file number (TFN) for no tax to be withheld. There is no minimum age limit to apply for an Australian tax file number.
  • If they’re under 16 and earn more than $420 in interest and don’t provide their TFN, the bank will withhold PAYG tax at a rate of 47%, and the child will have to lodge a tax return if they want to get a refund. However, it’s quite unlikely that a young child’s account would earn more than $420 in interest in any given year.

More of your frequently asked questions about bank accounts for babies

Can I open an account for my baby before they’re born?

No – opening a bank account for a baby in Australia requires you to show their birth certificate if the account is to be in their name jointly with yours. If you are already known to the lending institution you approach, you’ll only need your child’s birth certificate and one form of photo ID for yourself. However, if you do not already have an account with that particular bank or building society, you’ll have to show 100 points of ID before opening a new account, just as you would if you were opening an adult bank account.

Can relatives make deposits into my baby’s bank account?

If you open a savings or transaction account for your baby, you’ll be able to supply your relatives with the BSB and account number and they’ll be able to pay pocket and birthday money directly into your baby’s account. As your child grows, they’ll be able to monitor their nest egg as interest is added each month.

What happens to baby bank accounts when the child turns 18?

Most bank accounts for kids are only operable until they turn 18. Before their 18th birthday arrives, a bank, building society or credit union will contact the account holders and ask where they would like the funds to be transferred to, which would normally be an adult account. At this point, it’s a good idea to talk to your bank about the best type of account to have to meet the growing needs of a young adult.

Are building societies and credit unions just as safe as banks if I’m thinking of opening an account for my baby?

Yes – banks, building societies and credit unions are all known as ‘authorised deposit-taking institutions’ (ADIs), which means they’re regulated by the Australian Prudential Regulation Authority (APRA), which is accountable to parliament. If an ADI financial institution were to fail, account holders are protected by a guarantee from the Australian Government of up to $250,000 per account holder, whether in one or more accounts.

What sort of parental controls are available to safeguard my child’s money?

Parental controls vary according to which bank or building society you choose to open an account with. Some accounts allow a parent to be notified each time a withdrawal happens from their child’s account, or even to approve each withdrawal. Others offer daily, weekly or monthly withdrawal limits. Another useful safety feature is the ability to immediately lock a child’s account if the linked debit card becomes lost. These features can all become useful as your child grows and begins to actively participate in their own banking.