A kids savings account is a bank account made for children and teenagers, usually for anyone under 18. It works much like a normal savings account, but it is set up to help a young person save money and earn interest on it, while a parent or guardian looks after the account with them.
If you are thinking about opening one for your child, this guide explains how it works in plain terms: who can open one, how interest is earned, what it costs, and what happens when your child turns 18. For general guidance on choosing a savings account, MoneySmart is a useful official starting point.
What Is a Kids Savings Account?
A kids savings account is a savings account offered by a bank or credit union for people under 18. Pocket money, birthday money and money earned from small jobs can be deposited into it instead of sitting in a piggy bank, and the balance earns interest over time.
The key difference from an adult savings account is the setup. The account is held in the child’s name, but a parent or guardian usually opens it and acts as a signatory, especially for younger children. As the child gets older, many banks let them take more control, such as checking the balance in an app or making deposits themselves.
It is also different from a kids transaction account. A savings account is for money you want to keep and grow, while a transaction account is for everyday spending. If you are weighing up the two, our comparison of a kids savings account vs transaction account explains which suits which job.
How Does a Kids Savings Account Work?
The basic idea is simple:
- Money goes in. You or your child deposit money, either in a branch, by bank transfer, or through the bank’s app.
- Interest is calculated daily. Most banks work out interest each day based on the balance in the account at the end of that day.
- Interest is paid monthly. The interest earned during the month is added to the account, usually at the end of the month.
- Interest earns interest. Because the interest stays in the account, the next month’s interest is calculated on a slightly larger balance. Over years, this compounding effect is what makes regular saving add up.
For example, if a child saves a small amount each week and leaves it alone, the balance grows from both the deposits and the interest. It will not make anyone rich overnight, but it teaches the habit that matters most: money left saved grows, while money spent is gone.
Who Can Open One?
Most kids savings accounts are open to children from birth up to age 17, though the exact age range varies by bank. In practice:
- Babies and young children: a parent or guardian opens the account and manages it on the child’s behalf.
- Older children and teenagers: many banks allow them to open an account with a parent or guardian’s consent, and to use online banking or an app under supervision.
- Identification: the parent or guardian usually needs to show their own ID, and may need the child’s birth certificate or other ID. Requirements differ, so check with the bank before you go in.
There is generally no minimum age to start saving this way, which is why some parents open an account soon after a child is born and deposit birthday money into it from the start.
What About Interest and Bonus Interest?
Kids savings accounts usually pay a variable interest rate, which means the rate can go up or down over time, often in line with broader interest rate movements. Many accounts also have two parts to the rate:
- A base rate paid on the balance no matter what.
- A bonus rate paid on top when certain conditions are met for the month.
Common bonus conditions include depositing a minimum amount each month (for example, $20) and making no more than one withdrawal in that month. If the conditions are not met, only the base rate applies for that month, which is often much lower.
This is worth understanding before you choose an account. An account that looks like it pays a high rate may only pay that rate when the bonus conditions are met every month. If your child is likely to dip into the money often, an account with no bonus conditions may work out better in practice. Our round-up of the best kids savings accounts compares accounts on exactly these features.
Are There Fees?
Most kids savings accounts charge no monthly account-keeping fee, and many charge no fees for deposits or withdrawals either. That is one of the reasons they suit small balances: fees would otherwise eat up the interest a child earns.
Still, check the fine print. Some accounts may charge for things like paper statements, replacing a card, or using another bank’s ATM. Opening deposits are usually small or nothing at all, with many accounts requiring no minimum opening deposit.
Is the Money Safe?
Yes, in the same way as adult bank deposits. Kids savings accounts are offered by authorised deposit-taking institutions, which are banks and credit unions regulated in Australia. Deposits are covered by the Australian Government’s Financial Claims Scheme, which guarantees deposits up to $250,000 per account holder, per institution.
That means the money is far safer than cash kept at home, and unlike a piggy bank, it earns interest while it sits there.
Is the Interest Taxed?
Interest earned on a kids savings account is generally treated as taxable income. In practice, small amounts of interest often fall below the tax-free threshold, so many children pay no tax on it.
There is one rule worth knowing: if a child under 16 earns more than $120 in interest and other investment income in a financial year, the bank may withhold tax at a high rate unless the child’s date of birth or tax file number (TFN) has been provided. If that happens, the tax can usually be sorted out at tax time, but providing the details up front avoids the withholding. For most families saving small amounts, this is not something to worry about, but it is worth knowing it exists.
What Happens When Your Child Turns 18?
A kids savings account does not last forever. When the account holder turns 18, the youth account is usually converted to an adult account, or the young adult is asked to choose a new account. The bonus youth rate generally stops at that point, and the standard adult rate and fees apply.
This is a good moment to sit down together and review the options. By then, your teenager will have years of saving habit behind them, and choosing their first adult account is a natural next step.
Is a Kids Savings Account Worth It?
For most families, yes, provided you go in with realistic expectations. A kids savings account will not turn pocket money into a fortune, and its interest may not keep up with inflation over long periods. Its real value is different:
- It gives saving a visible, growing balance a child can watch.
- It teaches delayed gratification: money left alone grows, money spent is gone.
- It introduces banking basics early: deposits, withdrawals, interest and statements.
- It keeps the money safe and separate from everyday spending money.
The best account is the one whose conditions your family can actually meet. A simple account with no monthly fee and a fair rate you earn without jumping through hoops beats a headline rate that disappears the month your child makes two withdrawals.
Frequently Asked Questions
Can a child open a savings account on their own?
It depends on the bank and the child’s age. Younger children need a parent or guardian to open and operate the account. Older teenagers can often open an account with parental consent, and some banks allow more independence from around age 14.
How much money do you need to open a kids savings account?
Usually very little. Many accounts have no minimum opening deposit, and others ask for as little as $1 to $5. The bigger question is the minimum monthly deposit needed to earn any bonus interest, so check that before choosing.
Can grandparents open an account for a grandchild?
Some banks allow a grandparent to open an account, but most require a parent or guardian as the signatory. If you are a grandparent wanting to help, the simplest route is usually to contribute to an account the parent has already opened.
Can a child withdraw money whenever they want?
Withdrawals are possible, but they may affect bonus interest for that month, and younger children generally need the signatory’s involvement. Talk about withdrawals together first: every withdrawal is a lesson in weighing up what matters more, the thing now or the goal later.
What is the difference between a kids savings account and a kids transaction account?
A savings account is for storing money and earning interest, while a transaction account is for everyday spending, often with a debit card. Many families use both: spending money in the transaction account, savings in the savings account.
