I’m looking at opening an everyday bank account for my two grandchildren. Any experiences or suggestions would be most welcome. Thanks.
John Blakey
Perth WA
I assume your grandchildren are children not adults, and you may be funding the accounts with a gifted allowance, and the purpose is to teach them financial management. A great way to start them off.
This site seems like a good index of those available. Note that some accounts have minimum and maximum ages so some may be quickly removed from consideration if your grandchildren are not old enough, or might soon be too old. I hope this helps start your search. It is always imperative to use these sites as introductory and to always verify everything on them with the bank’s web site if an account looks interesting.
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If this is the case, also look at tax implications for any interest earned on the accounts as well.
Also see what bank their parents bank with. If the parents bank at the same institution, it may be more convenient when there is a need to visit a bank or to do online banking (as parents will be familiar with the bank in question). Also see if the child’s account can be linked to the parent’s account, so that it can be managed through the one log in.
Children when they get older can also easily change bank accounts to something that they want themselves, or better suits their needs.
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Thanks Phil. Nothing is ever simple when dealing with banks. Cheers. John Blakey Perth WA
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As they are most likely minors any interest they earn is taxed at the maximum rate, only if they are working and only for that money earnt will they be entitled to a normal tax rate. They also do not get a tax free threshold on interest. You are best speaking to an accountant who has some experience in the area or who can research all the implications eg if you hold the account/s in trust you may also be liable for the tax on the interest earnt.
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Well I would think that there would be very close to zero interest paid on the money in everyday at call type accounts, so the important thing is to pick an account with zero account management and transaction fees. Or as close to that as you can get.
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Reality is transaction accounts rarely pay interest, and those that do, it is very little. $120 in interest even at 1% would be an average balance of $12,000. At 0.1% that would be a grand amount for most of us, let alone grandchildren. From ratecity the highest shown looks like 1.5%, or an average balance of $8,000.
That, or the grandparents bank, might be the most reasonable options as a matter of practicality so long as they offer a reasonably competitive product.
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We don’t know how much will be invested originally nor do we know what on-going deposits will be made. All these are possibly treated as unearned income and can be taxed at the highest rate. A lot has changed from when we opened trust accounts or even non trust accounts for our children. Legislation and Tax Office treatment of these accounts has changed a lot as my Cousin found out for his son just recently.
A link from an article that may offer some idea:
"Keen Money reader Angela asked Kids & Money to explain tax rates for kids, so here goes. Kids’ tax rates are higher than adults’ rates for income earned from savings or investments.
For the under-18s there is a whopping 66% tax bill when they earn more than $416 from “unearned” (my highlighting of the actual term used) income – ie not from employment.
If their income reaches $1307 the tax rate for kids drops to 45%. Why are the rates so high?
Well, the system is designed to prevent parents splitting their income in their children’s names and taking advantage of the $6000 tax-free thresholds"
Regular deposits can be taken as unearned income as my Cousin found out, so not just the interest earned. The Children should also get TFNs, yes they can have TFNs no matter if minors or not.
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Thanks everyone. The TFN for children is very interesting. Best regards. John Blakey Perth WA
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