An overview of children's bank accounts

 Are children's bank accounts really necessary? There will come a time when each and every person will need a bank account in their day to day life. Employer’s no longer pay their employees in cash instead they will credit the employees’ bank account, many utilities companies and other household suppliers will want payment via direct debit or standing order and many other suppliers prefer
payment by credit or debit card, as opposed to cash, which requires a bank account.

Banking can be complex and confusing and if you get it wrong it can end up costing a lot of money in unnecessary fees and charges. Modern day banking is a skill that needs to be taught and the childrens bank accounts offer the perfect opportunity to teach your children money management and the art of modern day banking.

There are some children's bank accounts where the parents have full control over the account and make all the decisions. This type of bank account is fine for younger children, but it is not going to teach your children how to manage their finances. Similarly, high interest savings accounts do not offer the flexibility needed to teach your children how to manage a bank account. In order to show your children what to do you are going to need a bank account where your child has control over their account, obviously under your supervision.

The age at which a child is mature and responsible enough to manage their own finances will vary from child to child, however most banks consider it to be from the age of about eleven years old. There are many childrens bank accounts that are designed to be the first bank account for children in the 11 – 15 year old range and one of these should be top of your list.  

There are many banks that offer bank accounts for children in the 11 – 15 year old range, so you are spoilt for choice. All the banks offer the same services, offer similar interest rates and work in the same way therefore no bank is better, or worse, than the others. The final choice is likely to hinge on the location of the bank and personal preference.

Childrens bank accounts will require you to provide photographic identification of your child, such as a passport or a photographed certified by a professional, such as a GP or doctor. The identification must also provide proof of address. In addition to some identification the only other thing required to open up children's bank accounts is the minimum deposit to get the account up and running, which can be as low as one pound.

Many childrens bank accounts offer the account holder the opportunity to own a cash card, which allows cash to be withdrawn from ATMs. The amount of cash the account holder can withdraw will be restricted and the amount is generally £50, which should be more than enough for most account holders.

Some children's bank accounts will offer a debit card to older teenagers. With a debit card the account holder can withdraw cash from ATMs, usually up to the value of £300 per day, and pay for goods and services from shops, cafes and other retail outlets.

Childrens bank accounts will not let the account holder go overdrawn therefore your children cannot get in to debt. This means that once the cash in the account is gone, it’s gone, which will help teach your children the value of money and to live within their means. This is a very important skill.

All childrens bank accounts offer free daily banking services, as you would expect, however not all banking services are free of charge. Any CHAPS and BACS transactions will incur bank charges, just like they would if they were being paid through any bank account.

Childrens bank accounts will offer higher interest rates than other bank accounts, however the rate isn’t that brilliant, especially in today’s current economic climate. Many people think that children's bank accounts pay interest gross, i.e. without tax deducted, however this is not the case. A child is a tax payer and should pay tax. A child also has an annual personal allowance and provided
the interest received is less than the personal allowance the child can claim back the tax deducted from the interest received. 

Childrens bank accounts do not offer account holders a cheque book, which is a big disadvantage. Writing a cheque is not obvious and there is a right way and a wrong way to write a cheque. Writing a cheque is a skill that must be learned however your child will have to wait until a cheque book is issued with a current account, which is going to be when your child is older.