better banking

New Quick Guide: Children’s Bank Accounts

26 Jul 2017

The Banking Ombudsman Scheme has a new quick guide on children’s bank accounts. It covers setting up accounts, who owns the money and what happens if things go wrong.

The way children learn about money often determines how they deal with money later in life. Many banks offer products specially tailored for children and tools to teach children about money, such as setting saving goals and setting limits on expenditure.

Problems can crop when children have bank accounts, but a bit of planning can avoid a lot of them. For example, when an account is set up there is a key document that says who owns the money in the account and who controls it. Our quick guide explores how this document works and what happens if things go wrong. 

In one case, a mother and son opened an account. She believed she had to sign for withdrawals, but the son withdrew the money and bought a car. The mother complained that the bank had allowed her child unrestricted access to the account. We couldn’t uphold the complaint because the account documents said the money was the son’s money and that he could operate the account. From there we could not say the bank should have stopped him from buying a car.

When parents separate, there can be disputes about who owns the money. For example, in another case, two parents set up an account in the name of their children. One parent withdrew the money, and the other complained to us. Again, we could not uphold the complaint because the account’s documents allowed each parent to manage the account individually. We also talked to the other parent who said that the money had been transferred to a term deposit for the children.

Even if settings have been restricted, it still pays to monitor accounts regularly. In one case, the bank inappropriately allowed access to the account, even though the account was set up to limit access. In that instance, the bank refunded half of the money spent. 

Children's bank accounts quick guide.

Tina Mitchell 021 2544281