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First Bank Accounts

How to find the right savings account for your child

By
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Originally published on TodaysParent.com October 11, 2010

Chances are you’re already saving on your child’s behalf — putting a few bucks into an RESP, or holding on to birthday cash for safekeeping. But money experts say a kid needs his own bank account, and maybe sooner than you think. “When kids start to want to buy things or ask how much things cost, they’re probably ready,” says Carrie Russell, senior vice-president of personal deposits and payments at TD Canada Trust, as well as the mom of 11- and nine-year-old boys.

To make sure you’re ready when they are, here are some tips on choosing the right first savings account for your child:

Set appropriate limits

Kids under 12 need a parent or guardian to open an account and, as the grown-up, you automatically become their joint account holder. That means you can keep an eye on transactions, as well as deposit or withdraw funds for your child. You don’t have to set her up at the same branch where you bank, but it’s usually more convenient.

If she’s old enough to make transactions on her own, you can set daily or weekly withdrawal maximums, or make the account “deposit only.” You can also choose the specific access your child has — ATMs, online, phone banking or in-person only — and decide whether she will have a debit card.

As your child becomes more responsible, you can ease the restrictions — think of them as financial training wheels. Your authority over the account ends automatically when your child turns 18, or earlier if she requests it any time after turning 12. In any case, monitor your child’s banking activities closely, advises Laurie Campbell,
executive director of Credit Canada, an organization that teaches financial management. “Up till she’s 14, you have to be pretty hands-on,” she says.

Insist on fee-free

All the major banks offer youth accounts without monthly fees; CIBC and TD Canada Trust also waive transaction fees, meaning kids can make unlimited deposits, withdrawals or payments from their accounts free of charge. Youth accounts at BMO, Scotiabank and RBC offer as many as 30 free transactions a month. (Banks are notorious for changing their fine print, so be sure to ask before you sign up.) The exception: All kids’ accounts will be dinged for Interac transactions, including withdrawals, at ATMs run by competing banks and independent companies, usually $1.50 to $3 per transaction.

Youth accounts may come with other kid-friendly features, such as easy-to-read statements. Some banks offer online tools to help kids learn about money (cibc.com/ca/youth has a game that lets them practise saving for stuff they want). Otherwise, youth accounts are similar to the ones adults hold.

Save and learn

Signing kids up with a savings account helps them learn how banks work, and lets them see for themselves the value of setting money aside. “You are sending a message that you don’t blow everything you get,” says Campbell. “My 12-year-old daughter and 14-year-old son look at their accounts and feel a sense of pride and accomplishment that they can save for the longer term.”

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    • 21 February 2013