What to look for

Some accounts are clearly better for saving, others better for frequent transactions and there are plenty which suit both purposes. 

Savings accounts

Accounts geared towards savings are good for younger kids and older children who don’t need frequent access to their savings. The account will reinforce what they’re increasingly being taught in school (see "Banking ABCs") and give them a good introduction to the importance of saving.

• The key feature to look for in a savings account is how much interest you'll get and how low the fees are.

Transaction accounts

If you have teenagers or near-teens you’ll know how often they end up spending money – bus fares, snacks, mobile top-ups – and how having an everyday transaction account can become essential.

• For an account that’ll be used more frequently, look for one that comes with an ATM card and make sure you won't get charged any direct penalties for making withdrawals.

ATM cards

There are big differences in the minimum age the banks require before issuing kids with ATM cards.

With adult signatory (which usually means parental) permission SBS Bank would issue a card at age 5, the TSB Bank, PSIS and ANZ at age 7 and Kiwibank and The National Bank at age 10. ASB had no minimum age as long as one of the parents signs a guarantee and indemnity for the account. Westpac would issue a card at 12 and BNZ wouldn’t issue one until age 13.

We think that if the ATM card is going to be actively used, 12 and upwards is an appropriate age.

We asked a dozen or so secondary-school students about their banking habits. Our group ranged in age from 13 to 17 and most had ATM cards. Nearly all the ATM users sometimes used machines that were not from the bank that issued their cards. Our group was not a heavy user of bank branches – only a few had been into a branch to make a withdrawal. The number of transactions made in a month varied from under five to over 30.

If you're going for a transaction account, it's a good idea to choose one that doesn’t incur a charge if the ATM card is used at another bank’s ATM. In our picks we looked for this as well as good interest rates and no fees or other charges.

Don't pay too much tax

All interest that’s paid into a child’s bank account gets Resident Withholding Tax (RWT) deducted before it’s credited to the account. Getting an IRD number for your child and supplying this to the bank means the lowest RWT rate (19.5 percent) can be used. Otherwise a "no-notification" RWT will apply (either 38 or 39 percent – the rate varies across banks).

To apply for an IRD number, you’ll need to complete an Inland Revenue Department IR595 form. IRD can post the form (and a guide to completing it) or you can download the form and guide from www.ird.govt.nz.