MONEY COMMENT
Make Your Child A Money Expert

By David Kuo (TMFDragon)
August 23, 2004

My twelve-year old son asked me the other day whether he could have his own bank account. He already has a savings account with a building society, but decided that he would now like something a bit more "grown up".

I thought about it for all of one minute before concluding that if he is old enough to know the difference between a savings and a current account, then he is almost certainly mature enough to operate his own current account.

Most high-street banks offer junior bank accounts, such as BarclayPlus from Barclays and The Under 19's account from Lloyds TSB. NatWest and Nationwide BS also offer bank accounts for their younger clients, though you need to be at least sixteen at the latter.

The underlying feature of all junior bank accounts is easy access to cash. Account holders are provided with cashcards that can be used at thousands of ATMs. Nationwide BS even allows its junior customers to withdraw cash when they are abroad at no extra charge, though some ATM operators may levy their own charges!

Some banks even issue their junior customers with a debit card that can be used to pay for goods and services in shops or online. These come in the form of either Solo or Electron cards, though Lloyds TSB restricts the issue of debit cards to customers who are sixteen or over.

Reassuringly, junior account holders are not allowed to go overdrawn until they are over eighteen, because cheque books are not issued to minors. That said, some accounts do pay generous interest on credit balances, though this varies quite considerably from one bank to another. Consequently, it pays to shop around!

Here's a sample of what is on offer on the high street:

* 4% on £50+ and 4.5% on £1,000+ 

** 1.5% on £500+ and 3.0% on £1,000+

As you can see, there is plenty to digest, so choosing a junior bank account goes a lot further than simply plumping for the bank that offers the biggest CD vouchers! Hence, sitting down and discussing the pros and cons of each account is essential.

Personally, I believe that junior bank accounts can be an invaluable aid in teaching children how to manage their own finances. There is, and quite rightly so, considerable concern about the poor grasp of financial affairs among our adult population. That is all the more reason to properly prepare the next generation to deal with financial issues, distinguish good products from bad ones, and become money experts in their own right!

> Bank accounts for grown ups!