The best kids' bank accounts for learning and earning

Hi Nicole,

Thank you for your story on what high school kids need to know about money. I'm really keen to know your advice for my younger children. They are eight and 10 and spending like crazy. We pay them pocket money ($10 a week) and they put some of this into a piggy bank for holiday savings, but they raid it virtually every week. I can't get them to understand the value of money. In desperation, I sat down with them last week and went through my bank statement with a highlighter so they could see how much their game downloads were costing. They were stunned! What bank accounts or strategies do you recommend?

Debra, Melbourne

Game downloads, huh. Debra, this is micro-spending (at a micro age) – and it can do maximum damage. My first piece of advice would be to set any parental purchase restrictions you can on your game console. Then if your kids want a game they can give you the physical money upfront, out of their piggy banks.

It's key they realise that "virtual" money – whether online or in a bank account (more in a mo) – is still money. It runs out too.

Next, you need my Pocket Money Challenge. Give your kids the option to keep receiving $10 each week – that's close to average for their ages, says TAL research – or $40 in one hit at the beginning of every month. They'll think Christmas has come early and opt for $40. Remember this has to now cover their downloads and whatever else. When, not if, they spend it all in the first week, don't give them more. Eking it out is the lesson.

I hope they also work for their money. As an adult, money is earned not bestowed. So giving it to them no-strings-attached sets up false and dangerous expectations.

As for bank accounts for young children, there's a bit to know. One of the highest paying listed by comparison site Canstar is big-name Bankwest, with its Kids' Bonus Saver (for under 15s). The trouble is all but 0.01 per cent of the 4.75 per cent interest is a "bonus" – paid if they make no withdrawals and deposit between a high $25 and $250 a month. Almost all your money is also swept away to a linked account with paltry interest once a year.

A better option is the First Option Credit Union Kids Bonus Saver (for under 16s), which offers the highest 5.15 per cent – also with a 0.01 per cent base rate but with the "bonus" for just a $5 minimum deposit and no withdrawals. If these conditions still aren't do-able, go for Select Encompass's Kick Start Saver (for under 18s), with 5 per cent on balances up to $5000.

Your little gamers might also enjoy the cute animated goal saving tool, with a wall progress print out, on BCU's kids pages. And it's free!

Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. You can write to her for help solving your money problem, or with a consumer question, at nicolehelps@fairfaxmedia.com.au.