Kids’ accounts cause confusion
Parents are being told to make sure they understand the terms and conditions of the bank accounts they set up for their children.
Deputy Banking Ombudsman Tina Mitchell said, in one complaint received by her scheme, a woman was upset that her son had been able to withdraw money from his account to buy a car, which he then wrote off.
She had thought she had to sign for any withdrawals from 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,’’ Mitchell said.
Children cannot open their own bank accounts. When parents do so on their behalf, they accept an account mandate, which lays out how the account will work.
Mitchell said it was important that parents understood that document, and that the account suited their purposes.
She said they should check it every so often to make sure it was still a good fit – as children got older, their needs could change. For older children, banks usually allow a wider range of activities, such as making withdrawals, setting up internet banking or a debit card.
Mitchell said all the major banks offered no-fee accounts for children.
Parents can open standard savings accounts in their kids’ names, but with themselves as sole signatories. Another option is to open an account with themselves and the child as joint account holders, or an account in their own names but on the understanding that the money is for a child.
But if the account is in a child’s name, the child owns the funds. If a parent is a signatory but not an account holder, the parent does not own the money, even if they can control where it goes.
Mitchell said most of the complaints the scheme received about kids’ bank accounts were in cases where a parent could not access the account after a separation. People also complained about mistaken payments and closures, who had authority over an account, and issues relating to estates.
‘‘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,’’ Mitchell said.
‘‘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.’’