Warning on child’s bank account

Parents are being warned to be careful about how they set up their children’s bank accounts after some complained their children or former spouse could access money they shouldn’t have.

The Banking Ombudsman Scheme has released a guide on children’s bank accounts to help people understand who owns the money and what happens if things go wrong.

It says the most common complaints it receives about children’s accounts are over who controls or has access to accounts.

In one case a mother and her son opened an account together but the mother believed she and her son had to co-sign for withdrawals.

The son withdrew $1400 and bought a car which he wrote off in an accident. The mother complained to the bank that it had given her son access to the account without her permission.

The bank offered her $600 in compensation as a goodwill gesture.

The Banking Ombudsman found the son was able to withdraw funds on his own.

In another case two parents set up an account in the name of their children and, after separating, deposited $12,000 in each account for joint use for the children.

But one parent withdrew the money, and the other complained about it to the scheme.

The Banking Ombudsman couldn’t uphold the complaint because the accounts’ documents allowed each parent to manage the account individually. The guide says “understanding clearly who has signing authority is vital”.