It makes sense that a growing number of financial institutions should be targeting their products at customers as early as possible.

Children's bank accounts with features such as bonus interest rates raise the possibility someone will be a customer for life and also encourage savings habits at a young age.

The chief executive of financial comparison site InfoChoice, Shaun Cornelius, says BankWest has consistently offered the leading rate for children's saver accounts. It is paying a maximum 6.01 per cent a year on its Kids Bonus Saver, compared with Suncorp's 4 per cent on its Kid Savings Account and 3.75 per cent on IMB's Zoo Account.

Cornelius says higher rates are usually available for account holders who regularly deposit money in their accounts and do not withdraw funds.

“These accounts generally encourage the habit of saving," he says.

BankWest pays a basic interest rate of 0.01 per cent and a bonus 6 per cent interest rate each month when $25 to $250 is deposited and no withdrawals made.

Suncorp pays a base rate of 0.75 per cent and a bonus interest rate of 3.25 per cent when at least $20 in combined deposits is made each month and when no more than one withdrawal is made a month.

IMB requires a minimum $10 deposit each month and no withdrawals in the same month to earn the bonus interest of 3 per cent.

A financial analyst at financial products ratings agency Canstar Cannex, Peter Arnold, says a further feature of most children's bank accounts is the exclusion of fees.

“Really parents should be looking for the best interest rate and those that offer bonus rates or rewards for extra savings," he says.

Arnold says its ratings are weighted heavily towards the interest rates on offer but that it also looks at how interest is calculated and how customers can access their money. Funds are generally accessible through ATM cards.

Its top ratings go to BankWest's Kids Bonus Saver, followed by the Commonwealth Bank's Youthsaver account, Suncorp's Kids Savings Account and Westpac's rewards saver under 18 years.

Pocket money

There are no hard and fast rules about when to start giving pocket money or how much to give but it would appear that there is a preference that the money should be earned. According to the recent BankWest Social Indicator Series, 58 per cent of parents give their children pocket money, with the average amount $10.68 a week.

NSW children are Australia's best paid at $12.40 a week while South Australian youngsters struggle to get by on $8.70.

Generally the starting age is about seven, with the bounty ending at about 17 or 18 years of age.

Nearly three out of four parents set conditions for pocket money – the most common being performing chores around the house such as tidying their room and making the bed. Other conditions are good behaviour and good school performance.

While about half the parents surveyed said they closely monitored what their children spent their money on, 3 per cent said they had no idea what they spent it on.

More than two-thirds of children spend their pocket money on games or toys, about half spend it on food or sweets and more than a third spend their money on entertainment.

Case study

Each week Monty Bradley, 2 years, puts $4 into his frog money box and $4 into the bumble bee box belonging to his eight-month-old sister, Claudette.

While mother Hollie admits Monty doesn't really understand what is happening, saving is a habit she wanted him to adopt early. As is the idea that he has a few jobs to do around the house to earn his money.

“If we go shopping he helps unpack and he likes vacuuming, so he does that,” Hollie says.

In Monty's short life he has saved about $325, a figure Hollie is familiar with because she recently raided his money box to pay for dinner.

“We had Thai takeaway dinner home delivered and they only took cash," Hollie says. "I thought I had enough in my wallet but I didn't so I had to get it out of Monty's money box.”

Hollie is not the first parent to tap into a child's life savings.

According to the latest BankWest Kids Piggy Bank report, almost one-third of parents pinched money from their child's money box to pay for anything from a litre of milk to funding a new air conditioner.

“We know the economic downturn has stung many people and we found the most common reason for raiding the piggy bank is to cover household bills, groceries and tuck shop money,” says the chief executive of retail at BankWest, Ian Corfield.

“On the more unusual end of the scale, we found parents are also using their kid's savings to bankroll a night on the town, pay off a credit card, or buy an air conditioner.

“Mums are twice as likely as dads to take to the piggy bank with a hammer.”

Encouragingly, most parents said they paid back the money they purloined from their child's savings — as was the case with Hollie, who paid back every cent into Monty's high-interest-bearing savings account.

KIDS’ SAVINGS BALANCES
$10 weekly deposit              Balance
1 year                  $530.12
2 year                  $1,081.31
3 year                  $1,654.41
4 year                  $2,250.30
5 year                  $2,869.90
Source: www.canstarcannex.com.au, based on 4% interest rate