“While there might be several savings accounts aimed at kids in the market, it’s important not to simply choose a product based on the interest rate alone,” warned Paul Thomas chief executive of Gateway Credit Union.
“Many accounts have associated fees, penalties for withdrawals and conditions on bonus rates that can all eat into their savings.
“A quality account will offer a competitive rate, no account keeping fees, unlimited fee-free transactions, unlimited deposits, and no minimum balance,” he said.
Westpac’s recent Bump promotion, is an example of where parents might think they are getting the best deal, when it actual fact there is better out there.
The promotion promises parents that their child will get $200 if they are born in 2017 and set up the account then. But on closer inspection the $200 can’t be accessed until the child is 16 years old.
Based on the scenario provided by Westpac’s Bump promotion, at the proposed savings rate of 1.5 per cent and with an initial deposit of $200, a $20 weekly deposit for 16 years, can end up with around $19,000.
Whilst Westpac’s promotion is good, there’s even better out there. Many accounts, which we’ve listed below, pay above 1.6 per cent.
So if we use the same $200 deposit plus regular $20 weekly savings, these are going to deliver a higher result once a child reaches 16 years.
For example, a CommBank Youthsaver account has an interest rate of 2.3 per cent, so if you deposit of $200 at birth and then $20 per week for 16 years, your child will have around $20,000.
The result was even better when I looked at some of the top savings accounts and bonus interest paid on kids’ bank accounts, according to Mozo.com.au.
While CBA declined to comment and be compared to Westpac, National Australia Bank were happy to promote what they offer parents, although the result was less impressive.
“We have a NAB Reward Saver account which rewards customers with bonus interest every month they make no withdrawals and at least one deposit, and this is a great way for parents to teach their kids important savings skills.
“For example, if a new parent were to put $10 a month into a NAB Reward Saver account for their child from the day they’re born, and make no withdrawals, they would have a balance of a few thousand dollars by the time they turn 18 years of age.”
The financial comparison site Mozo.com.au released a report last week which compared 35 kids savings accounts for its annual Experts Choice Deposit Awards to find the best value savings accounts for kids pocket money.
Of all the savings accounts compared, the kids accounts earning the highest amount of interest had at least one condition attached.
Common conditions include minimum deposit amounts like $10-$20 a month and no withdrawal limits.
Top kids savings accounts with unconditional interest include:
|CUA||Youth eSaver||4.00% p.a. (up to $5,000 balance)|
|Bank of Sydney||Student Savings Account||1.85% p.a.|
|Beyond Bank||Junior Savers Club Account||1.80% p.a.|
|Gateway Credit Union||Dollaroo Savings||1.65% p.a.|
|Suncorp Bank||Kids Savings Account||1.50% p.a.|
Top kids savings accounts with ongoing bonus rates include:
|Bankwest||Kids Bonus Saver||4.75% p.a.||Deposit between $25 and $250 per month with no withdrawals|
|BCU||Scoots Super Saver||3.50% p.a.||Deposit a minimum of $20 and withdraw no more than $5 in the month.|
|Credit Union SA||Children’s Savings Account||3.25% p.a.||Make one deposit and no withdrawals in the month.|
|Greater Bank||Life Saver||3.00% p.a.||Account balance must increase each month|
|Hume Bank||Clancy Koala Junior Saver||3.00% p.a. (for $1 and over)||Deposit a minimum of $10 and no withdrawals in the month.|
|Newcastle Permanent||Smart Saver Account||3.00% p.a.||Increase account balance by $10 (excluding interest) and no more than two withdrawals in the month|
|Police Bank||Dynamo Kids Savings Account||3.00% p.a. (for $500 and over)||Deposit a minimum of $10 and no withdrawals in the month.|
|Police Credit Union||Beans Savings Account||3.00% pa.||Deposit a minimum of $10 and no withdrawals in the month.|
Source: Mozo.com.au as at 15 March 2017