Teaching your kids to save is one of the most important financial lessons you can give as a parent. Think about all the time you spend at swimming lessons. Imagine if you put that much effort into getting your kids financially savvy.
Explaining how a savings account works and giving them a simple understanding of compound interest is a good start.
And if you don’t have time to do it, it’s a great job to handball to the grandparents, who might even help top up the balance.
RateCity’s data shows there are more than 40 savings accounts on the market specifically for those under 18, offering an average base rate of 1.21%. Unfortunately, on those numbers, your kids are unlikely to save their way into early retirement, but it’s a step in the right direction.
The top rate for a youth savings account on the market is 5% with Endeavour Mutual Bank’s Kick Start Saver Account.
If a child starting school deposited $10 every week into this account for 10 years they would save an estimated $6683. Not a bad start for a 15-year-old.
However, the golden rule with savings accounts is to read the fine print carefully. Banks attach all kinds of conditions that most adults, let alone children, would find hard to understand.
Who would have thought kids saving accounts could be so confusing?
When Money came to us and asked us to compare some of the most popular children’s accounts, we thought it would be quick and painless. We’re talking about children’s accounts after all.
One of the most complicated kids accounts is the Bankwest kids bonus saver account with an attractive maximum interest rate of 4.75% – one of the top rates on the market.
However, this account comes with a complicated list of conditions, adults let alone children, would find hard to understand.
To receive the bonus rate you must deposit between $25 and $250 a month to be eligible and make no withdrawals, otherwise the rate drops to a low 0.01 per cent, almost nothing. The account also has a maximum opening deposit of and monthly deposit limit of $250.
The final sting with this account is that at the end of each year your total balance is swept back into a different children’s account, with much lower interest rates. This is a point we should have included in our original workings on this story.
The most popular kids saving account is still CBA’s Youthsaver, which includes the Dollarmites Club. The account offers a maximum rate of 2.30%, providing you make at least one deposit and no withdrawals each month. If you fail to meet the requirements the rate drops back to 0.01%.
So, the moral of this story is sit down with your kids and read the terms and conditions together. It will be a lesson in itself. Most importantly, use this as an opportunity to talk to your kids about money. The more they understand now, the better equipped they are in the future.