As you know, it’s really important for kids to have their own bank account from the time they are old enough to manage it on their own or with a little help from Mum and Dad. But getting a good deal on a kid’s savings account can be tricky, so how do parents make sure they’re getting the best deal for their child?
When it comes to kids’ savings accounts, the good news is that there is plenty of healthy competition. It’s possible for kids to earn interest rates – on at least some of their money – that their parents can only dream about.
Getting the best deal, though, means checking what’s available and reading the terms and conditions of your chosen account carefully.
What to look for?
We research and rate kids’ savings accounts for both the Junior Banking Award and the Junior Saver profile in the star ratings for Savings Accounts. Below is a summary of the features and price points that we consider when assessing kids’ savings accounts for the value they provide.
Key features for a kids’ savings account include the following:
- Account facilities should include branch access, ATM access, and internet online banking and/or mobile banking access.
- Exemptions from account fees should apply for students and children.
- Accounts should be able to be personalised with named sub-accounts and savings plan goals.
- Parental control should be enabled on Junior Banking accounts for Under 12s.
A key feature of providing a Junior Banking or Youth Banking program is the supporting tools and material available to help young people grow in their money management skills.
- Tools available should include a specifically designed junior website, youth website, savings calculators, budget calculators, and money games for young savers.
- School and community workshops should be offered, run by bank facilitators.
- Support and educational resources should be available for parents and teachers to help their young savers learn.
School Banking program
Branch access and school banking are excellent tools to help children learn to save.
- The program should be run frequently in schools so that deposits can be collected and kids can ask questions of bank staff.
- In terms of services, kids in the School Banking program should be able to open an account, make deposits, and earn rewards for their saving activities.
- The program should provide benefits to schools in the form of commissions and grants as a reward for promoting financial literacy.
Traps to look out for
Sifting through the terms and conditions of a children’s bank account can be a great learning experience for you and your child!
The main thing to work out is what purpose the child’s account will be used for: savings or transactions. Accounts designed for saving will often charge a fee or cut the interest rate as a penalty for transaction behaviour like making a withdrawal or making EFTPOS purchases. A child’s account should not have any account-keeping fees if it is a good value account.
|EFTPOS Transaction Fee|
|Branch Withdrawal Fee|
Who charges fees?
- 22 of the 61 eligible youth transaction accounts charge an Eftpos transaction fee,
and 10 of the 85 youth savings account charge an Eftpos transaction fee.
- 24 of the 61 eligible youth transaction accounts charge a branch withdrawal fee,
and 34 of the 85 youth savings account charge a branch withdrawal fee.
- 20 of the 61 eligible youth transaction accounts charge an account-keeping fee,
and 2 of the 85 youth savings account charge an account-keeping fee.
Conditions on earning bonus interest
Interest rates themselves vary quite considerably:
|Balance||Minimum Rate||Average Rate||Maximum Rate|
|$500 – $1,000||0.00%||1.09%||5.00%|
|Balance||Minimum Rate||Average Rate||Maximum Rate|
|$500 – $1,000||0.10%||2.13%||5.15%|
Source: CANSTAR. Interest rates are current as at 15 June 2016. Total rates are the sum of the base plus bonus rates.
It is important for parents to understand what conditions kids need to follow in order to earn the advertised bonus interest rate, as the base rate is often as little as 0.00% – a no growth scenario.
When it comes to making withdrawals, even if there’s no withdrawal fee charged, children may forfeit their bonus interest rate if they make a withdrawal in that month.
Some accounts require that you make a minimum deposit each month and make no withdrawals in order to earn the bonus interest. Commonly, a $10 per month deposit is required to earn the bonus interest.
Other accounts specify a maximum account balance on which the higher bonus interest rate will be paid. The portion of a child’s balance that is above this limit will only earn the base rate, while the portion within the limit earns the bonus rate.
Finally, a bonus interest rate may only be an introductory rate that applies for a certain timeframe.
How do you know it’s the right bank account?
Interest rates, account fees, minimum and maximum deposits… If this is sounding like a bit too much hard work, don’t stress – CANSTAR has already done the heavy lifting for you.
We research and rate kids’ bank accounts on the value they provide in terms of price and features, for our annual Junior Banking and Youth Banking Awards. You can compare kids’ bank accounts simply and easily on our website with our award reports.