5 savings accounts that could save your children thousands
Here’s how you can plant the seed of savvy savings and teach your kids how to save up and invest money from a young age.
There’s no doubt that starting our kids early as savers will better prepare them for independent living. Putting a way as little as five dollars a week from a young age could save your child thousands, and accrue even more in interest.
But what accounts are the best out there? How can you get away without needing to fork out an ongoing deposit? And what traps are out there to lure you in…
TODAY spoke with finance expert Sally Tindall from RateCity* who told us how we can set up our kids the best way possible from a young age.
9Saver Tip: Compare children’s savings accounts at RateCity*
1. SALLY – LET’S KICK IT OFF WITH THE HIGHEST INTEREST ACCOUNT…
We did this research based on a scenario where a parent deposits $5 a week into their kids account from kindy all the way through to year 12.
In this scenario, Nexus Mutual took the crown, earning $1,169 in interest over the 13 years. That’s in addition to your own money so your total will be well over $4,500.
To qualify for the maximum rate you need to make at least one deposit and no more than two withdrawals a month.
2. AND WHAT ARE THE SAVINGS ACCOUNTS THAT DON’T REQUIRE ONGOING DEPOSITS?
The next best accounts were CUA, offering a rate of 4 per cent, and Endeavour Mutual offering 3.5 per cent. Neither of these accounts have rules around deposits and withdrawals which is good for people who just want to put in lump sums here and there. However – a word of warning – the interest rate on both of these accounts fall away as soon as your balance hits $5,000 so you have to be wary of that.
3. WHAT ELSE IS OUT THERE FOR THE REGULAR SAVERS?
4. HOW CAN YOU CHOOSE THE RIGHT SAVER FOR YOUR CHILD?
Firstly, get your kids involved in the process. It is never too early to start teaching them about money and their first savings account is a great place to start.
Jump on to a comparison site like RateCity* to see who is offering high rates but make sure you pick one where you can easily meet the terms and conditions.
Then sit down with your child and read through the terms and conditions. You’ll be amazed at what hidden nasties you might find.
Finally, get your kid to review their account every 6 to 12 months. You don’t want to teach your kids to be complacent with their money, otherwise you might find they stuck with the one bank for life.
5. WHAT ARE THE TRAPS TO LOOK OUT FOR?
Kid’s savers aren’t child’s play – there are plenty of traps to be wary of when you’re picking your kid’s first savings accounts.
Firstly, be wary of bonus rates that only last for a few months. They typically won’t deliver bang for buck in the long run.
Balance caps are also common pitfall, where your rate drops as soon as you get a healthy amount of money saved up – usually balances over $5,000.
And a lesser known trick is the “sweep facility” where the bank moves your savings into a separate low interest account once a year. That’s the bank’s way of really limiting just how much interest they pay out.