When it comes to kids bank accounts here in Australia, they are often anything but straightforward. Headline rates might look appealing. But when you do a little digging, there are special conditions and bonus rates that can require you to jump through hoops.
Having worked in marketing for both the big banks and credit unions, there is a common saying from “womb to tomb”. Basically, that is the utopia of a banking relationship.
Having someone as a customer from when they are a child, through to when they are an adult is the best kind of customer a bank could ask for.
My friends over at the Spending Hacker talk about the hidden ‘tax’ we pay for being loyal.
This is also the case for kids bank accounts. The bank will sweeten the deal with an introductory or bonus rate, that then later converts to a low rate.
If you keep an eye on your kid’s accounts you can definitely maximise the value you get from them.
Here is my list of the top picks for kids savings accounts in August 2017. Note that rates may have changed since then.
Select Encompass Credit Union Kick Start Saver – 5.00% p.a
In the past, most credit unions had criteria where you needed to work for a certain employee group or live in a certain community to be able to join. Over the year these rules have changed quite substantially, so it can be worth considering these as alternatives to the big banks.
This account offers a 5.00%p.a rate. The catch is that this is only for balances below $5,000.
A balance between $5,000 and $10,000 will earn 2.00%p.a and balances over $10,000 earn a miserable 0.01%p.a
So you can see in this case it pays to be conscious of your balance as once you hit $5,000 there are better options out there.
To have this account the Child must be under 18 and the sole account owner. There is a maximum of 1 account per eligible child.
Bankwest Kids Bonus Saver – 4.75%p.a
This one definitely makes you jump through hoops to be able to get the high bonus interest rate!
If you don’t meet the special conditions the interest rate defaults to a miserable 0.01%p.a
The maximum opening balance for the Bankwest Kids’ Bonus Saver is $250. To be eligible, the child must also hold a linked Bankwest Children’s Saving Account in his or her name. Bonus Interest will apply each month if no withdrawals are made, and deposits total at least $25 but no greater than $250. After a year, any balance over $1 will be swept into the Bankwest Children’s Savings Account.
CUA Youth e-saver – 4.00%p.a
This account offers a rate of 4.00%p.a for balances under $5,000. But it then drops to 1.00%p.a for balances over $5,000.
BCU Scoot Super Saver – 3.50%p.a.
The default interest rate is 0.75%p.a, but you can earn 3.50%p.a. if you deposit at least $20 per month and have no more than $5 in withdrawals within the same month.
Credit Union SA Children’s Savings Account – 3.25%p.a
The default interest rate is 0.25% p.a. But you can earn 3.25%p.a. if a minimum of one deposit and no withdrawals are made in the month.
Greater Bank Life Saver Account – 3.00%p.a.
The catch with this account is that the account balance must increase each month.
So this is not a bad option if you think you might need to make a withdrawal, as long as you can top it back up within the same month to bring your balance up to higher than it was the month before.
Police Credit Union Beans Account – 3.00%p.a.
A standard interest rate of 1.00% p.a. You can earn 3.00%p.a. if you make no withdrawals in the month. And you make a minimum deposit of $10 per month.
First Option Credit Union Kids Bonus Saver – 3.00 %p.a.
First Options Credit Union, current rate is 3.00%p.a. The catch is that this is only for balances below $5,000.
You need to make a minimum deposit of at least $5 a month and no withdrawals. Otherwise, the rate drops down to a far less attractive 0.15%p.a.
Teachers Mutual Mighty Saver Account – 2.81%p.a.
A standard interest rate of 1.00% p.a. You can earn 2.81%p.a. if you make no withdrawals in the month. And you make a minimum deposit of $10 per month.
Hume Bank Clancy Koala Account – 2.76%p.a.
A standard interest rate of a pretty sad 0.01% p.a. You can earn 2.76%p.a. if you make no withdrawals in the month. And you make a minimum deposit of $10 per month.
Suncorp Kids Savings Account – 2.75%p.a.
A minimum deposit of $20 a month plus no more than one withdrawal earns a 2.75%p.a. special interest rate. If these conditions are not met, the rate drops to a less appealing 1.50%p.a.
This is not a bad option if you think you might need to make a withdrawal in a month, as it does allow you to do one without being penalised and losing your bonus interest.
Newcastle Permanent Smart Saver Account – 2.75%p.a.
Offers a high special interest rate of 2.75% if your deposit $10 a month, otherwise you’ll receive no interest at all.
Like the one above you are given some flexibility by being able to make up to two withdrawals each month.
Peoples Choice Credit Union Young Saver Account – 2.55%p.a.
Offers a high special interest rate of 2.55% if your deposit $5 a month, and make no withdrawals.
Otherwise, the interest rate drops to 1.45%p.a
Given some of the restrictions that apply once you reach $5,000 for some of the accounts, you might like to consider other options. Such as savings for your child’s future in your mortgage offset account, or look at something like an index fund if you are investing for an extended period of time.
Are you using any of the bank accounts above to save for your kids future? Are there any others we may have missed?