Best Kids Savings Account

We all want our kids to start saving early in life. The hope is to not only create a healthy habit of saving money, we also want them to have a significant amount of money to lean back on when they turn 18. So what we do is we help them open a kid’s savings account with our favorite financial institution.

What most people don’t know is that kid’s savings accounts usually pay abysmal interest rates. The interest you’d earn on most accounts is actually less than inflation. If we are trying to encourage a kid to save money by telling them their money will grow, then getting a kids savings account is a bad way to motivate them.

Having said that, there are certain accounts that are actually quite decent. Remember, however, that there are no “best” accounts – only one that’s best for you. To know which one is most suitable for you, consider these factors:

1. The interest rates your kid will earn from his/her account will usually be divided into two parts: the standard variable rate and the bonus variable rate. The standard rate is what you’ll earn as long as the account is active.

   The bonus rate, however, is the rate you’ll earn if you meet a certain criteria. For most accounts, the bonus rate make the bulk of the total interest rates the account will earn. This is why it’s crucial to find out exactly what criteria is. For example, some account offer extremely high rates – but that rate will only last for the first 6 months.

2. Look out for fees. Because of how low the amount of interest kids can earn out of their savings, it’s doubly important for you to check out for fees or you’ll actually have to pay for “privilege” of using their account.
3. Are there a minimum amount required to open the account? What if your kid has $30 to save and the minimum is $100, should you help? Or should you find an inferior alternative instead? That’s a decision you’ll have to make.
4. What is the age limit? If you kid is starting at 14, it might worthwhile to find a slightly inferior account that has an age limit of 18, rather than the best one that has age limit of 15 so as to avoid the hassle of moving your account.
5. How easy is it to access the account? As a parent, you might want to be able to easily check how your kid’s account is doing. Does the account offer online access? What about phone banking or branch access? Does it even offer ATM and EFTPOS access? What if your kid wants to use his saved funds? Would you have to withdraw it for him/her?
6. Is the interest calculated annually, monthly or daily? With the amount your kid are saving, the difference between the frequency of interest may not amount to much, but remember that this is completely passive. Your kid wouldn’t have to wait any longer or work any harder to make that extra money.
7. Bonus tip: Compare more than just the Big Four for a kid’s savings account. Don’t hesitate to take credit union and building societies into account. Some obscure financial institution might offer better rates than your major bank – you never know.
8. Ask yourself if it is even necessary. If your kid is earning interest rates lower than you could, why not just open an account for him/her under your name? I remember growing up without a savings account but my parents taught me the value of saving by “investing” with them instead of the bank.

   Sure, as a family, we may not be maximizing our income, but they succeeded in teaching me to consistently save by providing “ample” returns for my investment.

In other words, the best kid’s savings account depends entirely your and your kid’s goal and lifestyle. There’s no one right solution and you may not even need one.

Related posts:

1. How To Choose A Savings Account For Your Kids
2. Simple Savings Plan – Savings Account For Kids
3. The Best Kids Bank Account
4. Savings Accounts for Children – Teaching Kids The Value Of Money
5. Save Money For Your Kids