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Why it's never too early to start young

These days, most parents will not even reconsider whether to send their children to school. The choice is obvious because going to school helps to secure a child's future through formal education. But, what about securing their financial future? Reality is, schools rarely equip children with good money habits. So this responsibility falls back on all of us parents to help shape our children's financial future so that they will not become debt ridden when they grow up.

If you are still unconvinced of the importance of securing your child's financial future, consider this: credit card debts among Australians have now soared to a record high of close to $40 billion. Ability to save money and avoid overspending has now become just as important as the ability to earn money. So, before you rush out to buy yourself a 'Rich Dad, Poor Dad for Teens' book, you should consider some of the obvious options available to you. And one of the readily available options out there is the opening of a children's savings account.

Before we delve into the nitty-gritty of product features, let us consider the advantages of opening a children's savings account from two perspectives.

One of the reasons why you would want to open a savings account is so that you are able to make regular contributions for your children. Once again, you should realize that this amount does not have to be much, provided you keep it consistent because over the years this amount will gradually build up to a sizeable amount. For example, if you were to contribute $500 a year for 10 years into a savings account that earns a reasonable 6% interest, your child may earn up to almost $7000 at the end of 10 years. $500 a year would be the equivalent of only buying 3 cups of coffee a week over a year. Not very much considering how much better off your child will be with that sum of money.

Another good reason for opening a children's savings account is to help your child inculcate good saving habits. Bringing your child to a branch to deposit their piggy bank savings into an account in their own name will help them develop their responsibility towards their savings account. Also, ensuring that they are only allowed to spend on something after having already saved enough is another useful lesson. They then learn the importance of meeting financial goals and only spending what they can afford.

Interest Rates

Children's savings accounts are normally transaction accounts which pay a much higher interest rate, compared to traditional transaction accounts for adults. One thing to look out for is bonus interest rates, as displayed by the BankWest Kids' Bonus Saver in the table below. This high interest rate can only be earned when regular deposits are made with no withdrawals during the month. Furthermore, the big interest rate can only be earned for twelve months, after which the amount saved is automatically transferred to the Parent/Guardian Account and the Kids' account starts all over again. The other accounts shown in the table will also have conditions attached regarding deposits and withdrawals in varying degrees so it pays to know these conditions before you make a decision.

Features and Facilities

A children's savings account should at least have branch access facilities so that your child can have the experience of 'real-life banking'. Apart from branch access, phone and internet facilities are normally attached to most of the children's accounts out there. These facilities include ATM access, EFTPOS, and GiroPost but it is wise to check exactly what is available when shopping for the best children's account.

Fees and Charges

Most children's savings accounts do not charge a monthly account keeping fee, so this is a definite plus. However, charges for transactions made do vary between different accounts and these charges range from being free up to $2.50 per transaction. Parents should be aware of the fees attached to these features, as frequent use of certain transactions by the child may incur large transaction costs.

Here is a table of the top 10 highest paying children's savings account:

RateCity is the best website to shop around on for all savings accounts, as well as most other financial products. At RateCity, you can use expert comparative data from CANSTAR CANNEX, Australia's leading financial research and ratings firm. CANSTAR CANNEX has analysed and evaluated hundreds of financial products to award five stars to only the very best. The CANSTAR CANNEX star ratings go much further than just looking at interest rates. They also take into account important features so you can be confident you are getting the best product.

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