Amy Bradney-George investigates the basic lessons kids should learn about savings accounts.
November 18, 2009
The way that parents save money – especially using a savings account – will leave a lasting impression on their children’s saving habits, and new research from Bankwest shows parents are taking this on board.
The 2009 Raiding the Piggy Bank report shows that 58 percent of Australian parents give out weekly pocket money, and more than half of children regularly save it.
The majority of parents also set conditions for this money, with the most common being performing chores around the house, good behaviour and good school performance.
Bankwest CEO of Retail, Ian Corfield, said this practice helped children learn more about money and savings.
“The vast majority of Australians are trying to teach their kids the value of money by linking it to some type of work while encouraging their kids to save,” Corfield said.
“There’s no question that saving is an important skill and an invaluable lesson our kids need to learn that will continue rewarding them throughout their lives.”
Once kids start earning money they can also learn about how banking can help them save even more.
Kids Savings Accounts
It’s just as important to find the right account for your child as it is for yourself. With so many children’s savings accounts around, comparing rates and features can become part of the learning process.
Interest in these accounts can be as little as 0.01 percent p.a. or as high as 6 percent p.a. and are often influenced by factors including the balance, regular deposits and low or no withdrawals.
The frequency of the interest payments also influences how much can be earned, and is usually calculated annually or monthly.
By looking at the base interest rate you can show your children how to estimate the amount of interest they will earn to begin with.
If the account had been opened with a $50 deposit and had a base rate of 1 percent calculated monthly, your child would earn $0.04 cents in the first month.
If that $50 stayed in the account for a year it would earn $0.50, indicating that the longer money is in an account, the more interest it will earn.
This savings lesson is also the basis for kids’ accounts that have a higher interest rate for no withdrawals or regular deposits, the latter showing that by increasing the amount of savings more interest can be earned.
These types of accounts tend to base their rewards system on savings skills to encourage kids to learn, and are a great tool for practical savings lessons.
Finding the right account and actively teaching kids about money will help them develop an understanding of savings they can use throughout their life.