The top savings accounts for kids in July 2020

The top savings accounts for kids in July 2020

Teaching your children about money can be a challenging part of parenting, but one of the more convenient ways to do so is through a kids savings account.

Kids savings accounts are a helpful tool as they are simple to use and understand. They can teach little minds not only what savings are but also the importance of growing money through interest and having a rainy-day fund.

They differ from regular savings accounts in that the age eligibility will be for those aged under 18. They also can come with much higher interest rates than adult savings accounts as an incentive to encourage new customers to join. However, there may be conditions and restrictions around earning interest, or bonus interest, on these savings accounts.

If you’ve decided to teach your kids about money through a savings account, you’ll need to know not only how to do this, but which accounts may offer the best value for your little ones.

Tips to get your kids savings started

Financial literacy is a crucial life skill that can help to not only educate your kids on budgeting and spending but help establish valuable lessons that may prevent them from falling into debt as adults.

Here are some ways to use a savings account to teach your children about money:

  • Income

If your children are earning pocket money or chore money, you may want to encourage them to deposit this in their new account. This can help to mentally set up the idea of earning an income in return for labour or services and depositing regular “wages” into an actual account, as opposed to a piggy bank.

  • Interest

You can also then take them through their bank statements and show how interest accrues on their savings. They can then see how to passively grow their pocket money just by making regular deposits, and the importance of meeting conditions – if any – to get the highest interest rate.

  • Budgeting 

After they’ve deposited their pocket money or chore money, you can have your children decide whether to spend the money now or save up for something fun, like a new toy. Then you can help them to divide their savings between spend now money and save for later money – in other words, planning a budget.

  • Saving for a goal

If your children do decide to save up for something bigger, you can use a savings account to show them how to plan and save for a goal. Talk to them about what their goal may be and show how the “income” they earn through pocket money/chores paired with a budget can help them achieve this goal. Having kids slowly see how their savings grow over a number of weeks, while encouraging patience and regular depositing, may help them to develop great life skills.

  • Overspending

If you’re going to make money mistakes, you may as well make them at an age when this won’t have real-world consequences. If your kids fall behind on their budgeting and spend all their money in one go, it will teach them a valuable lesson early in life. It is a lot easier to learn this lesson as a kid, than when you’re an adult who has racked up an intimidating credit card debt.

Top kids savings accounts on the RateCity leaderboard

Choosing the right savings account for your little one can be a daunting prospect. It’s best to not only look at the interest rate, but to compare potential fees, as well as any conditions and regulations around earning said interest rate.

Thankfully, RateCity has done the research for you by ranking the most competitive kids savings accounts in the marketplace.

Here are the top-ranking kids savings accounts according to the RateCity leaderboard:

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Learn more about savings accounts

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.