Finding the best account for kids who want everything

Finding the best account for kids who want everything

RateCity looks at the release of Bankwest‘s Kids’ Bonus Saver Account and shows you how your kids can start building a healthy little piggy bank for themselves.

April 29, 2010

Kids continuously have something in mind that they want. Whether it’s a new bike, guitar or clothes, there is always something new and exciting that they just have to have. If you have children under the age of 15, now is the time to get more out of their money by taking advantage of Bankwest’s Kids’ Bonus Saver Account which is offering a high interest rate of 10 percent per annum.

This award-winning kid’s account holds one of the highest interest rates on the market according to RateCity, with Westpac following behind at 5.95 percent for both their Kids’ Reward Saver and their Youth Reward Saver. In comparison, one of the best adult online savings account on RateCity is at 6 percent by ING Direct.

Sounds too good to be true?
Like most savings accounts, there are a few catches that come with receiving the great offer. For instance, your child must have an existing Bankwest children’s savings account to link to their new Kids’ Bonus Saver and even though there is no minimum amount required for an opening deposit, they have set a maximum amount of $250.

Once your account is active, you are allowed to deposit between $25 and $250 only per month and if you don’t make any withdrawals you will receive the 10 percent bonus interest. The good news is that there is no monthly account keeping fees and interest earned is paid monthly.

So if you were to deposit the maximum amount of $250 per month ($3000 in total), you will earn about $141 in interest over the year if the rate stays the same. From a kid’s point of view that is a lot of money, but keep in mind that is the maximum amount they will be able to earn in interest per year.

After one year, the balance is automatically transferred to the linked account and your child must start their savings again.

Help your child get more out of their saving account
If your child earns more than $25 a month in pocket money then this may be the perfect account for them, as long as they don’t want to withdraw any of their funds in the next 12 months.

To help your kids with their saving and reach their goal, here are some ways they can get more out of their saving account:

  • Look for a children’s savings account that offers a high interest rate by comparing online at RateCity.
  • If possible, deposit more than the minimum amount each month to see their money grow faster.
  • Make sure they understand how their account will work in terms of all the conditions to receive the maximum amount of interest.
  • Set up an automatic transfer so you don’t have to remember to pay your child each month. They can go online to see that you have made the payment and see their cash grow in the mean time.

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Learn more about savings accounts

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.

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.

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.

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.

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 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

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.

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.

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

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

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.

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. 

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.

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.