Good money management is one of the most valuable skills our kids can learn, and with juicy rates of interest available on junior savings accounts, the small fry have good reasons to save. Chris Walker reports.
December 1, 2009
There was a time when the appeal of children’s savings accounts lay in freebies like stickers, comics or piggy banks. But today’s pint-sized savings accounts have replaced these frivolous rewards with high rates of interest. And it seems plenty of Aussie kids have spare cash to tuck away.
A survey by Bankwest found 58 percent of parents pay pocket money on a regular basis. One in two parents keep a close eye on how their children spend the loot, but most of it goes on here-today-gone-tomorrow treats, with toys, lollies and entertainment topping the list.
Encouraging children to save at least part of their pocket money is a great way to teach basic budgeting skills.
Around 86 percent of children are required to perform a few chores to earn their pocket money, so for many the idea of earning interest on their savings would hold considerable appeal. It’s certainly a far easier way to make money than tidying their room or mowing the lawn.
Like adult savings accounts, kids accounts also come riddled with restrictions and conditions. For instance, with Bankwest‘s Kids’ Bonus Saver account, kids need to deposit between $25 and $250 each month and make no withdrawals to earn the top rate.
The account also has a ‘sweep’ facility, which automatically transfers the accumulated balance to a regular BankWest Children’s Saver account at the end of each year. This limits the amount of interest children can earn annually.
Another kids’ saver worth considering is the Under-16 Saver Account offered by Cairns Penny Savings and Loans. Here too conditions apply. Children can earn interest but only on balances up to $2,000. Savings over this amount earn almost nothing.
Other accounts worth a look include Suncorp’s Kids Savings account and IMB‘s Zoo account.
The biggest challenge for kids with healthy savings habits could be keeping mum and dad out of the honey pot. The same BankWest survey found 25 percent of parents dip into their children’s savings – in come cases to fund big ticket purchases like a new air conditioner. Clearly there are some well-heeled children out there who could teach plenty of grown ups a thing or two about saving.