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Financial literacy is a valuable life skill that should be taught to kids as early as possible. One tool you can arm kids with to help them develop their personal finance skills is a savings account.
Kid’s savings accounts are simple to use and understand. They help to teach children what savings are and the value of growing your money. Many lenders provide kids (consumers under 18) with savings accounts while also offering competitive interest rates.
Why open a children’s saving account?
Australian kids are running the risk of falling behind. Around a fifth of Aussie 15-year-olds do not have basic financial literacy, according to a recent OECD Programme for International Student Assessment report. Therefore, it’s crucial to teach kids financial literacy as early as possible so that these skills trickle into all aspects of their life.
Here are several lessons you can teach your kids by opening a savings account:
- Teach kids about income
By storing your kids’ pocket money or chore money into a savings account, they can better understand the concept of a salary or income. A piggy bank may feel like a low maintenance approach; however, it prevents them from learning that you can earn regular “wages” in return for labour or services that are transferred into a bank account.
You can also print off their bank statement and talk it through with them, teaching them basic money concepts such as account balances, when and how the money comes into the account and interest.
- Teach kids about budgeting
A saving account is also a great way to show children how to budget. By storing their pocket money into a kids’ savings account they can then choose whether to spend the money now or save it for something bigger.
ASIC recommends using a “save 50 per cent, spend 40 per cent, donate 10 per cent” rule as a good measurement to help kids understand the concept. Or, you can sit with them and help draw up a budget of how they’d like to split their pocket money.
- Teach kids how to plan for a goal
Whether they want a new toy or a bike, every kid will have something they want to spend their money on. By setting a savings goal, you can help them to develop their patience and get a sense of forward planning. Sit with your child and talk through what their savings goal may be, and how the income they gain through pocket money and simple budgeting will help them to achieve this. If they’re also old enough to understand interest, this is a great opportunity to see it in action.
- Teach kids about over-spending
Everyone makes mistakes and these are still great lessons to learn, especially at an early age. If your child spends all their pocket money in one go instead of putting it towards their savings goal they’ll quickly understand they’re even further away from that big-ticket item. They may feel disappointed, and you may feel tempted to help them out, but the experience will help them to budget better in the future. It’s a lot easier of a habit to break early, before they’re old enough to rack up huge amounts of debt on a credit card.
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Personal Finance Editor
Alex is a personal finance writer and editor at RateCity, and has been writing about finance for over five years. She is passionate about closing the gender pay and superannuation gap, and aims to help young Aussies to overcome their financial apathy and better manage their finances. Alex has been published in numerous print and online outlets, including Money Magazine, Lifehacker Australia, and Business Insider.
Frequently asked questions
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 an ANZ locked savings account?
An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.
With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.
Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.
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 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 have multiple ING savings accounts?
Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.
To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.
With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.
Should I open a Commonwealth locked savings account?
If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up.
The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money.
The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits.
To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:
- Depositing a fixed minimum amount into the account every month.
- Making a fixed number of deposits each month.
- Making a minimum or no withdrawals each month.
- Maintaining a minimum account balance.
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.
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.
What are the requirements of an ING Bank locked savings account?
An ING bank locked savings account - also called a term deposit - offers you interest in exchange for holding your money for a period of time.
The terms offered include as little as 90 days or as long as two years. Generally, the longer you lock your money away, the higher the rate of interest.
The minimum deposit amount for an ING locked savings account is $10,000.
To be eligible to apply, you must:
- Be an Australian resident for tax purposes
- Be aged 13 years or older
- Hold the account for personal use (ING offers business term deposits as a separate product).
Should I open multiple savings accounts with UBank?
UBank offers customers an opportunity to make the most of their savings by opening multiple savings accounts. Having multiple savings accounts with UBank may be ideal for savers tracking different goals in separate accounts.
It’s important to note that to earn bonus interest, you will still need to meet the conditions of the UBank savings account every month. If you don’t make these deposits, you will receive the standard interest rate, which is typically lower.
Keep in mind that you won’t earn bonus interest on your UBank savings account in the month an account is opened and if you open multiple savings accounts with UBank, you'll start earning any bonus interest the following month.
It's also not yet known how long the special interest rate will hang around for, so please check with your bank for more information.
What is a Westpac locked savings account?
The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.
There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is.
Do banks run credit checks on savings accounts?
When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money.
As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements.
What are the two types of NAB locked savings accounts?
With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.
The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.
Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.
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 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.
Who has the highest interest rates for 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 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.