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Dumping Dollarmites: why CBA’s school banking scheme doesn’t pay

Dumping Dollarmites: why CBA’s school banking scheme doesn’t pay

Parents with children enrolled in CBA’s Dollarmites should send their school a message by switching to a more competitive savings account, according to RateCity.

Victorian schools have now dumped the Dollarmites scheme in favour of curriculum-linked financial lessons.

With three cash rate cuts over the last year, savings rates have plummeted, including on CBA’s Youthsaver, the account kids open in the Dollarmites program.

CBA Youthsaver

CBA Youthsaver max rateCash rate
A year ago (Nov 2019)1.85%0.75%
Now0.80%0.10%
Change-1.05%-0.65%

Which kids accounts deliver the best returns?

RateCity put 25 kids’ accounts to the test, working out how much interest they earn when a child puts $10 a week into the account from kindergarten to the end of primary school, applying each bank’s terms and conditions.

The highest interest rates didn’t necessarily turn into the biggest returns.

The findings:

  • CUA’s Youth eSaver earned the most interest over the seven years from Kindy to Year 6.
  • The account with the highest interest rate (LCU) ranked last in terms of interest earned due to onerous terms and conditions.
  • CBA’s Youthsaver ranked 22nd in terms of rate and 21st in terms of interest earned.

Research Director at RateCity, Sally Tindall, said it was ironic savings accounts designed for children came with some of the most complicated terms and conditions.

“Kids’ savers are anything but child’s play. Many of them are littered with terms and conditions adults would have trouble keeping track of,” she said.

“There are penalties if you don’t deposit enough, there are penalties if you save too much. Some accounts simply stop existing when you hit high school.

“It’s also worth regularly checking to see if your rate is still competitive. It’s a great way to teach your child how important it is to stay on top of your finances,” she said.

News the Victorian government is stepping away from the Commonwealth Bank’s Dollarmites Program and stepping up its own financial literacy programs should be replicated across the country.

“If McDonald’s came into schools to teach kids about healthy eating there would be an outcry. Why do we let the Commonwealth Bank take the reins when it comes to learning about money?” she said.

“There are cash incentives for schools that sign students up, and it’s effective marketing for CBA which get customers, sometimes for life. There has to be a better way to teach our kids about money that doesn’t involve kickbacks.

“Australia’s other state and territory governments should follow Victoria’s lead and kick CBA out of the classrooms,” she said.

Common kids savings account traps:

  • Interest rate caps when you hit a certain balance.
  • Age limits – lots of accounts stop as soon as you turn 13.
  • Penalties if you withdraw money.
  • Minimum monthly deposits to qualify for the max rate.

Tips for setting up a kids savings account

  • Plan how much you’ll deposit and withdraw: Start by thinking about how much you or your child are likely to deposit each month and how long you want to save for.
  • Compare the options: A high interest rate won’t necessarily deliver you the best return. Work out how much interest you’re likely to earn based on your circumstances.
  • Read the fine print: Carefully read the fine print to make sure you qualify. If you are unable to meet the criteria, then try another account.
  • Watch for rate caps: Be aware that some accounts only pay the higher rate on balances up to $5K.
  • Keep switching: Rates can and do change at a moment’s notice. Review your saving account every 6 months.

Kids savings accounts – interest earned depositing $10/wk from K to Yr 6 (primary school years)

BankAccountMax RateRank by rateTotal interest earnedRank by interest earned
CUAYouth eSaver2.75%2$3751
Auswide BankZiggy Kids Saver2.01%3$2692
Australian UnityKids Saver2.00%4$2683
Queensland Country BankStar Saver1.90%5$2544
BCUScoot's Super Saver1.90%5$2544
Police BankDynamo Kids Savings1.80%7$2396
Newcastle PermanentSmart Saver (Under 25)1.55%9$2057
Teachers Mutual BankMighty Saver1.55%9$2057
Police Credit UnionBeans1.50%11$1999
IMB BankZoo1.50%11$1999
Geelong BankYAS Young Achiever1.50%11$1999
Credit Union SAChildrens Savings1.50%11$1999
Gateway BankDollaroo Kids1.50%11$19813
Greater BankLife Saver1.40%16$18514
Endeavour Mutual BankYoung Saver1.25%17$16415
Illawarra Credit UnionWildlife Saver1.70%8$16415
P&N BankWay Cool Saver1.10%19$14417
People's ChoiceYoung Saver1.10%19$14417
Northern InlandSuper Saver1.09%21$14219
Summerland Credit UnionSuperSaver1.25%17$13420
WestpacBump0.80%22$10421
CBAYouth Saver0.80%22$10421
NABReward Saver0.55%24$7123
ANZProgress Saver0.50%25$6524
LCUYoung & Free Student3.50%1$125

Source: RateCity.com.au.

Note: Northern Inland Credit Union rate drops from 2.09% to 1.09% on Dec 1. Contact RateCity for the full research, including terms & conditions.

Assumptions/Calculations:

  • Rates are advertised as of 30 November 2020
  • $10 deposits are made weekly on a Monday
  • Assumes child’s birthday is on the 1st Jan of every year

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This article was reviewed by Senior Finance Writer Liz Seatter before it was published as part of RateCity's Fact Check process.

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