Kids earning higher interest rates than parents

Kids earning higher interest rates than parents

Banks are paying interest rates of up to 4.75 per cent on children’s savings accounts – although conditions apply.

Bankwest pays a bonus rate of 4.75 per cent on its Kids’ Bonus Saver (see table below), which is available to Australians aged under 15. However, there are two conditions:

  • You must deposit between $25 and $250 per month
  • You must make no withdrawals in the same month

If you fail to meet these conditions, Bankwest will pay only 0.01 per cent interest.

Also, at the end of 12 months, all but $1 is transferred to a linked account, which means that even if you qualify for the bonus rate, it will be calculated on a smaller balance.

The Nexus Mutual Junior Saver account, which is available for under-18s, pays a lower bonus rate (4.35 per cent) than the Bankwest Kids’ Bonus Saver – but the conditions are friendlier:

  • You must deposit at least $2 per month
  • You must make no withdrawals in the same month

If you don’t meet these conditions, you earn the base rate of 3.00 per cent.

At the moment, it is almost impossible for an adult to find an everyday savings account that pays 3.00 per cent interest.

Here is a list of children’s savings accounts with some of the highest interest rates in Australia:

Lender Product Base rate Bonus rate How to get bonus rate
Bankwest Kids’ Bonus Saver 0.01% 4.75% Each month, deposit $25 to $250 and make no withdrawals.
Nexus Mutual Junior Saver 3.00% 4.35% Each month, deposit at least $2 and make no more than two withdrawals.
CUA Youth eSaver 1.00% 4.00% Keep balance under $5,000.
BCU Scoot Super Saver 0.75% 3.50% Each month, deposit at least $20 and withdraw no more than $5.
Endeavour Mutual Bank Young Saver Account 2.00% 3.50% Keep balance under $5,000.
Credit Union SA Children’s Savings Account 0.25% 3.25% Each month, deposit at least 1c and make no withdrawals.
Police Bank Dynamo 0.25% 3.00% Deposit at least $5 per week and keep balance above $500.
First Option Credit Union Kids Bonus Saver 0.15% 3.00% Each month, deposit at least $5 and make no withdrawals. Also, keep balance under $5,000.

Please note that savings accounts that pay the highest interest aren’t necessarily the best savings accounts for each person.

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Learn more about savings accounts

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

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 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 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)

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 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 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 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 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 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 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 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

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.