School banking failing our kids: ASIC report

School banking failing our kids: ASIC report

Consumer advocate, RateCity.com.au, believes state and territory governments should kick banks out of our primary schools, on the back of today’s damming school banking report from ASIC.

Late last month, the Victorian government dumped the Dollarmites scheme in favour of curriculum-linked financial lessons. Bendigo Bank, IMB, Northern Inland and Southwest Credit have or are in the process of terminating their banking programs in light of this review.

Key findings from ASIC:

  • School banking programs say they help children develop long-term savings habits; however, providers could not demonstrate this.
  • In the last financial year, schools received $1.3 million in kickbacks for encouraging banking programs at their schools.
  • School banking is in 63 per cent of primary schools across Australia, with CBA the largest partner.
  • Young children are exposed to sophisticated advertising and marketing tactics by school banking providers.
  • Banks aren’t effectively disclosing that a strategic objective of these programs is customer acquisition.

A RateCity.com.au survey found school banking programs did not improve people’s financial confidence later in life and in some cases, fostered complacency.

RateCity.com.au survey of 1,000 respondents:

  • Just over half of Australians used a school banking program as a child.
  • Of these people, 34 per cent still bank with that same institution as adults – some even into their late 60s.
  • Using school banking as a child made little difference to how confident people felt about managing their finances later in life.

Sally Tindall, research director at RateCity.com.au, said: “This is a damning report from ASIC that exposes the weaknesses of letting banks into our schools to teach our kids about money.”

“School should be a safe environment where kids aren’t exposed to financial marketing and advertising,” she said.

“If McDonald’s came into schools to teach kids about healthy eating there would be an outcry. When it comes to teaching kids about money, parents and teachers should be taking the reins.

“There are cash incentives for schools that sign students up, and it’s effective marketing for CBA which get customers, sometimes for life. There must 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 replace school banking with financial literacy lessons.

“Learning about money is a life skill but right now it’s buried in the curriculum. It should be a stand-alone subject,” she said.

ASIC found 61 per cent of parents whose children participate in these programs indicated that they would be “furious if the school stopped school banking”.

“School banking is a convenient way to get your kids to learn about banking, but parents can easily do this at home without being forced to use one specific provider,” she said.

“CBA’s YouthSaver is offering a rate of just 0.80 per cent – parents can teach their kids to do better than this by shopping around.”

Which kids accounts deliver the best returns?

RateCity.com.au 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:

  • CBA’s Youthsaver ranked 22nd in terms of rate and 21st in terms of interest earned.
  • 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.
Rank by interest earned Bank Account Max Rate Total interest earned
1 CUA Youth eSaver 2.75% $375
2 Auswide Bank Ziggy Kids Saver 2.01% $269
3 Australian Unity Kids Saver 2.00% $268
4 Queensland Country Bank Star Saver 1.90% $254
4 Police Bank/Bank of Heritage Isle Dynamo Kids Savings Account 1.80% $239
6 BCU Scoot's Super Saver 1.75% $233
7 Newcastle Permanent Smart Saver Account (Under 25) 1.55% $205
7 Teachers Mutual Bank Mighty Saver 1.55% $205
9 IMB Bank Zoo 1.50% $199
10 Gateway Bank Dollaroo Kids Account 1.50% $198
11 Credit Union SA Childrens Savings Account 1.40% $185
12 Greater Bank Life Saver 1.40% $185
13 Geelong Bank YAS Young Achiever Savings Account (S50) 1.30% $171
14 Illawarra Credit Union Wildlife Saver 1.70% $164
15 Police Credit Union Beans 1.20% $158
16 The Mutual Mighty Mutual 1.05% $152
17 P&N Bank Way Cool Saver 1.10% $144
17 People's Choice Credit Union Young Saver Account 1.10% $144
19 Northern Inland Credit Union Super Saver 1.09% $142
20 Summerland Credit Union SuperSaver 1.25% $134
21 Westpac Bump 0.80% $104
21 CBA Youth Saver 0.80% $104
23 NAB Reward Saver 0.55% $71
24 ANZ Progress Saver 0.50% $65
25 Laboratories Credit Union Young & Free Student Account 3.50% $1

Source: RateCity.com.au.

Assumptions / Calculations:

  • Rates are advertised as of 15 December 2020.
  • $10 deposits are made weekly on a Monday.
  • Assumes child’s birthday is on 1st Jan of every year.

How to give yourself a financial health check

  • Start by comparing rates: on your home loan, credit card and savings accounts, interest rates can vary widely – even between the rates for new customers versus loyal existing ones at the same bank.
  • Talk to your lender: negotiate on your rates and fees. You’ll have greater bargaining power if you’ve done your homework first and know what’s available from the competitors.
  • Don’t be afraid to switch: the banks have streamlined the process of refinancing in recent years making it faster and easier than before. Refinancing can save a borrower thousands. For a few hours of work on your behalf, it is likely to be the best return on time you’ll get this year.
  • Review your bank products regularly: A lot can happen in the mortgage market in a year, as 2020 has taught us. So set a reminder annually and make it a financial health check day.

How to find a competitive rate for your child

  • Plan how much you’ll deposit and withdraw:Start by thinking about how much you or your child are likely to deposit each month. Consider if you are likely to make any withdrawals.
  • Compare kids savings accounts: Look at the top rate kids’ savers on a comparison site.
  • Read the fine print: Carefully read the fine print in line with your personal circumstances. If you are unable to meet the criteria month to month, 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: Review your saving account every 6 months.

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Fact Checked -

This article was reviewed by Janet Lee before it was published as part of RateCity's Fact Check process.

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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.

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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.

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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.

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.

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.

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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.

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.

Can you set up a savings account online?

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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.

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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. 

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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:

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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.

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