Choosing Savings Accounts for Children

What to Consider when Opening a Junior Bank Account

Apr 4, 2009

Parents planning to open savings accounts for their children should look for those with high interest rates, low account fees and useful banking facilities.

It’s never too early to start good money habits. And one of the best ways to raise money-smart kids is by opening savings accounts for children when they are still young. With so many banks and finance companies offering various junior bank accounts, settling for the right savings account will need some serious thoughts.

Here are the few important things for parents to consider when choosing savings accounts for their children.

High Interest Rates

In general, children’s savings accounts pay a higher interest rate compared to transaction or savings accounts for adults. Interest rates for junior savings accounts vary from bank to bank, though. Some pay much higher interest rates with certain conditions.

For example, in Australia, the BankWest Kids’ Bonus Saver offers a very high interest rate – at one point 10% per annual bonus interest rate – provided that monthly deposits of between $25 and $250 are made during the 12 months the account is active and that no withdrawals are made. Such kids’ savings accounts are extremely useful to earn good returns and for very young children who still haven’t started spending money on their own yet.

No or Low Account Fees

Look for children’s savings accounts with no or very low account fees. Most kids' savings accounts don’t come with fees and charges. So this is not that big a problem. However, fees may apply if there are frequent transactions. For older children who will be making lots of deposits and withdrawals, look for a savings account with unlimited free transactions.

The Choice Youth package from Westpac designed for young people under 21, for example, allows account holders to have zero-fee unlimited banking transactions at all branches, ATMs, over the phone and the Internet.

Useful Banking Facilities

If the aim is just to save money, a junior savings account with a very high interest rate that discourages withdrawals such as the BankWest Kids’ Bonus Saver is ideal. However, if parents would like children to experience real-life banking, the bank account should have easy branch access facilities, ATMs, phone and Internet banking facilities. Online banking access is also excellent to let children see for themselves how their money can grow over time.

Compare Children’s Savings Accounts

To know which bank offers the highest interest rates, lowest fees and best banking facilities, parents will need to compare the myriad savings accounts from different banks. This tedious job is now made considerably easier by websites such as RateCity and InfoChoice which allow users to compare savings accounts and other banking products.

Opening a children’s savings account is a good start to help kids become money-smart. Opt for saving accounts that come with high interest rates, no or low fees and good banking facilities. Shop around by comparing children’s savings accounts from different banks before deciding on one.

Keers, Helena. “Teach Children the Joy of Saving Money” in The Sydney Morning Herald. December 19, 2007.

The copyright of the article Choosing Savings Accounts for Children in Kids & Money is owned by Wei Yin Wong. Permission to republish Choosing Savings Accounts for Children in print or online must be granted by the author in writing.