Plenty to ponder when they go from piggy bank to real thing
Debra Cleveland, Sun Herald, 21st of May 2006
Debra Cleveland surveys the array of accounts on offer.
WHEN it comes to children's bank accounts, the Commonwealth may seem the obvious choice because for many parents the bank's Dollarmite program is as synonymous with childhood as Vegemite sandwiches. But while CBA does have the marketing advantage, there are better rates on offer.
As shown in the accompanying table from Cannex, you can get as much as 5.8 per cent on your child's account, compared with 2.71 per cent on CBA's Youthsaver account or 0.25 per cent with St George's Happy Dragon account. All rates in the table are for children under 16 and assume a $500 balance.
The rates shown for NAB and Westpac are offered only if there are no withdrawals in a month and at least one deposit. Otherwise, the interest reverts to a much lower rate.
Also, if Dollarmite banking is offered at your child's school, the CBA account is convenient because everything is done at school and it encourages kids to save regularly as banking is done once a week.
School banking is particularly useful for younger children who may be getting their first accounts. And since their account balances will be minimal, the lower rates won't matter - and at least you don't have to worry about missing out on bonus rates if you make withdrawals.
CBA and St George back up their kids' accounts with educational material on their websites. CBA and ANZ (with its Progress Saver account) have interactive websites.
Here are what the bigger banks offer:
ANZ Although the table points to Access Advantage as the ANZ's children's account, there is higher interest available on ANZ's Progress Saver account and bonus interest of 3.75 per cent if no withdrawals are made in a month and a deposit of at least $10 is made. Otherwise the rate is 0.1 per cent. The bank's kids' website (follow the links from www.anz.com.au) offers fun ways of learning about money. There are no monthly fees and no transaction fees for those under 18. If your child is younger than 12, you'll have to hold the account in trust for them. Customers receive a statement with a savings graph to help them track their savings easily.
CBA Its Youthsaver account pays 2.71 per cent on balances under $5000 (but bonus interest of 0.03 per cent if no withdrawals are made in a month). It's open to customers under 18, there are no monthly fees and withdrawals are free at CBA branches or ATMs. Access is via ATM, phone or internet and account holders can get "inquiry-only" internet access to monitor their progress. CBA has three savings "clubs": Dollarmite for kids under 10; Rule for those aged 10-13; and Pi for teenagers up to 17.
NAB While Cannex points to the bank's Smart Junior account with its 3.5 per cent rate (0.5 per cent with a bonus 3 per cent when there are no withdrawals and one deposit a month), you can get higher interest with NAB's Smart Reward Saver. It offers bonus interest of 4 per cent on a base rate of 0.01 per cent. Withdrawals are made via branch, phone or internet only. One free withdrawal a month is allowed.
ST GEORGE Anthony Sexton, financial analyst with Cannex, suggests countering the low 0.25 per cent offered on the Happy Dragon account by opening a Dragondirect online account, offering 5.55 per cent, and linking them. They are open to children under 13 as long as a legal guardian acts as signatory and there are no monthly service fees or withdrawal fees. The bank's website has some useful information on teaching money lessons to children of different ages.
WESTPAC The Westpac One Youth is the same as the adult Westpac One account, but there are no monthly fees (usually $5). It bundles a transaction account and a savings account. In the linked savings account, your child can earn 5.8 per cent interest as long as there are no withdrawals in a month and at least one deposit. Otherwise, no interest is paid. There are unlimited free Westpac withdrawals (via the branch, internet or ATM) and Handycard access for over 12s. A financial goals calculator (www.westpac.com.au) is a fun way to help kids work out how long it'll take them to save for that PlayStation or CD player.
OTHER OPTIONS Credit unions offering competitive interest on children's accounts are thin on the ground. Sexton points to IMB's Zoo account as one of the best, with free transactions and 3.1 per cent on balances up to $500. Online accounts, with which you need another account to which money can be transferred for withdrawals, offer higher interest. The best is BankWest Direct's TeleNet Saver with 6.4 per cent for the first year, reverting to 5.75 per cent. It is open to customers 12 and older.
