As you may have noticed, we here at Mozo have just launched Mozo Answers, a brand spanking-new forum platform where anyone can start up or get involved in a range of money conversations. As an offshoot, I’ve decided to launch a ‘question of the week’ style column, where I’ll take the best or most commonly asked question of the week and attempt to provide an in depth answer myself.
This week’s about the young ones. It seems like there are a lot of forward-thinking parents looking to setup childrens’ savings accounts for a myriad of purposes. Whether you’re saving for university, angling for tax breaks or simply looking to teach your kids the value of saving, here’s my take on the best accounts in the market.
First off, let’s look at kids savings accounts. The big fish at the moment is BankWest’s Kids’ Bonus Saver, which offers a jaw-dropping 10%. Like most other kids accounts however, there are number of conditions that affect how much you can earn. The key flaws with the account are that you lose interest if you make any withdrawals, there is a maximum deposit of $250 a month and that after one year all your money is swept into a different BankWest account that earns a paltry 1%. These sorts of deposit and withdrawal conditions are commonplace amongst kids accounts, and as I’m about to show you, they can make a considerable difference.
In terms of simplicity, flexibility and interest my personal vote would have to go to Suncorp’s Kids Saving account, which allows 1 withdrawal per month and earns 5.75% interest. As a testament to the power of small print, despite it having a markedly lower headline rate than BankWest’s offering, you’d stand to make $209 more interest with Suncorp (assuming a regular monthly deposit of $250 with no withdrawals).
If your child is over 12 then there’s an ever better option. RaboDirect’s High Interest Savings has a great, market-leading standard interest rate of 6.0%, no deposit conditions and no monthly fees. It’s available to anyone over 12 years of age and as it’s not a kids account per see, your child can keep using the account well into adulthood.
All up, the key message to take away is to look for a flexible account with a good headline rate, keeping well abreast of the small print in the process. Follow these rules and your child may no longer need to hit you up up for pocket money (not likely mind you!).
Got any more questions on kids accounts? Or anything else for that matter? Ask away on Mozo Answers.