Kids savings accounts: Is Westpac’s $200 initiative for newborns good value?
Ready to give your newborn baby the best start in life financially? Say hello to kids savings accounts, the virtual piggy banks that often come with sweeter interest rates than banking products for grown ups!
If you’re in the market to open an account, then Westpac’s initiative offering bubs born this year $200 probably sparked your nurturing instincts already. The catch? You’ll need to set up a “Bump Account” (launching this April) for your bundle of joy first, which a dedicated landing page on the Westpac website has indicated will have a rate around the 1.50% mark (as variable rates constantly change the actual interest rate will be announced on launch date). For your kids to keep the free cash some 16 years later, they can’t have withdrawn funds from their stash before that time.
In theory it sounds like a great deal. Especially after Westpac said that based on weekly $20 deposits into a Bump Account, by the time teens turned 16, they’d have saved $19,054 all up.
Westpac’s Bump Account versus the top 6 kids savings accounts
Don’t be hooked in just yet. Plenty of kids savings accounts offer interest rates higher than 1.50%, making Westpac’s 200 buck incentive pale in comparison. Here at Mozo, we decided to run the numbers, to see just how much the difference in value would be. See for yourself with these savings calculations...
| Kids savings account | Starting balance | Interest rate | Balance after 16 years* |
|---|---|---|---|
| Westpac Bump Account | $200 | 1.50%** | $19,054 |
| BCU Scoots Super Saver | $0 | 3.50% | $22,365 |
| Credit Union SA Children’s Savings Account | $0 | 3.25% | $21,885 |
| Greater Bank Life Saver | $0 | 3.00% | $21,418 |
| Hume Bank Clancy Koala Junior Saver | $0 | 3.00% | $21,418 |
| Police Bank Dynamo Kids Savings Account | $0 | 3.00% | $21,418 |
| Police Credit Union Beans Savings Account | $0 | 3.00% | $21,418 |
*Based on $20 weekly deposits over 16 years and no withdrawals.
**The example interest rate used by Westpac on the official Bump landing page.
Savings reality check
The top six children’s savings accounts on our database tell a more prosperous savings story than Westpac’s Bump Savings initiative. For instance, BCU’s product dubbed the Scoots Super Saver offers over double the interest rate, plumping the balance in the scenario up $3,311 higher than Westpac’s after 16 years. Even going for a less competitive interest rate at 3% will give kiddiewinks $2,364 more than what the Bump Account has to offer young savers.
Put it this way. Whether your sweet 16 year old wants to spend that money on an international school exchange or funds for their first car, that extra K will be a welcome boost.
Reasons why savings accounts are great for children
1. Teaches kids about money. Youngsters are curious creatures. Opening a savings account in your child’s name will give him or her a reason to learn how interest rates and the economy works.
2. Sets up a lifelong healthy habit. We all know saving money is not easy - even for adults! Kids who ration out pocket money into savings have a head start on developing their budgeting skills.
3. Lets them own the cash. When you open a savings account for your child, it’s on their behalf. So essentially you’re giving them ownership of their savings, instilling in the little one a sense of independence and worth. How nice is that?
4. Fun activity. You know the saying “Children are like sponges”. Not only that, they’re equally fascinated by the world. Who knows, your youngster just might find filling out those deposit slips and reading bank statements fun.
