When to open a savings account for your children

Teaching your kids how to save money early in life could help to set them up with money management habits which they’ll take into adulthood. So, when is the right time to open a savings account for your child? And what key features should you look for in a kids savings account?

For the foreseeable future, we’re all going to need a grasp on how to save money. It’s a necessary means of purchasing expensive items, applying for things like home loans, and making sure you have a safety net in times of financial hardship. 

But when you’re a kid you can hardly think ten days ahead, let alone decades into the future. Luckily, they’ve got financially-savvy parents and guardians like you to give them a head-start (after all, you are a Mozo reader).

Kids savings accounts are just like regular savings accounts, except they’ll come with slightly different features and age limits.

Depending on the age of your child, they may need a parent or guardian to set up their account with them. Typically, children under the age of 14 will need an adult to put their name down as an account holder – like you would with a joint bank account.

After your child reaches adulthood, their kids savings account will usually transition to a regular savings account.

No or low fees

Kids savings accounts usually don’t have monthly account fees, which is great for growing their balance. 

Bonus interest rates

Most kids savings accounts have a low standard interest rate, but offer a significantly higher bonus rate, if they meet certain criteria. To unlock a higher bonus savings rate they’ll have to do things like make a minimum monthly deposit, or make no withdrawals for the month. 

Parental control features

Some kids savings accounts have parental control features, which can include the ability to see your child’s spending, set up savings goals for them, or even limit the types of purchases they make.

Generally speaking, the earlier you open a bank account for your child, the better. But it’s never too late to start. 

Provided their account has no monthly fees, they don’t withdraw their funds regularly, and they take advantage of the bonus interest rates available, your child’s savings are virtually guaranteed to grow from the first deposit.  

Let’s take a look at an example of how starting a savings account for an eight year old can set them up for the future. 

If we deposit $50 per month into a kids savings account with a bonus interest rate of 3% pa over 10 years, then they could end up saving:

• $660 ($10 interest) after 1 year
• $1,936 ($86 interest) after 3 years 
• $3,290 ($240 interest) after 5 years
• $4,729 ($479 interest) after 7 years
• $7,055 ($1,005 interest) after 10 years 

Not only will they have saved up a significant amount of money, but they’ll also get a nice little reward of over $1,000 in interest when they turn 18. What better way is there to see the benefits of compound interest? 

Of course interest rates do fluctuate over time, which is why comparing the best savings account rates every so often is a good idea.