The products doing the rounds can seem quite appealing, but before you make a decision, refer to Your Money Magazine's checklist.
1. Fine print
Most of the accounts with the best advertised headline interest rates also have conditions. This can mean serious restrictions on your savings. These accounts might have base rates and bonus rates, with criteria that are hard to meet. Sure, a 10% interest rate is great, but if you make a withdrawal or are unable to meet the minimum monthly deposit, you can slide all the way down to 0% interest. So, check the rules. If you are not sure you can commit to the bonus rate guidelines, you are probably better off going for an account with a slightly lower interest rate, but without the rules.
The high-interest, fee-free environment of accounts for children can sometimes tempt dodgy types to try and use them as a place to save their own money. Just remember that if the parent opens the account in his or her own name and makes the transactions personally, it is their own in the eyes of the law and must be declared for tax purposes. If transactions are made up of gift money or wages from an after-school job, the money belongs to the child. Children do not need to lodge a tax return if their sole source of income is interest totalling less than $3,001.
If you want your child to learn the ins and outs of banking, the major players offer an extensive interactive experience. The young learner can log on and be introduced to money matters with the help of cute characters, visual savings gauges and more.
4. Better options?
If you’re not worried about involving your youngster in the process, and would rather manage their money yourself, all-age online savings accounts can yield higher interest rates and be managed from within the cosy confines of your own home.
5. Fees and rates
Kids’ banking is a competitive market for financial institutions and none of the products should have rates or fees. If they do, give them the flick as there are plenty of other options out there.
6. Ask and you may receive
If you are a one-bank family and wish to keep your business in the same institution, ask your bank manager to match a competitor’s rate for your child. Many would rather bend the rules slightly than lose your business altogether.
#1 Tip to remember!
Choose wisely my friends, because you are looking at 15 years or more worth of savings, but also remember to stay on top of the latest deals, as it is easier than ever to make the switch in modern times. Let’s make the banks work for us!
- Tim McIntyre
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